Say ‘insider trading,’ and most people will immediately think of shady market moves and dishonest salesmen, or, perhaps, Martha Stewart, who was famously convicted of illegal insider trading after getting a stock tip on a biopharma company.
But there is plenty of insider trading that can be conducted based on information in the public realm, even if it is generally known mainly by corporate officers or company directors. In that case, as long as the insiders publish their trades in timely fashion, in accordance with SEC rules, the insider trades are perfectly legal.
The SEC rules don’t make the insiders’ knowledge more readily available, but they do make the insiders’ trades easy to follow. And following corporate officers, to see what trades they make and when, can make a viable strategy for retail investors.
Bearing this in mind, we’ve used data from the TipRanks Insiders’ Hot Stocks tool to find three stocks that are showing recent – and informative – insider buys. A dive into the stock data and the analyst commentary may provide some additional insight.
Dominion Energy, Inc. (D)
We’re starting in the energy industry, with a power utility company. Richmond, Virginia-based Dominion has its hands in the electricity and natural gas sectors, with electric utility customers in Virginia and both Carolinas, and natural gas customers in West Virginia, Ohio, Pennsylvania, the Carolinas, and Georgia, along with parts of Utah out west.
The past year has not been kind to Dominion, and EPS is down from 2019. In the recently reported Q4, the company reported GAAP earnings of 82 cents per share, down a significant 32% from the $1.21 reported in 4Q19. Full year earnings showed a worse picture, with a 57-cent net loss per share compared the $1.62 EPS profit in 2019.
While 2020 showed losses for Dominion, the company did not attribute those losses to the corona crisis. Rather, the company noted several business factors that depressed earnings: charges due to planned retirement of electricity generation plants in Virginia; cancellation of the Atlantic Coast Pipeline project; and lost operations due to the sale of the company’s Gas Transmission and Storage segment. These are all one-time charges, and in some respects offer the long-term benefit of streamlining business. Dominion guided 2021 full-year earnings to the range of $3.70 to $4.00 per share.
Despite the mixed results of 2020, Dominion has seen some recent insider purchases that are pushing the insider sentiment needle into positive territory. President and CEO Robert Blue spent nearly $1 million on 14,442 shares of Dominion, while Board of Directors member Mark Kington made a smaller purchase of 2,000 shares, paying $138,578.
Dominion has scored fans within the analyst community as well. Analyst Jeremy Tonet, from JPMorgan, covers Dominion Energy, and sees strength ahead for the company, in light of its ability to tack the political winds and shift to non-fossil fuel operations.
“With 52% of Dominion growth allocated to zero-carbon investments, D’s leverage to ‘green rate of change’ leads most peer utilities and should drive a multiple re-rating over time. Importantly, the VA regulatory construct limits D’s offshore wind project risk relative to other industry participants given cost prudency presumption,” Tonet wrote.
To this end, Tonet rates D an Overweight (i.e. Buy) and puts an $87 price target on the stock, implying an upside of 15% for the coming year. (To watch Tonet’s track record, click here)
The 6 to 2 breakdown on recent stock reviews, in favor of Buy versus Hold, shows that Wall Street generally agrees with Tonet here, and makes the analyst consensus rating a Strong Buy. Shares in D are priced at $73.21, and their $81.50 average price target suggests an 11% upside from that level. (See Dominion stock analysis on TipRanks)
Keurig Dr. Pepper (KDP)
In these corona days, we should check in with a Doctor. Dr. Pepper, actually – a long-known brand in the food and beverage industry. The company owns over 55 brands of coffee, along with 20 flavored soda brands – including Dr. Pepper, 7Up, and A&W Root Beer – as well as an array of bottled waters, teas, juices, and mixers. Keurig Dr. Pepper is the 8th largest food and beverage company in the US, and saw more than $11 billion in total sales in 2020.
While the company’s top-line revenues grew year-over-year in every quarter of 2020, earnings missed expectations in 4Q20 (EPS came in at 30 cents, against a 39-cent forecast). Yet, the company showed its confidence by increasing the regularly quarterly dividend by 25%, to 75 cents per share. At $3 per share annualized, this gives a yield of 2.27%.
In early March, Board member – and corporate insider – Robert Singer made 4 informative purchases of KDP shares. Singer paid nearly $500,000 for a total of 9,500 shares.
5-star analyst Nik Modi appears to echo the Director’s sentiment. Providing key takeaways from the fourth-quarter, Modi noted: “Strong quarter for KDP with continued momentum in coffee and gains in packaged beverages. This quarter is another data point suggesting KDP is well positioned for 2021 and beyond. The dividend was also very positive news. We believe KDP has a very unique combination of strong underlying growth and significant balance sheet optionality.”
Based on the above, Modi rates KDP an Outperform (i.e. Buy) along with a $37 price target. This figure indicates a 10% upside potential from current levels. (To watch Modi’s track record, click here)
Wall Street’s analyst corps are somewhat divided here, as shown by the Moderate Buy consensus rating based on 3 Buys and 2 Holds. KDP shares are priced at $33.56, and the $36.75 average price target implies a 9.5% upside for the year ahead. (See KDP stock analysis on TipRanks)
Dentsply Sirona, Inc. (XRAY)
We’ll conclude in the medical supply sector, where Dentsply is a major maker of dental equipment and dental health consumable. The company boasts annual revenues near $4 billion, based on equipment sales and educational services, and also has an active research program in the dental health field. Dentsply Sirona has global reach, with manufacturing facilities in 21 countries and marketing reach more than 120.
The Q4 results showed $1.08 billion at the top line, compared to $1.11 billion in the prior year quarter, with EPS of 45 cents just 1-cent down from the year-ago quarter.
Turning to the inside trades, Board member Gregory Lucier bought 5,000 shares of the stock on Mach 4, paying $294,750. Following the purchase, the Director now holds 23,142 shares, which are valued at $1.43 million.
On the analyst front, Piper Sandler analyst Jason Bednar sums up the bull case for XRAY in his recent note on the stock: “[The] stock isn’t getting enough credit for the visibility that management is providing… With a solid financial path to now follow and with management continuing to execute methodically towards its intermediate- to long-term financial targets, the ownership case for shares of XRAY remains attractive, in our opinion…”
Taking all of this into consideration, Bednar stays with the bulls. The analyst rates XRAY an Overweight (i.e. Buy) along with a $70 price target, which implies ~12% upside from current levels. (To watch Bednar’s track record, click here)
As for the rest of the Street, the bulls have it. XRAY’s Moderate Buy consensus rating breaks down into 8 Buys, 4 Holds and 1 Sell received in the last three months. However, shares are selling for $62.06 and their recent appreciation has pushed them almost to the $63.67 average price target. (See XRAY 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.