3 Big-Buy Stocks Are Sparking Insider Interest
When markets become volatile, it is natural to look for a signal to reduce additional noise and clarify stocks that are destined for long-term gains. A signal that some investors are latching onto is the insider trading trend.
CEOs, CFOs, COOs, and board members all have access to the inner workings of their business and their roles hold them accountable for business performance. It gives them a vested stake in the company – and it also gives them a much clearer view of the potential performance of their company’s stock. To level the playing field, federal regulators require insiders to publish their trades in a timely manner, allowing the retail investor to see what insiders are doing.
In this context, we used the Insiders’ Hot Stocks tool, from TipRanks, to research details on three stocks that have recently attracted substantial “informative buying” from their leaders. All three are also considered “strong buys” by the consensus of Wall Street analysts. Let’s dig a little deeper, to find out what should attract them to our attention.
We’ll start with Natera, a leader in medical testing. Natera is focused on cell-free DNA testing, or cfDNA; that is, to do genetic testing based on the subject’s DNA fragments floating freely in the bloodstream. The company has several testing platforms, including Panorama as a set of non-invasive prenatal tests; Signatera, a set of tumor-specific assay tests to generate individualized cancer treatments; and Prospera, a set of top-notch organ tests, to screen for rejection before transplant surgeries. The Texas-based company has expanded its operational footprint to 90 countries around the world and has more than 3 million cfDNA tests performed in total.
As Natera’s business boomed in 2021, the company’s net loss worsened. Natera generated $173 million in revenue in 4Q21, up 54% year-over-year. This included a 51% increase in product revenue. For the full year 2021, the company recorded $625.5 million in revenue, an increase of 60% over the previous year. During the year, Natera processed over 1.45 million cfDNA tests. This represents a 51% increase from the 961,000 tests processed in 2020.
At the same time as revenues increased, Natera recorded larger net losses. For 4Q21, the company reported negative EPS of $1.48. This is a 66% loss increase over 4Q20. For all of 2021, Natera’s net loss was $5.21 per share, nearly double the EPS net loss of $2.84 from the pre-corona year of 2019 .
For investors who follow insider movements, Natera saw several important developments this month. First, the company was accused earlier this month of deceptive billing practices. This allegation caused a sell-off in NTRA stock – it also prompted the company to decisively rebut the charges the following day. This issue has not yet been resolved; the company points out that the allegation was made by a short seller research firm.
A week after the billing allegations, on March 14, the company announced that all senior executives, including CEO, CFO, COO, co-founder and executive chairman, as well as nonemployee board members, would take the remainder of their 2022 salaries in company stock rather than cash. The company presented the move as an insider vote of confidence in the stock.
A few days after this announcement, Roelof Botha, the lead independent director on the board, spent more than $5 million to buy 153,000 shares.
Assessing the recent allegations, BTIG analyst Mark Massaro noted: “We believe [the] stock weakness has been exaggerated…NTRA management has decisively refuted all of the allegations, which helps to allay some of our concerns…We believe the most likely scenarios range from NTRA avoiding any wrongdoing in this matter to potentially NTRA possibly paying a settlement agreement in the event of a formal investigation.
To that end, Massaro gives Natera stock a Buy rating, and his $100 price target indicates confidence in a 152% year-on-year upside. (To see Massaro’s track record, Click here.)
Overall, Wall Street remains bullish here, with the recent 10 reviews breaking down 9 to 1 in favor of buys over holds for a strong buy consensus rating. The shares are priced at $39.25 and their average target of $103.75 implies an upside of around 164% for the year ahead. (See NTRA stock forecast on TipRanks)
Vita Coco Company (COCO)
Coming next to our insider shopping list. The company owns several brands, including its flagship Vita Coco, Runa energy drink, a protein-infused water called PWR LIFT, and Ever & Ever, a sustainable enhanced water. Vita Coco boasts a 46% share of the US coconut water and coconut beverage market, a larger share than its top 10 competitors combined.
