In such a confused financial environment, investors are hard-pressed to find a market strategy that will bring positive results. The old saws may not be reliable. One way out of the quandary is to follow the insiders.
These corporate officers have a vested interest in their own companies – they are responsible to shareholders for performance, and they are also shareholders themselves – so when they start buying large bundles of shares, investors should take note.
TipRanks has the tools to help you do just that. The Insiders’ Hot Stocks page shows which stocks top insiders are most active on, for both purchases and sales. You can sort insider trades by a variety of filters, including trading strategy. We’ve done some of the legwork for you, and pulled up three stocks with recent informative buy-side transactions. Here are the results.
Sutter Rock Capital (SSSS)
First on our list is a stock in the financial sector, Sutter Rock Capital. This venture capital investment corporation provides capital backing for private companies, giving them access to funds for new projects. Sutter Rock’s portfolio includes investments in 22 companies, worth an aggregate $159.9 million.
The insider moves over the past three months have all been informative buys. Most recently, Robert Birch, a >10% owner in the company, has been purchasing large blocs of stock. In June alone, Birch has bought 180,000 shares, paying a disclosed $1.15 million for the stock.
Ladenburg analyst Jon Hickman notes that Sutter Rock’s portfolio is well-positioned to gain in current economic conditions: “…several of the top holdings are actually performing very well and even benefiting from the current environment. The education-related names (Course Hero, Clever, and Coursera) are leaders in online learning/education space which has become even more in demand with the shuttering of physical classrooms at all levels. Additionally, the services provided by both Palantir and Nextdoor have gained traction in the wake of the COVID outbreak.”
Hickman’s $12.25 price target on the stock indicates a high upside potential of 85%, and supports his Buy rating.
The analyst consensus on SSSS shares is a unanimous Strong Buy, based on 3 Buy ratings given in the last three months. Shares are priced at $6.5, and the average price target of $10.75 implies a strong upside of 65% for the coming year.
Extreme Networks (EXTR)
Next up, Extreme Networks, is a tech company. Extreme Networks operates in the network infrastructure segment, designing, developing, and manufacturing the equipment for both wired and wireless networks, and developing software for network analytics, management, and security.
Edward Kennedy, a director with Extreme Networks, has made the recent insider trades on this stock. In the past week, he has bought two blocs, totaling 150,000 shares worth $587,100. Kennedy’s total holding in EXTR is valued over $2.2 million, so these purchases were a significant percentage of his stake in the company.
While network companies – especially those involved in wireless networks – found themselves in a strong position during the corona crisis, EXTR saw its stock and earnings drop sharply in Q1. Yet, analysts expect to see EXTR make a strong sequential gain in its next quarterly report.
5-star analyst Christian Schwab of Craig-Hallum is optimistic on Extreme Networks’ prospects, and rates the stock a Buy. His $6 price target suggests the stock has room for 26% upside growth in the next 12 months.
Supporting his thesis, Schwab writes, “Should the company experience a more accelerated “V-shaped” recovery and quickly return to a $1+ billion with continued modest topline growth and operating margins approaching management’s previously targeted 15% level, we calculate the business can drive annual EPS power approaching $1.00.”
Overall, Extreme Networks has a Moderate Buy analyst consensus rating, based on 5 reviews which include 3 Buys and 2 Holds. The stock is selling for $4.75 after the market gyrations of recent months, and the $5.67 average price target indicates a possible 19% upside potential.
HP, Inc. (HPQ)
Last on our list is an old name in the personal computer world, HP. Split off from Hewlett-Packard in 2015, HP has the parent company’s personal computer and printer divisions. HP is consistently in the top three vendors of personal computers, worldwide, measured by market share and sales volume; it was ranked second in 2019, with a 22% market share.
Two insiders have made informative purchases here in June. Enrique Lores, President and CEO, bought 13,500 shares for over $207,000, while board member Robert Bennett picked up 67,000 shares for just over $1 million.
Since the February market crash, HPQ has seen extreme volatility. Since mid-March, HPQ shares have been bouncing between $13 and $17, a significant drop from the stock’s February peak of $23. Despite the inconsistent share performance, HP management declared it’s third dividend of the fiscal year, to be payable in July. The payment, at 17.62 cents per share, gives a yield of 4%, more than double the average among tech sector peers.
Amit Daryanani, 5-star analyst with Evercore ISI, sees HPQ with a stable niche, noting, “…demand rose during the quarter as some consumers upgraded home devices in light of remote work.” The analyst reiterated his Buy rating on the stock, along with a $21 price target implying a 20% one-year upside potential
The Hold consensus rating on HPQ reflects both the stock’s volatility and analyst concerns over supply and distribution chain disruptions during the COVID-19 pandemic. Shares in HPQ are selling for $17.50, and the average price target of $17.92 indicates a minimal upside.
