Markets

3 Stocks Flashing Signs of Strong Insider Buying

Confused by the current financial landscape? You’re not alone. Unemployment is high, the Street is expecting a rough earnings season, yet in the face of this bad news, stocks have been charging forward. Add to the mix a rapidly rising rate of new COVID-19 infections, and you get a sense of the market’s clear disconnect. In times like these, traditional metrics alone might not tell the full story. You need other strategies to do the job.

The activity of insiders can act as a more reliable trading signal. Who are these people in the know? They are the corporate officers and board members standing at the helm, entrusted with the task of steering their companies in the right direction. Given the nature of their positions, they have access to information before the general public, and thus, insiders are required to disclose the purchase or sale of shares.

Sure, there could be several reasons that a corporate insider will sell shares, but there’s typically only a single reason to up the ante. So, informative buys can signal that now is the time to pull the trigger.

Bearing this in mind, we used the Insiders’ Hot Stocks tool from TipRanks to point us in the direction of stocks the insiders are snapping up. We found three flashing signs of strong insider buying that warrant a closer look.  

Vaccinex Inc. (VCNX)

We will start with an interesting healthcare stock. Vaccinex has a unique approach to treating neurodegenerative disease that involves the inhibition of semaphorin 4D (SEMA4D), a key driver of neuroinflammation. Given its recent release of encouraging data and $5.00 share price, now might be the ideal time to make a move.

This is the stance taken by the players on the inside, namely Albert Friedberg. The Director and more than 10% owner pulled the trigger on July 10. Scooping up 1,126,760 shares, the purchase came with a price tag of almost $4 million.

Out on the Street, VCNX is scoring points with Oppenheimer’s Leland Gershell. The five-star analyst cites the strong results from the Phase 2 CLASSICAL-Lung trial as being a key component of his bullish thesis, arguing the data demonstrates “a distinct potential for combination immunotherapy with pepinemab to treat advanced non-small cell lung cancer, including disease resistant to PD-1/PD-L1 inhibitor monotherapy.”

What makes the data so promising, in Gershell’s opinion, is the durability that was witnessed. Looking more closely at the results, 11 out of 34 patients who experienced PR or SD didn’t display any signs of progression for at least six months, with 5 not experiencing disease progression for at least a year. “Notably, 97% of PR+SD subjects evaluated had low/no PD-L1 expression,” he added.

Further supporting his optimistic take, Gershell highlights the clinical benefit that could correlate with CD8+ infiltration level and number of weeks on study seen during CLASSICAL-Lung. “We believe these observations support the outlook that responses, as analyzed per RECIST criteria, may become more favorable upon future disease assessments,” he stated.

Going forward, VCNX is slated to publish near top-line data from CLASSICAL-Lung in advanced NSCLC, along with interim analyses from combination Window-of-Opportunity studies in multiple solid tumors during the Virtual ASCO meeting.

Everything that VCNX has going for it prompted Gershell to leave an Outperform rating and $22 price target on the stock. Should the target be met, a twelve-month gain in the shape of a whopping 338% could be in store. (To watch Gershell’s track record, click here)

W&T Offshore (WTI)

Next up we have W&T Offshore, which is an independent oil and natural gas producer, with its activity primarily in the Gulf of Mexico. 2020 has been brutal for this name, but the insiders are standing squarely in the bull camp.

Starting on July 7, Tracy Krohn, WTI’s CEO and President, picked up shares on three separate occasions. How much did he shell out? A total of $1,765, 076. The largest of these informative buys was for 346,358 shares. Additionally, directors Virginia Boulet and Frank Stanley made buys on July 6 and June 25, respectively.

Roth Capital analyst John White also counts himself as a fan. Pointing to WTI’s debt reduction, he notes that from January 1 through June 22, the company repurchased $73 million of the $625 million 9.75% Senior Second Lien Notes that are due in 2023. As for 2020 free cash flow, the analyst sees the figure coming in at a “robust $33 million and as such we model no additional borrowings.”

On top of this, WTI has placed a significant focus on cutting LOE by between 15-25%. White said, “We have assumed a 5% reduction for 2Q 2020 and a full 15% reduction for the balance of 2020 as it will likely take a quarter of adjustments to operations and negotiations with vendors to reach the full 15% reduction.”    

Some investors have expressed concern over the lack of guidance for 2020 production, and while White did trim his estimates to account for shut-in production and deferred production from the recent hurricane as well as the capex guidance, he remains optimistic.

Part of this continued optimism is related to its hedging. “WTI has hedged approximately 55% of our estimated crude oil volumes for 2020 using a combination of a $60.92/bbl swap and a $63.60/ bbl x $45.00/bbl collar. WTI has hedged approximately 31% of our estimated natural gas volumes for 2020 using a $3.00/MMBtu x $1.83/MMBtu collar. We view this hedging program as very favorable in the current environment,” he explained. If that wasn’t enough, the analyst is also expecting higher crude oil prices.

Based on all of the above, White gave WTI his stamp of approval, rating it a Buy. Along with his bullish call, White's $4.50 price target implies shares could climb 77% higher in the year ahead. (To watch White’s track record, click here)

WTI has stayed relatively under-the-radar, with its Moderate Buy consensus rating breaking down into 1 Buy and 1 Hold. At $2.85, the average price target indicates 14% upside potential. (See WTI stock analysis on TipRanks)

Bed Bath & Beyond (BBBY)

Home goods retailer Bed Bath & Beyond missed the mark with its fiscal Q1 performance. That said, those in the know see better days on the horizon.

Conveying their confidence in the company, directors Sue Grove and Ann Yerger gave their BBBY holdings a boost over the last few days, purchasing $268,260 and $49,740, respectively, worth of shares.

Turning now to Wall Street, Wedbush analyst Seth Basham acknowledges that the earnings miss came as a result of light sales as well as severe margin pressure due to store closures and other pressures from the pandemic. However, he points out that as stores have reopened, the business has rebounded.

Expounding on this, the analyst stated, “Indeed, sales declined only -7% in June on a -25% decline in store sales, but comp sales in stores that reopened were down only –LSD (and many stores are comping positive). At the same time, the company’s digital business remains very strong, 80%-plus year-over-year in June. This implies run-rate double-digit sales growth in the sales base including only reopened stores and the online channel.”

Comparing BBBY to its peers, Basham commented, “This bounce back is much sharper than reported by other leading department stores that have recently reopened their stores and speaks to the strength of BBBY’s brand and a spending shift to the home goods category.”

Against this backdrop, its cash position has also been improving, with Basham going so far as to say the company might repurchase stock or debt again in the near-term. It also doesn’t hurt that CEO Mark Tritton has finished hiring the rest of the management team, with BBBY now able to ramp up its transformation plans. As part of this restructuring, it could see a “run-rate operating profit benefit of $250 million to $350 million through its restructuring initiatives, including guided to closing at least 200 Bed Bath locations over the next two years, lower product costs, supply chain optimization and SG&A efficiencies.”

Even though he is still waiting for an update on management’s plans for the $1 billion BuyBuyBaby business, its “crown-jewel," Basham is very much on board. “While the sales recovery and transformation is unlikely to be a straight line, we see strong potential,” the analyst said.

In line with his optimistic take, Basham stays with the bulls. In addition to reiterating an Outperform call, his $14 price target suggests 51% upside potential from current levels. (To watch Basham’s track record, click here)       

Other analysts are more cautious when it comes to BBBY. 4 Buy ratings, 5 Holds and 4 Sells have been assigned in the last three months, so the stock gets a Hold consensus rating. The $9.42 average price target brings the upside potential to 12%. (See Bed Bath & Beyond stock-price forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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