Vita Coco went public in the fall of 2021, with an IPO that saw the company put 11.5 million shares on the market. Of this total, 9 million shares were sold by existing investors and 2.5 million were sold directly by the company. The initial price of $15 per share was below the expected range of $18 to $21 each. Even at the lowest price, Vita Coco raised $173 million in the IPO.
During the corona crisis, Vita Coco reported an increase in sales, as consumers stocked up on bottled drinks – and showed a preference for healthier options. In 2021, the company said sales remained strong, with a 22% year-over-year gain to $380 million. This was driven by the 39% growth of the Vita Coco coconut water brand. The company reported annual net income of $19 million, or 35 cents per share, in 2021.
As for insiders, we see that Vita Coco co-CEO and board member Martin Roper last week bought more than $875,000 worth of company stock, a buy of 100,000 shares of the company. Roper now owns more than 435,000 shares of COCO.
Evercore analyst Robert Ottenstein sees the company well positioned for future growth and writes, “Consumer migration to products perceived to contribute to a healthy lifestyle, and the demographic driver of Hispanic and Asian American populations will continue to benefit from COCO’s brands and the non-beverage category can claim greater authenticity than coconut water. COCO’s understanding of the category, along with its unreplicable supply chain, has allowed it to beat the brands of much larger companies and maintain its dominant market share.
Consistent with his bullish outlook, Ottenstein rates COCO as an outperformer (i.e. a buy), and his $15 price target implies a year-over-year upside of around 63%. (To see Ottenstein’s track record, Click here)
Evercore’s stance isn’t the only bullish view, as the stock has a strong buy consensus rating backed by a 3-1 split of buys to books. The stock is selling for $9.18 and its average price target of $12.50 suggests a 36% upside from that level. (See COCO’s stock forecast on TipRanks)
Mission Production (AVO)
The final stock we’ll be looking at here is Mission Produce, a small-cap company that’s been a major player in the global avocado market for over 35 years. Mission manages both the supply and production of avocados, as well as the distribution, for an extensive network of retail, wholesale and foodservice customers, and four main packing facilities. The company has operations in California, Mexico, Peru, Chile, New Zealand and South Africa, and its distribution centers offer additional services including ripening, bagging, packaging and logistics . Mission also has over 10,000 acres of growing space, spread across the globe to take advantage of growing seasons at different times. In addition to avocados, Mission also markets mangoes.
Earlier this month, Mission released its financial report for the first quarter of fiscal 2022. The report showed an 18% drop in the volume of avocados sold, which was more than offset by a 50% increase. % of average selling prices compared to the first quarter of fiscal 2021. Total revenue for the quarter was $216.6 million, up 25% year over year. Despite the increase in revenue, the company reported a drop in earnings from 3 cents per share in the year-ago quarter to a net loss of 19 cents in the current report. AVO shares fell more than 20% after the earnings release.
On the insider front, Stephen Barnard, president and CEO of Mission Produce, bought 25,000 shares of AVO in the middle of this month, paying more than $293,000 for the stock.
Despite the current low share price, Stephens analyst Ben Bienvenu believes AVO is a stock to watch. He writes: “We believe the stock is attractive to long-term oriented investors. With volumes poised to recover as we shift to a new source of supply, we expect results to improve as we pivot into the second half of AVO’s fiscal year and beyond. The secular volume growth story is intact, the company’s market leadership position is intact, and we believe LT’s shareholder value will be realized.
Bienvenu establishes an overweight (i.e. buy) rating on AVO commensurate with his comments above, and his price target of $20 suggests the stock has room for an upside. 70% over the next 12 months. (To see Bienvenu’s prize list, Click here)
Overall, Wall Street tends to agree with the bull. The stock’s 4 recent valuations include 3 Buy and 1 Hold, for a strong Buy consensus rating, and the $19 mid-price target indicates 61% upside potential from the current stock price of $11.78. (See AVO stock forecast on TipRanks)
To find great stock trading ideas at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ stock information.
Warning: The views expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.