With so much information proliferating the internet about equity market opportunities, it’s hard to know whom to trust. That’s especially the case when you consider insider stocks or transactions that corporate insiders — executives, high-level employees and major stakeholders — execute on the companies with which they are associated.
According to a Dec. 1, 2021 report from CNBC, “CEOs and corporate insiders have sold a record $69 billion in stock in 2021, as looming tax hikes and lofty share prices encourage many to take profits.” These names include a who’s who of business titans, which then raises the question — why should you purchase insider stocks when the people closest to the business are dumping them?
Now, let me be clear: On balance, there’s nothing wrong with executives dumping so-called insider stocks. Maybe the CEO needed to buy a bigger helicopter pad for his new helicopter. Or he had to get the latest exotic car to show off to his friends in the Hamptons. Who knows? The point is, insider selling doesn’t necessarily spell nefarious activity.
Nevertheless, I go back to the original question. Why should you acquire insider stocks when the insiders themselves seem in a rush for the exits? I don’t think retail investors should overthink this. If a particular security had a high-confidence probability of moving higher, it behooves executives to hold them. That way, they can buy more helicopters, Lambos and whatever else they desire.
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But that’s not why we’re here today. Instead, I’d like to consider the opposite case. Below are the insider stocks to buy that executives are running toward, not away from:
- Incyte Corp (NASDAQ:INCY)
- Indus Realty Trust (NASDAQ:INDT)
- Blue Apron (NYSE:APRN)
- PennyMac Financial Services (NYSE:PFSI)
- 2U Inc (NASDAQ:TWOU)
- Adtalem Global Education (NYSE:ATGE)
- Opko Health (NASDAQ:OPK)
Before we get started, I must provide a heavy caveat. Just because an executive is buying insider stocks does not mean these securities will automatically fly higher. They could be getting it wrong, just like anybody else. Still, it’s at least something to think about if company employees actually believe in their marketing pitch.
Insider Stocks to Buy: Incyte Corp (INCY)
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Love must be in the air because on Valentine’s Day, one unnamed entity — listed by Barchart as an “American shareholder” — bought nearly $107 million worth of shares from Incyte Corp, a biopharmaceutical company. According to its website, Incyte specializes in molecular products tailored for individual program needs, including small molecules, monoclonal antibodies and bispecific antibodies.
With its focus on addressing critical unmet medical needs, INCY admittedly saw a limited bump up from the dynamics stemming from the coronavirus pandemic. Indeed, since the summer of 2020, Incyte shares have been locked inside a bearish trend channel. This negativity has extended into this year, with INCY down more than 8% since the January opener.
Still, INCY has been printing a series of higher lows since late November of last year. Perhaps this American shareholder sees something others don’t. Either way, if you’re in the mood for speculation, consider INCY in your list of insider stocks to buy.
Indus Realty Trust (INDT)
Another unnamed entity who also got hit by Cupid’s arrow put down a hefty wager on Indus Realty Trust, to the tune of nearly $6.9 million. According to its website, Indus is a “real estate business engaged in developing, acquiring, managing and leasing high-quality industrial and logistics properties.”
Further, the company features a “modern logistics portfolio of 36 buildings aggregating approximately 5.4 million square feet in Connecticut, Pennsylvania, North Carolina, South Carolina and Florida in addition to several office/flex properties and undeveloped land.”
On paper, that’s all well and good. During the new normal, Indus’ business has veritably exploded, with INDT stock more than doubling since the spring doldrums of 2020. But due to recent concerns regarding consumer inflation, it’s possible that INDT could see some slow down.
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Therefore, Indus is one of the insider stocks to be cautious about. Nevertheless, the influx of serious money just recently suggests that some members of the smart money community believe in its momentum.
Insider Stocks to Buy: Blue Apron (APRN)
Source: Roman Tiraspolsky / Shutterstock.com
An ingredient-and-recipe meal kit company, Blue Apron is actually a cautionary tale about betting too heavily on an initial public offering. Starting with much fanfare when APRN made its debut in the public market back in 2017, it has since cratered. Since its first public closing session, shares are down more than 95%.
