An easy but effective way to make investment decisions regarding stocks is to see if there has been insider buying.
Insiders are people in a company who have access to confidential information that could move the price of the stock. Unfortunately, there have been many examples of insiders using this information to take advantage of uninformed investors. For example, an insider may know that news is about to come out that will drive the share price higher. They could take advantage of this information by buying shares from someone who doesn’t know.
The U.S. Securities and Exchange Commission has developed rules and regulations to prevent situations like this. One is the requirement that an insider must publicly disclose when they are buying or selling their company’s stock.
Investors can use this information to profit. In fact, insider buying could be a very bullish signal for a stock.
There are many reasons why a company insider would sell. Perhaps they need to raise money for paying college tuition or buying a house. Because of this, insider selling doesn’t give too many good signals.
But when the insiders are buying, it’s time to pay attention. There is only one reason why an insider would buy their stock. They believe that it’s currently undervalued, and the price will rise. This is especially the case if the stock price has declined.
There has been significant insider buying in the following stocks over the past week:
- Ironwood Pharmaceuticals (NASDAQ:IRWD)
- Lendingtree (NASDAQ:TREE)
- Danaher (NYSE:DHR)
- Sensei Biotherapeutics (NASDAQ:SNSE)
- Primo Water (NYSE:PRMW)
- Nautilus (NYSE:NLS)
- DTE Energy (NYSE:DTE)
Insider Buying: Ironwood Pharmaceuticals (IRWD)
Ironwood Pharmaceuticals is a healthcare company that develops and commercializes products used for the treatment of gastrointestinal illnesses. Ironwood Pharmaceuticals is headquartered in Boston, Massachusetts, and was incorporated in 1998.
As you can see on the above chart, over the past four months shares of IRWD have trended lower. In December they were trading around the $12 level. Today, they are trading around $10.70.
Alexander Denner is a director of Ironwood. He must believe that now it is good time to buy the stock, because he just made a significant personal investment. Between Feb. 26 and March 5, Denner bought 2.1 million shares at an average price of about $9.73.
Wall Street agrees with Denner. Four firms follow Ironwood and produce research on it. The consensus recommendation is a buy and the average target price is $11 per share.
LendingTree operates online consumer platform in the United States. It offers loans, credit cards, and insurance. LendingTree was founded in 1996 and is headquartered in Charlotte, North Carolina.
On Feb. 25 LendingTree reported its fourth-quarter earnings. It goes without saying that some investors didn’t like what they heard. The stock dropped about $100 from around $340 to $240 a share.
G. Kennedy Thompson is a director at LendingTree. He must believe that the selloff was an overreaction, because he just made a substantial personal investment. On March 1, he paid around $272. a share for a total of 1,500 shares. On Feb. 26, Kennedy bought 3,500 shares at an average price of around $276.
The four Wall Street firms that follow LendingTree and produce research on it agree that the selling is overdone. The consensus rating is a strong buy and the average target price is $345 a share. This is about 45% higher than the current price.
Danaher Corporation designs, builds, and markets professional, medical, industrial, and commercial products and services. Its customers are worldwide. Danaher Corporation was founded in 1969 and is based in Washington, DC.
As you can see on the above chart, since the middle of February DHR has lost about a fair amount of value. During this time, there hasn’t been any company-specific news.
Mitch Rales is the chairman of the Executive Committee. He must believe the stock is a good value at current levels. On Feb. 26 he bought 6,600 shares at an average price of around $221.50.
The Street agrees. This company is widely followed. Nine firms cover it and produce research on it. The consensus rating is a buy, and the average target price is $268. That’s almost 23% higher than current levels.
Sensei Biotherapeutics (SNSE)
Sensei Biotherapeutics is a clinical-stage immunotherapy company. It engages in the research and discovery and development of therapies. It main focus is on treatments for cancer. Sensei was founded in 1999. Its headquarters are in Rockville, Maryland.
Sensei is a new company. It just went public on Feb. 4. The initial public offering, or IPO, price was $19 a share. Then when it started trading in the secondary market, the price reached $26. Since then shares have been trending lower. The stock is currently trading around $16.30.
Cambrian Biopharma is a company that has a substantial investment in Sensei. James Peyer is a member of the board of directors. They both must think that this company’s long-term prospects are good. We reported last week that these two insiders were buying shares. Since then they have continues to buy.
On Feb. 26 each of these insiders reported purchases of 5,000 additional shares. They both paid an average price of around $16.25.
Primo Water (PRMW)
Primo Water Corporation provides home and office bottled water delivery and filtration services. It offers water dispensers, purified bottled water, and self-service refill drinking water. Primo was formerly known as Cott Corporation. It changed its name to Primo Water Corporation in March 2020. The headquarters are in Tampa, Florida.
In a matter of just three weeks, shares of Primo Water trended from $17.50 to $14.50. This is a decline of about 17%, and it comes as there has been no specific news on the company.
But CEO Thomas Harrington must believe that shares will soon recover. On March 1 it was reported that he purchased 35,000 shares of PRMW at an average price of $14.53 a share. This was a personal total investment of almost $510,000.
Only one firm on Wall Street follows Primo, and they think its a good buy here as well. Jeffries & Co. has a “buy” rating on it with a $21 price target. This is about 33% higher than where shares are currently trading.
Nautilus is a fitness solutions company. It designs, develops and sells cardio and strength fitness products. It was founded in 1986 and is based in Vancouver, Washington.
Nautilus release its earnings a few weeks ago and as you can see on the above chart, shareholders weren’t impressed. They knocked the shares down from around $30 to around $20.
Jim Barr is a director of the company. He sees this selloff as an opportunity. His insider buying history implies that there are better times ahead for NLS. After the shares got crushed, on Feb. 26 Barr bought 2,000 shares at an average price of $17.92. This was a personal investment of more than $35,000.
Wall Street agrees. Only three firms follow Nautilus, and they all have strong buy recommendations on it. The average price target is $32.25 a share. That is almost 70% higher than where it is currently trading.
Insider Buying: DTE Energy (DTE)
DTE Energy Company focusses on electric utility. It generates and sells electricity to approximately 2.2 million residential and industrial customers in southeastern Michigan. The company was founded in 1903 and is based in Detroit, Michigan.
DTE rallied after reporting earnings on Feb. 19. But with a few days, the stock quickly reversed. As you can see on the above chart, DTE soared from $120 to $125 in just two days before falling to $118. It is now trading around $124.
Davis Thomas is a member of the board of directors. He must believe that the selling is overdone, because he just made a personal investment of almost $50,000. On Feb. 24 he paid an average of $126.56 for 395 shares.
The Street thinks that this was a good decision. The consensus rating is a strong buy. The average target price is about $137 a share. This is about $13 higher than where it is currently trading.
At the time of this publication, Mark Putrino did not have any positions (either directly or indirectly) in any of the aforementioned securities.