- Insider buying usually means those in the know have a lot of faith in the stock. Below are six stocks insiders are buying now.
- Plains All American Pipeline LP (PAA): This oil and gas pipeline company has a yield of 8.6% and a low P/E multiple. Recently a major director bought $2 million of the master limited partnership’s shares.
- Chegg (CHGG): Insiders have been buying this educational direct-to-student learning platform since the end of last year. Moreover, Chegg just declared a doubling of its $1 billion buyback program.
- DaVita (DVA): The COO of this kidney dialysis laboratory and center, based in Denver, recently purchased a large number of its shares. This should encourage investors to follow suit, as the stock is cheap at 7.8x earnings and with a 31% earnings growth forecast for 2023.
- Chesapeake Energy Corp (CHK): The oil and gas company’s COO increased his stake by 1o% in this value play, which has a 2.0% dividend yield and 5.7x forward earnings multiple for 2023.
- Kyndryl Holdings (KD): The CEO of this IT cloud services company bought 11% more shares in May. The company has started repurchasing shares in its latest quarter.
- Rocket Companies (RKT): The CEO of this large real estate mortgage origination company recently bought a large number of shares. He obviously wanted to buy in before the Q2 earnings come out in July. The stock is cheap, trading at just 10x forecasts for 2023 earnings per share.
Today I’m going to talk about stocks insiders are buying now. This article will study insiders who are taking advantage of the weakness in their stocks’ prices to purchase shares. I have decided to also include situations where the company is buying back shares. That automatically increases insiders’ ownership.
The theory here is that while directors and officers of these companies are legally allowed to purchase shares during set periods, the public might want to follow them. Given how short a window some of these insiders have to buy shares, when they take advantage it shows how much faith they have in the prospects. The obvious implication is that they know more than the public.
So, in effect, the public can piggyback on their inside knowledge. This is important, especially if the insiders make substantial purchases.
Let’s dive in and look at these stocks.
|PAA||Plains All American Pipeline||$10.07|
|CHK||Chesapeake Energy Corp||$88.64|
Stocks Insiders Are Buying: Plains All American Pipeline (PAA)
Plains All American Pipeline (NYSE:PAA) is an oil and gas master limited partnership (MLP) that pays an annual 87-cent dividend. That gives the stock a dividend yield of 8.6% on its price of $10.07 as of June 28’s close.
A director of the company, Kevin S. McCarthy, recently purchased nearly $2 million worth of the MLP’s shares. According to Seeking Alpha, this is the first major purchase of the shares since he joined the board in 2020. That makes the purchase quite significant.
The reasoning here is that $2 million is seen as a large part of anyone’s net worth. For example, even if he is worth $100 million, that would be an allocation of 2% of his net worth.
Another reason this is significant is that McCarthy is deeply involved in energy investments as the head of Kayne Anderson’s energy investment area. He is also vice chairman of that investment firm.
Chegg (NYSE:CHGG) is an educational software direct-to-student learning platform that is forecast to show 10% revenue growth next year. That makes this one of the few recession-resistant tech companies. This is because everyone has to go to school.
Moreover, earnings per share (EPS) are forecast to rise by 15% to $1.22 in 2023 from $1.06 in 2022, which will be down from $1.29 in 2021. Therefore, at $18.35 on June 28, CHGG stock trades for just 15x 2023 forecast EPS.
Insiders — specifically the CEO, chief financial officer (CFO), and a director — were buying CHGG stock at the end of last year, based on information from Openinsider.com.
Moreover, the company announced on June 2 that it is doubling its $1 billion buyback program to $2 billion. It had $65 million remaining from its prior $1 billion program. So in effect, it was re-upping the $1 billion program. In fact, in the first quarter (Q1), Chegg spent $300 million on its accelerated share repurchases. It completed those in April.
Chegg has plenty of free cash flow to fund its buybacks. The Q1, FCF was $49.3 million, which works out to a quarter of its sales. That is a very high FCF margin and is the basis for the company’s confidence in re-upping its $1 billion buyback program.
DaVita (NYSE:DVA) is a $7.7 billion market cap kidney dialysis center and laboratory operation for people with chronic kidney failure. The company is profitable and has an estimated 30.8% growth rate in earnings next year.
On top of this recently the COO, Michael David Staffieri reportedly purchased $1.55 million of its stock. That was an increase of 18% in his holdings, as of June 27, according to Openinsider.com.
Investors can take this as a positive sign from such a high-up executive in the company. Moreover, the fact that the stock is cheap at just 10.1x 2022 forecast earnings and 7.8x forecasts for 2023, should encourage investors to follow suit.
Chesapeake Energy Corp (CHK)
Chesapeake Energy Corp (NASDAQ:CHK) is an oil and gas company whose stock is up almost 37% year-to-date. Nevertheless, the stock is off of its peak of over $104 per share earlier in June.
That has led one of its senior executives, Joshua J. Viets, the COO, to purchase a large number of shares on June 21. According to Opensinsider.com the EVP increased his stake in the company by 10% for over $200,000.
There is a very short window for execs like Viets to purchase shares before the company reports its earnings after the end of the quarter. He must have wanted to get in before the announcement of its Q2 earnings.
Kyndryl Holdings (KD)
Kyndryl Holdings (NYSE:KD) is an IT cloud services company whose earnings are forecast to turn positive for the year ending March 2024 at $1.43 per share. So, at $9.96 on Jun. 27, KD stock is cheap on a forward P/E multiple of just 7.3x.
So, no wonder the CEO, the president and the CFO all decided to increase their stakes in the company by significant amounts in May, according to Openinsider. For example, the CEO raised his stake by 11% and the two others increased theirs by 7% each.
Kyndryl has started buying back its own shares in the latest quarter. Given how cheap the stock is based on analysts’ forecast for the next year, I suspect Kyndryl may increase its buybacks.
Investors may want to follow suit with these execs who really seems to believe in its turnaround.
Rocket Companies (RKT)
Rocket Companies (NYSE:RKT) – The CEO of this company, Jay Farner, bought a large number of this mortgage origination company’s shares on June 24. This was not a result of an award or an exercise of options, according to Barchart.com.
One can certainly understand why he did this. Analysts are forecasting that its earnings will rise from 38 cents per share in 2022 to 75 cents in 2023. That puts the stock on a cheap forward P/E of just 10x earnings for 2023.
Although the stock does not pay a dividend, it is now well off of its highs, down 47% YTD. The recent insider buying by the CEO might lead other investors to want to follow suit. After all, a lot of bad news in the real estate and mortgage business is already “in” the stock price today.
This makes it one of the top stocks insiders are buying now.
On the date of publication, Mark Hake did not hold (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.