Earnings season is upon us yet again, frequently bringing along binary events in which stocks can move up or down dramatically, based on surprising reports. Wall Street consensus estimates can be only so accurate, and when they aren’t, a stock can sell-off or be pushed up by buying pressure. In many cases, it can be like a full-time job to examine a company’s financials in an attempt to determine if it is undervalued or not.
However, this is not the case for everyone.
Corporate insiders, defined as senior officials, individuals with more than 10% equity in a particular stock, or members of a board of directors, often have more information to work with, when deciding when to buy company shares. Trying to time the market is something many investing pros will advise against, yet some of the most successful traders do so, time and time again.
The truth is, insider trading in most cases is fully legal. The trades themselves must be submitted ahead of time to the Securities and Exchange Commission (SEC), which then publicly publishes a disclosure. These forms are available to anyone looking, but the information found in them is best visualized using TipRanks’ insider tools, like Insiders Hot Stocks and the Top 25 Corporate Insiders.
For the curious trader, these pages can be leveraged by following the insiders’ most indicative trade type, the Informative Buy. Insiders may make transactions for any number of reasons, but the Informative Buy trades are the only trades for which use their very own capital.
Utilizing TipRanks’ Daily Insider Transactions tool, let’s take a look at some of the most recent indicative trades made by insiders.
When it comes to pharmaceuticals or biotechnology, timing can be everything. A company’s shares may surge following an FDA approval, or on the flip side, collapse following a rejection by the FDA. After the news is released, the market tends to immediately digest it and react in kind.
A company which has seen considerable Informative Buys as of late is Prothena Corp. (PRTA), a late-stage clinical biotechnology firm that develops monoclonal antibodies for fighting off proteins which may cause disease. The company is hopeful that its neurological innovations will help treat Parkinson’s, Alzheimer’s, and Amyloid light-chain amyloidosis. Significantly, insiders within the company have been buying Prothena stock.
Over the last 23 days, three separate insiders on the company’s board and in senior positions have purchased several hundred thousand dollars in company stock. Most recently, the Chief Accounting Officer known as Karin Walker made a transaction of $390,230 on Friday October 22, 2021. TipRanks calculates Walker’s trades as successful 64% of the time. Moreover, her trades have netted her an annualized average return of 51.4%.
What catalyst do these insiders have for these well-sized transactions? It might be because Prothena has a pivotal Alzheimer’s treatment pipeline currently pending FDA approval. Analysts have recently weighed in on the stock and its progress, with Kennen MacKay of RBC Capital Markets observing “increasing flexibility from the FDA toward Alzheimer’s Disease (AD) clinical trial endpoints and trial design."
Indeed, the shift toward more widespread acceptance of “surrogate endpoints” could provide for a faster route to commercialization for Prothena.
While the general population may not know when or what the exact FDA outcome may be, the utility of TipRanks and its insider trading tools allows investors to closely follow the trades of those who do. When conducting due diligence, check with TipRanks to learn about the company’s most privy shareholders and their activity.
Just as with many sectors of the economy, energy has recently been soaring. Over the last two months, publicly traded oil and gas companies have rarely seen more than a of couple consecutive red days. The current macro environment of persisting inflation is driving up the cost of nearly everything, and the high energy demand from a reopened economy is propelling prices even more.
Along with this trend, HighPeak Energy Inc. (HPK) has seen its share price rise nearly 30% since the start of the month. The company focuses on oil and natural gas exploration services in the Midland basin in western Texas. After a recent pullback in valuation about a week and half ago, it appears an insider has eyes on further upside.
On Friday October 22, 2021, President and member of the board of directors Michael Hollis made his move. This came in the form of an Informative Buy worth $454,540 in shares. Hollis’ collective trades have thus far outperformed the broader market, with 52% of them achieving success in some way, and his average annualized return standing at 12.8%.
Unquestionably, as oil and gas prices continue to soar, so will the companies that facilitate their extraction.
West Texas’ Midland Basin is a segment of the larger Permian Basin, known for its massive oil and gas deposits. The region is of high importance to U.S. energy industry and its output. Its significance seems to grow each passing day that OPEC maintains its capped production levels. The oil rich group has refused to increase production after international calls for more supply, and instead has thus far chosen to inflate costs of the commodity.
While ample resources exist on fluctuating oil and natural gas prices, a company involved with the commodities can move most suddenly on inside news unavailable to the average investor. While this news can be hard to discern or access, the corporate insiders making large trades provide a strong clue.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.