Many investors are familiar with the idea that there are many reasons why insiders sell shares, but there’s only one reason they buy. Insider buying indicates a belief that a company’s stock is undervalued.
Heavy insider buying should make you curious. When you research the reasons for why insiders are buying it can help reveal a buying thesis you may not have considered. It can also lead you to companies and stocks you may not be that familiar with. But part of investing is being curious. It’s always good to build a watchlist. And stocks with strong insider buying are worth putting on that list.
Insider buying is only one data point that investors should consider before taking a position in a stock. If other metrics are positive, it can also add to your confidence. I recommend using a stock screener to help you quickly create a list of stocks with strong insider buying. Here are seven I’ve been watching.
Bristol-Myers Squibb (BMY)
Bristol-Myers Squibb (NYSE:BMY) had two insiders making three buys in the last 90 days. Two of those buys came from Chief Executive Officer (CEO) Christopher Boerner.
The catalyst was likely the announcement of the biotech giant’s licensing deal with SystImmune which could be worth up to $8.4 billion. However, finalizing the deal will only cost Bristol-Myers Squibb $800 million. That’s not a big issue for a company that generated full-year profits in 2022 of around $15 billion.
BMY stock is down 26% in 2023 and is trading near its 52-week low. The key reason is that the company lost patent protection on its popular cancer drug, Remlivid. But with biotechs, you always have to watch the pipeline. The deal with SystImmune only adds to the company’s robust pipeline, specifically in the oncology area.
Bristol-Myers also has a number of cash cows like the blood thinner, Eliquis. And Remlivid still has a patent thicket that leaves it protected for some indications into 2026.
Now is an attractive time to consider BMY stock. It’s trading at just 6.8x forward earnings and has a reliable dividend that currently yields 4.43%.
Occidental Petroleum (OXY)
I recently put Occidental Petroleum (NYSE:OXY) on a list of stocks to buy if the Federal Reserve managed a soft landing. At that time, I noted that the stock was below the price where Warren Buffett had made two buys earlier this year.
As it turns out, I could’ve waited a couple of days and Buffett would have written the copy for me. In the week of December 11, Buffett’s hedge fund Berkshire Hathaway (NYSE:BRK-B) bought approximately $300 million of OXY stock.
Some of this may be due to the fact that Occidental is in line for a number of green credits. However, I tend to believe that it’s a nod to the idea that oil prices are heading higher.
Occidental recently announced a deal to acquire CrownRock for $12 billion. The deal will immediately improve the company’s free cash flow (FCF) accretion.
Darling Ingredients (DAR)
Darling Ingredients (NYSE:DAR) is one of the leading companies in the circular economy and a leading producer of renewable energy, particularly in the areas of renewable diesel and biomethane. The company was named to a list of America’s Most Responsible Companies of 2024 as assessed by Newsweek and Statista.
However, before you ask why the company is listed among stocks with strong insider buying, you need to understand why the stock is being sold. DAR stock is down 19% in 2023 and currently trades at $49.99, 65% below the analysts’ consensus price target of $83.60.
The most likely culprit is lackluster earnings. The company has missed on the top and bottom lines on several occasions in 2023. And in the company’s most recent quarter revenue and earnings were lower year-over-year.
In the last three months, five different insiders have made six purchases. So what’s the buy case? While there’s no single news item to drive shares higher, it’s clear that market sentiment has changed. DAR stock is up 18% in the last month. That coincides with a 5% drop in short interest in the last month.
Funko (FNKO)
Funko (NASDAQ:FNKO) is the maker of a variety of pop culture-inspired products ranging from media and entertainment content to fashion accessories under brand names such as Pop!, Funko, and Popsies. You can even turn yourself into a Pop! Vinyl character.
The company makes this list of stocks with strong insider buying because of seven purchases made by one insider group in the last three months. Normally, this doesn’t tell investors much. However, it did bring the percentage of insider ownership in FNKO stock over 10%, which is significant for a company with a market cap of just over $375 million as of this writing. It also correlates nicely to the fact that institutions hold 89% of the stock. That’s also good for retail investors to see.
There’s risk in FNKO stock, but that’s true of many small-cap stocks. I’d like to make sure the company’s earnings picture is truly turning around. It may take a few quarters for confirmation. But I wouldn’t count out the impact Funko is having in the collectibles culture.
Westrock Coffee (WEST)
Westrock Coffee (NASDAQ:WEST) is another small-cap stock on this list of stocks with strong insider buying. The company has seen six buys in the last three months from co-founder and chairman Joe Ford. WEST shares are down about 29% in 2023.
However, that may be a little deceptive. The company went public as a special purpose acquisition company (SPAC) stock in October 2022. From that perspective, the stock is actually holding up well despite declining revenue due to falling coffee prices.
Westrock operates in the very competitive coffee industry. The industry has been a laggard due to those falling coffee prices. However, that’s expected to turn around in the next two years. Which may allow investors to focus more on the ways the company is appealing to a younger coffee drinker with initiatives like its Farmer Direct Verified (FDV) program that helps “enable digital traceability from farm to the finished products across all beverage platforms.”
STAAR Surgical (STAA)
STAAR Surgical (NASDAQ:STAA) has one of the largest amount of insider buys in the last three months with 12. Ideally investors would like to see this coming from more than two major shareholders. But it should make you curious to find out why?
The company’s earnings are down year-over-year, but this is still a profitable company that continues to generate significant revenue. STAAR Surgical is the leading provider of implantable collamer lenses (ICLs).
In its most recent investor presentation, the company issued a forecast in which it “expects to sell more ICLs in the next three years than the first 25 years of ICL sales combined.”
Currently, just over 1% of STAAR surgical stock is owned by insiders, but 96% of STAA stock is owned by institutional investors so there may not be much float available. Still, speculative investors may see this as a case of a small-cap stock that’s been dragged down by association.
Neumora Therapeutics (NMRA)
With a $2.23 billion market cap, Neumora Therapeutics (NASDAQ:NMRA) is just into mid-cap territory. NMRA stock has only been trading publicly since September 2023. That alone may make you want to wait before jumping in. But you should know that four insiders have made 17 stock purchases in the last three months, making NMRA stock one of the stocks with the heaviest insider buying.
This is a small biotech company that is in the pre-revenue stage. Their goal is to deliver next generation novel therapies for patients suffering from brain disease. The company’s lead candidate is Navacaprant (NMRA-140) to treat Major Depressive Disorder is in Stage 3 clinical trials.
Results are expected in the back half of 2024. So it may still be a year before revenue is coming in the door. But if you believe in the company’s ability to bring the drug to market, now is the time to build your position.
On the date of publication, Chris Markoch 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.
