When it comes to investing, we’re all looking for that edge to get in early on the next big stock before it takes off. As outside investors, we sometimes feel at an information disadvantage compared to company insiders. But keeping an eye on what insiders are buying can give us valuable insight. In this market, insiders have been snapping up shares of specific stocks. As we near the end of August, these savvy investors could be positioning themselves ahead of significant catalysts on the horizon.
I’ve dug into the data to uncover three stocks insiders have been eagerly accumulating recently. These aren’t just average companies; they have solid fundamentals and ample growth opportunities in their respective sectors. The insider activity could signal that leadership sees even more upside ahead. Getting in on these stocks alongside insiders could expose investors to substantial gains if and when positive internal news becomes public.
Insiders may know something we don’t, and that knowledge gap represents a lucrative opportunity. Let’s dive in!
Asana (ASAN)
I’ve followed Asana (NYSE:ASAN) for a long time, and believe this work management software provider remains an attractive buy despite the negativity from some on Wall Street.
Asana provides a work management platform that helps teams organize, track, and manage their work. The company has seen tremendous top-line growth, with its Q1 revenue up 26.3% year-over-year. However, bears have honed in on the company’s lack of profitability, with its net loss totaling $18.5 million.
That said, it’s crucial to remember Asana is led by co-founder Dustin Moskovitz, who also co-founded Facebook, now Meta Platforms (NASDAQ:META). Moskovitz clearly has long-term conviction, recently purchasing almost $14 million of Asana shares within the past week alone. Insider buying at this scale signals confidence in the business’ trajectory.
The company’s path to profitability admittedly remains a question mark. But recent moves like reducing hiring plans for the next quarter indicate management is serious about tightening the belt and getting cash flow positive. Once scale kicks in after several more years of hypergrowth, I expect the company’s profit picture to improve markedly. Remember, Amazon (NASDAQ:AMZN) barely eked out any profits for nearly two decades as it pursued aggressive expansion.
There’s understandable frustration that profitability remains elusive despite Asana’s $4.8 billion market cap. But Moskovitz’s track record and skin in the game suggest patience will be rewarded for investors with a multi-year time horizon.
Mercury Systems (MRCY)
Another beaten-down stock I’ve turned bullish on is Mercury Systems (NASDAQ:MRCY). This aerospace and defense technology firm has plunged nearly 50% in 2022 due to execution missteps. Last quarter, the company’s earnings per share missed by a wide margin while revenue also fell short of estimates.
Management cited “challenged programs” that incurred unexpected costs to explain these misses. But it’s crucial to note these problematic contracts only represent around 20 out of Mercury’s 300+ programs. The vast majority of business lines continue performing steadily.
Though Mercury has work to do on tightening up operations, much negativity seems priced in after its steep selloff. That’s particularly true, when one considers that insiders have been scooping up shares on the weakness. Recent significant purchases include:
- Jana Partners buying $1.9 million of stock
- CEO William Ballhaus acquiring $1.5 million
- Board member Roger Krone purchasing $577,000
This level of buying signifies insiders expect Mercury’s troubles to be temporary. The company maintains a solid market position supplying technology solutions to aerospace/defense contractors. Its franchise development programs also represent a pathway to resume growth once operational issues are behind the company.
Mercury has guided conservatively for fiscal 2024, calling for flat revenue growth after a 12.6% decline. But its backlog remains healthy at over $1.1 billion (up 10% year-over-year), and management expects a turnaround in profitability and cash flow in 2023’s back half. After its harsh selloff, MRCY seems poised for big upside if its execution improves as expected.
Forward Air (FWRD)
Lastly, I’ve turned bullish on trucking firm Forward Air (NASDAQ:FWRD) following its nearly 50% plunge. Shares cratered after the company announced it would combine with Omni Logistics. The market balked due to Omni’s lower margins and potential integration risks.
However, recent insider purchases signal conviction the merger will pay off over the long term:
- CEO Thomas Schmitt – $1 million
- Director Robert Campbell – $322,00
- Director Laurie Tucker – $245,000
Management contends Omni’s footprint will allow Forward Air to access 7,000+ new customers and provide cross-selling opportunities. Approximately $125 million in projected cost synergies within two years also can’t be ignored.
No doubt, executing such a large acquisition brings risk. But insiders voting with their wallets indicates there’s plenty of confidence in management’s ability to achieve its revenue and cost targets. And keep in mind Forward Air historically has been an efficient operator, with operating margins above double digits, even in down markets.
While Forward unquestionably faces its toughest test yet integrating Omni, its outright dismissal by Wall Street ignores management’s impressive track record. The risks seem adequately reflected now, following the huge pullback. For long-term players, insider buying provides a compelling argument to take an opportunistic position.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