Frankly, I had completely forgotten about Blue Apron, considering that food-delivery services have dominated the collective consciousness, especially during the worst of the Covid-19 lockdowns. However, investor and entrepreneur Joseph N. Sandberg bought a cool $5 million — and an extra two bucks — worth of APRN.
In just one move, Sandberg turned Blue Apron into one of the most controversial among insider stocks. It’s not that the company itself is scandalous. Rather, the meal-kit service really punished early investors, so I’d imagine there are huge trust issues here. Nevertheless, if you don’t mind living dangerously, APRN might be the comeback kid you’re looking for.
PennyMac Financial Services (PFSI)
If you don’t mind dialing up the risk factor to 11 for insider stocks, you could take a look at PennyMac Financial Services. According to its corporate profile, PennyMac is an American residential mortgage company. Its business focuses on the production and servicing of U.S. mortgage loans and the management of investments related to the U.S. mortgage market.
Right there, alarm bells should go off. It’s true that housing prices have skyrocketed in recent years. As well, I believe most real estate brokers argue that housing prices can continue moving higher since the lift in demand is due to all-cash buyers and prime borrowers — as opposed to subprime borrowers that led to the 2000s decade housing crash.
Really? How much higher can they go before economic realities start to kick in?
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If it were me, I wouldn’t bother putting my money at risk with PFSI. However, PennyMac board member Farhad Nanji put down $5.8 million, so that alone is saying something.
Insider Stocks to Buy: 2U Inc (TWOU)
One of the growing numbers of educational technology (edtech) firms, 2U Inc contracts with non-profit colleges and universities to build, deliver and support online degree and non-degree programs. During the worst of the Covid-19 crisis, TWOU shares skyrocketed as you might imagine. With seemingly everything occurring online, acquiring 2U Inc just made logical sense.
But what about now? As I discussed several months ago in an interview with CGTN America, U.S. consumers — and I imagine people across the globe — are tired of the constant lockdowns and mitigation protocols. A surge of demand for regular social experiences has erupted, which in theory doesn’t bode well for online education providers.
Then again, the migration pattern that occurred during the pandemic — from busy metropolitan areas to the suburbs or even rural areas — implies that more people are physically untethered from your typical commerce centers. Thus, TWOU could be a contrarian winner among insider stocks.
Certainly, 2U chair Paul A. Maeder thinks so, having recently acquired $1 million worth of TWOU stock.
Adtalem Global Education (ATGE)
Per its website, Adtalem Global Education is billed as a “leading workforce solutions provider that partners with organizations in the healthcare and financial services industries to solve critical workforce talent needs by expanding access to education, certifications and upskilling programs at scale.”
As you can imagine, healthcare has been in the news a lot due to the Covid-19 pandemic. However, working in this field has caused many professionals stress, which may help to explain the underperformance of Adtalem shares. On a year-to-date basis, ATGE is down nearly 30%, making it one of the heavy laggards among insider stocks.
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Still, that didn’t stop Michael W. Malafronte, company director, from acquiring a little bit under $1 million of ATGE shares. Interestingly, this transaction comes after a massive dip in the security’s price between Feb. 8 and Feb. 10. Does Malafronte sense good times ahead? It’s risky, but you could give it a shot with funds earmarked for speculation.
Insider Stocks to Buy: Opko Health (OPK)
Source: Shutterstock / PopTika
Arguably the riskiest name on this list of insider stocks, Opko Health is a medical test and medication company focused on diagnostics and pharmaceuticals. Particularly, Opko seeks to serve unmet patient needs. While a noble pursuit, the company hasn’t translated this feel-good narrative into a profitable one in terms of market performance.
On a YTD basis, OPK stock is down 33%. In the trailing year, it’s shed 42% — and the comparisons start to get gnarly the further out you go. Interestingly, though, on a lifetime basis, OPK is still relatively close to its 1995 initial public offering price of $4.50, which is remarkable for the underlying company, having seen shares ebb and flow across multiple decades.
While I question the viability of lesser-known firms in this sector, Opko recently got a shot of confidence from Dr. Phillip Frost, the company’s chair and CEO, who put down $303,570 to acquire 100,000 shares.
To be fair, this shouldn’t be the end-all, be-all for OPK. But at a time when so many chief executives are abandoning ship, it’s nice to see someone believe in their own company.
On the date of publication, Josh Enomoto 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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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