For investors, finding the right sign is part of the game. Stocks don’t necessarily pick themselves, and the investors who do pick them need to know that they’re making the right choice. Fortunately for investors – and the safety of their portfolios – there are reliable signals that a stock is worth buying. One of the best is the insider buying.
Insiders are corporate officers, deeply invested in their company’s success or failure, they are usually stockholders themselves – but they are responsible for more than just their own portfolios. Corporate officers are beholden to their Boards of Directors, to their fellow company officers, and to the stock owning public to ensure profits and returns on the shares – and so, when these insiders start buying large blocs, investors should take note.
TipRanks follows the insiders’ trades, making use of the publicly published stock moves to track them. The Insiders’ Hot Stocks page provides the scoop on which stocks the market’s insiders are buying – or selling – so that you can make informed purchases. We’ve picked three stocks with recent informative buys to show how the data works for you.
Agree Realty Corporation (ADC)
First on the list is a major company in the REIT segment. Agree Realty, based in Metro Detroit, focuses on acquiring and developing properties for big-name retail tenants. At the end of 3Q20, Agree’s portfolio included 1,027 properties across 45 states, and totaled some 21 million square feet of leasable area. The company’s tenants include 7-Eleven, AutoZone, Dollar General, and Wendy’s franchises, among many others.
Agree’s third quarter results, reported earlier this month, showed a sequential increase in EPS from 76 cents to 80 cents, and total rental income of $63.7 million. The company reported a quarterly record of $470.7 million in rental property investments, and increased its dividend. The 60 cents a share dividend offers investors a 3.67% yield.
All of that comes at a time when many REITs have been reporting difficulty in collecting rents, as tenants have been coping with the financial repercussions of the corona crisis. In this area, however, Agree has been conspicuously successful. The company reported receiving 96%, 97%, and 99% of rents due in July, August, and September. Agree has deferral arrangements for another 2% of its tenants. This success in rent collection has provided the base for the solid quarterly income stream already noted.
On October 22, Agree has seen one big insider trade. CEO and President Joey Agree bought up 15,293 shares, shelling out over $1 million. This brings the insider sentiment here into positive territory.
Covering this stock for Raymond James, analyst RJ Milligan writes, “With rent collections at 99% for September, ADC continues to play offense while most peers are still tracking down rents. We believe the big increase in acquisition guidance will push Street estimates meaningfully higher for 2021/2022, which will likely serve as the positive catalyst ADC investors have been waiting for.”
Milligan rates the stock a Strong Buy, and sets an $82 price target that indicates room for 27% upside growth in the year ahead. (To watch Milligan’s track record, click here)
Overall, ADC gets a Strong Buy consensus rating, based on a unanimous 5 Buy reviews given recently. ADC shares are selling for $64.61 and their $74.38 average price target makes the one-year upside 14%. (See ADC stock analysis on TipRanks)
First American Financial (FAF)
Next on our list is First American Financial, a title and lenders insurance company. FAF is a staple of the mortgage industry, where its insurance products are essential to guaranteeing home loans. The company also deals in property and casualty policies, and saw $6.2 billion in total revenues last year.
After seeing sharp declines at the top and bottom lines in the first quarter this year during the economic shutdown period provoked by the coronavirus pandemic, FAF has seen a clear recovery. The company saw sequential growth in revenues in Q2 and Q3, with the top line growing from $1.4 billion in the first quarter to $1.6 billion in the second and finally $1.9 billion in the third quarter. Q3 earnings grew 24% to $1.31 per share.
FAF has seen one major insider buy recently. It wasn’t a million dollars, but the $191,000 purchase of 4,000 shares was still significant and gave the stock an overall positive insider sentiment. The buyer was Mark Oman, from the Board of Directors.
Among FAF's fans is Mark Hughes, 5-star analyst with Truist Financial. The analyst gives the stock a Buy rating with a $66 price target to suggest an upside of 41% in the next 12 months. (To watch Hughes’ track record, click here)
Backing his stance, Hughes notes the company’s steady flow of business, writing, “Purchase open orders last month equaled 2,500 per day, up 21% year over year. This compared to the July total of 2,400 per day, which was up 6% versus that same month last year. In the refi category, the daily number held steady sequentially at 3,200, up 46% compared to August 2019.”
"Our price target of $66 assumes the stock trades at just under 15x our 2021 earnings estimate, at the upper end of the recent range for the title companies – we believe this is appropriate in light of healthy fundamentals in the sector – but still with a wider-than-usual discount to the S&P 500," the analyst concluded.
Hughes’ review is one of two recent recommendations on record for FAF, making the analyst consensus here a Moderate Buy. The average price target is $65, giving the stock a 39% upside potential from the current share price of $46.62. (See FAF stock analysis on TipRanks)
Eastern Bankshares (EBC)
The last stock on our list is a new one to the market. Easter Bankshares is a holding company, the owner of Eastern Bank, a Massachusetts-based community bank – and the oldest mutual bank in the US. Earlier this month, Eastern conducted a changeover from mutual organization status to a join stock company, selling over 179 million shares of common stock. The offering price was $10 per share, and the sale grossed over $1.79 billion for the company.
And this is where the insider trades come in. Eastern’s corporate officers made large stock purchases during the IPO. Company CEO and Board Chairman Robert Rivers made the largest single purchase, for $2 million, and executive VP Barbara Heinemann bought $1.02 million worth of the stock. Five Board members made purchases in excess of $1 million or more.
For the most part, these buys were the company officers making their personal stakes in the company, and setting up stock holdings as part of their compensation packages. It’s a routine in the corporate world. But these large stock buys – 7 of at least $1 million, and 10 more of $200,000 or more – show confidence in the company and a willingness by the top brass to put their own skin in the game.
Turning to the analyst community, analyst Laurie Havener, who covers this new stock for Compass Point, wrote: "We like the EBC story as it offers investors a unique opportunity to invest in an overly-well-capitalized, 200+ year old, Boston based bank substantially below book. Importantly, EBC has a desirable franchise footprint, ranking #5 in the Boston MSA, with a fabulous low-costing deposit base.”
To this end, Havener rates EBC a Buy along with $15 price target, suggesting that this bank holding company has room for 24% upside growth in the year ahead. (To watch Hunsicker’s track record, click here)
Judging from the consensus breakdown, it has been relatively quiet when it comes to other analyst activity. Over the last few weeks, only 2 analysts have reviewed the bank. Both of which, however, were bullish, making the consensus a Moderate Buy. (See EBC stock analysis on TipRanks)
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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