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Stock Analysis & Ideas

Insiders have been Buying These 2 Underrated Stocks

The last two years have taught us, and are still teaching us, how to stand in the face of unexpected odds. This year has been even tougher— with the latest wave of COVID-19 stifling the Chinese economy and disrupting an already precarious supply chain. Moreover, the Russian invasion into Ukraine is impacting global economies and chip production (the latter being a leading consumer of neon, an essential component for semiconductor chip manufacturing), raging global inflation, interest rate hikes by the Federal Reserve, and investor fears of an impending recession.

Investors across the globe are currently passing through the stages of bear-market grief. Between bouts of positivity amid growing pessimism and dejection, the market has remained extremely volatile since the beginning of the year. Real estate prices are soaring above the reach of many buyers, gold prices continue to be choppy, inflation is spiraling out of hand, and fears of a recession are rife, leaving no place for investors to hide.

The uncertainty has led many investors to either stay put in their investments or even increase their equity allocation, thinking that this may be a good buying opportunity. This is typically the first stage of grief — denial. Again, a large cohort of investors, some of them graduating from the denial stage to anger, are running away with their money, crying about the unfairness of the situation.

These unstable sentiments are leading to slight positivity one day, and sharp losses the other, but nothing consistent, bringing the U.S. to the brink of a bear market.

However, we all know that a bear market does not last forever. Beyond the near-term clouds are solid upsides and tremendous technology-led growth for the U.S. economy supported by companies that survive the bloodbath.

Thus, making informed investment decisions during these times is of utmost importance, because what is done today will shape the returns tomorrow. However, this process can be complex, confusing, and cumbersome for panic-stricken investors. This is when it is wise to follow experts and take cues from their opinions and activities.

To ease this confusion, we dug into TipRanks’ list of Insiders’ Hot Stocks to zero in on two underrated stocks with a promising future.

Amtech Systems (NASDAQ: ASYS)

Amtech manufactures capital equipment such as thermal processing and wafer handling automation, which are used in designing semiconductor devices and other chips.

Earlier this week, Robert Averick, one of the company’s owners, bought 40,000 shares worth $316,150, giving a solid reason for investors to consider the company for further research.

Moreover, the investor confidence signal, which is based on two informative insider transactions by two unique investors over the last three months, is Positive, meaning there have been more Buys than Sells in this duration. This possibly indicates a strong upside to the stock, as insiders are most likely to buy shares only when they are sure of its prospects.

Last week, Benchmark Co. analyst Mark Miller reiterated a Buy rating on the stock with a price target of $18, leading to a consensus rating of Moderate Buy based on his rating.

HireQuest (NASDAQ: HQI)

Second up is HireQuest, which provides client companies with on-demand professional staffing and recruiting solutions. The company’s business model is franchise-based, expanding aggressively through acquisitions.

The company has been benefiting from the reopening of the economy, high employment rates, and even higher employee churn rate (employees leaving one company for another).

As of March 31, total cash on hand was $1.8 million, with no long-term debt, which is encouraging for investors. Also, the company’s consistent dividend payouts have been a plus point in the view of investors. Shareholders are due to receive a quarterly cash dividend of $0.06 per share in June this year.

Notably, President and CEO Hermanns Richard bought 3,000 shares worth $44,500 earlier this week. Additionally, two other directors of the company also purchased around 5,000 shares among themselves, bringing the total value of shares bought to $119,125. Thus, it looks like HQI shares are poised for an upward trajectory soon.

Recently, Barrington analyst Kevin Steinke reiterated a Buy rating on HQI stock, adding a price target $29. Steinke’s rating makes it a Moderate Buy.

Bottom-Line

One fact we know for sure is that insiders are privy to information that is less accessible to investors on the outside, thus giving everyday investors all the more reason to take insider transaction trends seriously. While investment choices definitely need deeper individual research, it is also prudent to make expert opinions and activities a part of the research.

After all, if one had created a portfolio keeping TipRanks’ insider transactions in mind, they would have garnered annualized returns of 11.37% in the past 13 years, and 25.24% in case they had followed our top-ranked insiders only. Both the returns are benchmark-beating.

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