Every stock has a backstory, and the backstories offer hints and clues to what lies ahead. A smart investor will learn which clues or signals bode best for the stock. These are the ones to follow.
One sound signal is insider buying. These insiders are corporate officers; they hold positions of high trust and responsibility in their companies, with accountability to shareholders and Boards for company success and profits – and they have deep knowledge of the company’s inner workings and plans. Insiders may trade their company stock, but they are required to publish those transactions regularly.
Investors can follow those published trades, secure in the knowledge that a Harvard study recently concluded that corporate insiders are well in-tune to the ‘near-term developments with their firm, and that insiders trades tend to earn above-normal returns in excess of 6% annually.
To get our own feel for this strategy, we’ve used the TipRanks Insiders’ Hot Stocks tool to pull up details on three equities whose insiders have been buying recently. There are other positive signifiers to follow; these stocks are rated as Strong Buys by the analyst consensus and are projected to pick up steam in the months ahead. Let’s take a closer look.
Berkeley Lights (BLI)
First up is Berkeley Lights, a biotech company following a fascinating medical technology to a logical conclusion. The company is developing microdroplet optofluidic technology, and using it to locate and culture individual cells for precisely targeted biomedical research applications. The Berkeley Lights Platform and technology allows researchers to quickly find exactly the cells they need – for faster and more accurate research at a lower cost.
The last 12 months have been tough on Berkeley Lights. The company’s share price has fallen sharply during this period, losing 76% of its value since its December 2020 peak. During that time, the company wrestled with short-selling fraud accusation related to its July 2020 IPO. The accusations claimed that Berkeley Lights held the IPO even though the flagship product was not ready for prime time.
Recent events are starting to disprove that. In October, Berkeley Lights announced two important sales – and in each case the customer was purchasing a third Beacon optofluidic system from the company. The first company was Genovac, a research organization that develops novel antibodies for diagnostic, therapeutic, and research purposes. The second customer was the major drug company GSK, which is also using the newly purchased Beacon optofluidic system for work on antibody therapeutics.
In other positive news for Berkeley Lights, the company reported record-level revenue in 3Q21. The top line reached $24.3 million, up 31% year-over-year. During the quarter, the company placed 13 new systems and boosted its installed base to 105 platforms. Among these numbers are 6 previously existing customers, including Genovac and GSK mentioned above.
In that context, we can note an important insider buy on this stock. Gregory Lucier, of the Board of Directors, made a purchase of 20,704 shares on November 5, paying more than $500K for the stock. Another ‘informative buy’ here, although smaller, was made on November 8 by Rothman James. The director spent $97,400 on 4,000 shares of BLI.
These actions will not be surprising to BTIG analyst Mark Massaro, who highlights several reasons to back the stock.
“The company is executing on both its capital sales model and its newer subscription model. We view BLI as an emerging global leader in helping researchers characterize live cells for accelerating development of biotherapeutics and other cell-based products, from antibody therapeutics and cell therapy to gene therapy and synthetic biology. BLI’s platforms and BioFoundry enable researchers access to single-cell specific digital information and help identify and isolate the best cells to develop the best therapies to the market much faster and a lot cheaper,” Massaro opined.
“We continue to like BLI here and defend the stock following significant weakness in the stock recently,” the analyst summed up.
In light of these comments, Massaro rates BLI a Buy, and he sets a $45 price target that implies an upside potential of 79% for the year ahead. (To watch Massaro’s track record, click here)
Overall, there are six reviews on file here from the Street’s analysts and they line up 5 to 1 in favor of the Buys over the Hold, for a Strong Buy consensus rating. The shares are priced at $25.15, with a $55.75 average price target – even more bullish than Massaro’s – suggesting an upside of ~123% in the next 12 months. (See BLI stock analysis on TipRanks)
ACI Worldwide (ACIW)
The second stock we’ll look at is in the payment provider niche. ACI Worldwide is based in Naples, Florida, and offers products to facilitate real-time electronic payments for business customers, including banks, merchants, B2B customers, and third-party payment processors. ACI’s products include ATM machine software, and point-of-sale terminals for merchant use, and the company has become a world leader in real-time payment processing, facilitating digital payments for more than 6,000 customers globally – to a total of $14 trillion daily.
ACI has seen its share price surge in recent days, after the 3Q21 quarterly report addressed investor concerns about the company’s future performance. Management aggressively raised the 2021 full-year revenue and earnings guidance in the Q3 report. Investors were calmed, however, on the company’s assurance that 99% of that guidance is based on expanded contracts with existing clients. These contracts are already signed – but the revenue will not be counted until the contracts’ effective dates. This means that the new revenue and earnings guidance, while not showing up in current numbers, is ‘baked in’ to the next quarter.
In the meantime, ACI reported $317 million in Q3 revenue, which was just a hair higher than the $315 million reported in the year-ago quarter. EPS, at 12 cents, was similar to the 13 cents reported in 3Q20. It’s important to remember that ACI’s pattern is to show the strongest results in Q4, which includes the holiday shopping season.
Looking ahead at the full-year updates, management raised revenue expectations to the $1.355 billion to $1.360 billion range. While only up 1.3% at the midpoint, it’s again important to remember that the increase is based on contracts already signed. The predicted earnings for 2021 are guided at $380 million to $385 million, the upper end of previous predictions.
So it should not surprise that according to the insider trading data, CEO and President Odilon Almeida spend $500,322 on a major share purchase of ACIW. Almeida increased his stake by 15,352 shares on November 8.
Among the bulls is BTIG’s 5-star analyst Mark Palmer, who rates ACIW a Buy along with $46 price target. This figure implies share appreciation in the next 12 months of 32%. (To watch Palmer’s track record, click here)
Backing his stance, Palmer noted, “Much of ACIW’s revenue growth is driven by expansions of contracts with existing clients, and such revenue is not recognized until the date on which the revised contracts go into effect. As such, management’s increase in ACIW’s full-year 2021 revenue guidance… Just as important, in our view, was management’s statement in conjunction with ACIW’s 3Q21 report that the company had signed 99% of its guided full-year 2021 revenue, giving them ‘high confidence’ in its ability to achieve its increased outlook.”
Overall, the Strong Buy consensus rating on ACIW is unanimous, based on 3 recent positive analyst reviews. The current trading price is $34.52 and the $42.67 average price target suggests room for ~23% growth from current levels. (See ACIW stock analysis on TipRanks)
We’ll warp up with Rent-A-Center. This company is an industry leader in rent-to-own options, providing flexible lease-purchase agreements – without long-term debt obligations – to a credit-constrained customer base. The Texas-based company offers a wide range of products, including consumer electronics, appliances, furniture, and computers through more than 1,900 RAC stores in the US and Mexico. Rent-A-Center also operates through its eponymous e-commerce platform, and has an active franchising business with 460 locations.
RAC’s revenues and earnings rose sharply from the end of 2020 through the first half of 2021. The third quarter revenues came in at $1.18 billion, up 65% yoy, while EPS came in at $1.52, up 55% yoy.
However, the generally improving economy, with unemployment down and wages up, has gone a long way toward normalizing consumer payment activity – and somewhat reduced demand for RAC’s services. The company cut its full-year guidance accordingly, and shares have fallen ~18% in response.
The drop in share price has not discouraged two Board members from increasing their holdings on November 8. Director Christopher Hetrick made the smaller purchase, of 15,000 shares, for $667,500. The second, larger, purchase was by director Jeffrey Brown, who spent $1.069 million to buy up 24,330 shares of RCII.
Wall Street likes this rental service company, and 5-ster analyst Bobby Griffin, covering the company for Raymond James, lays out a solid bull case.
“We continue to view Rent-A-Center’s outlook favorably as Rent-A-Center continues to benefit from 1) potential tighter credit conditions in CY21/CY22 (more RTO customers), 2) the impact of inflation on the traditional retail business (drives more gross margin dollars), 3) further growth in its virtual lease to own business through its digital initiatives, expanded capabilities with Acima and new retail partnerships, and 4) improved value proposition in the core Rent-A-Center business. Overall, we continue to view the risk/reward setup favorably, especially when factoring in the incremental upside from the Acima acquisition,” Griffin wrote.
Griffin sets a Strong Buy rating on RCII, along with a $65 price target that suggests room for ~42% upside in the coming year. (To watch Griffin’s track record, click here)
Overall, the 5 recent analyst reviews on this stock all agree that it’s a buying proposition, for a unanimous Strong Buy consensus rating. RCII is priced at $45.86 and has an average price target of $72.50, making the one-year upside a robust 58%. (See RCII stock analysis on TipRanks)
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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.