Seasoned investors will have different strategies to maximize returns but one way of gaining alpha in the markets is by keeping a tab on the actions of the insiders.
By insiders, we’re referring to the corporate officers who sit on company boards and are responsible for their respective firms’ performances. These in-the-know types have access to information not available to the casual investor and when they are seen picking up shares of the companies they work for – to keep the playing field level, by law, they are required to make these transactions public – it sends a strong signal they believe the shares are currently undervalued.
With this in mind, using TipRanks’ Insiders’ Hot Stocks tool we homed in on two names the insiders have been busy loading up on in recent times, in the process splashing out millions on their purchases. And if that is not a strong enough signal indicating these are equities currently worth leaning into, both are also rated as Strong Buys by the analyst consensus. Let’s find out why you might want to pay attention here.
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Remitly Global (RELY)
The first stock we’ll look at is Remitly, a financial services company in the global market. Remitly focuses on the international transfer payments niche, a valuable segment into today’s world, where a combination of labor shortages in high-wealth societies and relatively low cost international travel has incentivized the hiring of foreign guest workers. The company offers worry-free, safe and secure money transfers on the global network, along with 24/7 customer support for users.
The size of its market, and its potential for the long term, can be summed up in a few quick numbers. Remitly’s service is available in more than 170 countries, and in the last quarter, 3Q23, the firm reported a 42% year-over-year increase in total customers, to 5.4 million. The service is widely popular among migrant and immigrant communities worldwide, and the third quarter also saw a 36% jump in transfer send volume, to $10.2 billion.
Those weren’t the only positive results from that latest earnings report. The company’s quarterly revenue came to $241.6 million, growing 43% y/y and beating the forecast by $2.43 million. At the bottom line, however, the results were less rosy. The company’s GAAP EPS was listed as a 20-cent loss – and worse, the loss was 4 cents deeper than had been anticipated. On a positive note, the company raised its full-year revenue guidance, from a midpoint of $920 million to $939 million.
That said, in the immediate aftermath of the quarterly release, RELY shares fell by 31.9%, due to a combination of factors. These include EBITDA upside being directed to discretionary marketing spending, gross margin percentage that saw a sequential drop for the first time and little room for missteps considering big year-to-date gains.
However, the post-earnings drop must have been seen as an opportunity by Board member Nigel Morris, which brings us to the insider trades on the stock. He made purchases on November 3 and 6, totaling 300,000 shares, for which he paid over $5.8 million. This brings his total stake in the company to more than $38.3 million.
Morris is hardly the only bull here. David Scharf, covering the stock for JMP, describes the company as one of his top picks, and writes, “We maintain our Market Outperform rating on Remitly and continue to highlight the company as our top secular growth story and small cap pick. We haven’t encountered the phrase ‘priced for perfection’ much over the past two years, but our strong sense is that shares of RELY were reflecting an expectation that the company was going to deliver the same magnitude of upside and raised earnings guidance that accompanied the 2Q report.”
Looking ahead, the analyst explains why he sees the stock positioned for longer-term gains: “Following the likely reset in the shares, we remain constructive since we believe that management is investing in both top-of-funnel and performance-based marketing (out of luxury and not necessity) that may lead to necessary increases to the Street’s 2024 revenue forecasts.”
Along with his Outperform (Buy) rating, Scharf gives RELY a $32 price target that implies a robust one-year upside of 50%. (To watch Scharf’s track record, click here.)
The Strong Buy consensus on this stock is unanimous, based on 6 recent positive analyst reviews. The shares are trading for $21.30 currently, and their $30 average target price suggests a one-year upside potential of 41%. (See Remitly’s stock forecast.)
Sarepta Therapeutics, Inc. (SRPT)
Next up is a biotech firm, Sarepta Therapeutics. This company is at both the clinical and commercial stages, an important milestone for a biopharma, as marketable drugs begin to generate a reliable revenue stream. Sarepta is working on new precision genetic medicines to target rare diseases with high unmet medical needs.
The company’s research work has targeted various forms of muscular dystrophy, specifically Duchenne muscular dystrophy (DMD) and limb-girdle muscular dystrophies (LGMDs). Sarepta has an extensive pipeline, with genetic medicine products at both the discovery and preclinical phases and in human clinical trials.
The focus lately has been on Elevidys, the company’s recently approved DMD treatment. However, this is where things get a little complicated as the company recently announced Elevidys failed to meet its primary endpoint in the Phase 3 EMBARK trial. This news sent the stock crashing at the end of October, with shares falling by 37% in a single session.
On the positive side, investors should note two facts. One is that the EMBARK data had been shared with the FDA prior to its public release – and the second is that the drug is already approved (since June 2023) for pediatric use in DMD patients ages 4 and 5. The company has announced that it will seek a label expansion to all DMD patients – and considering that the original pediatric approval was given on an accelerated basis, and that the FDA has expressed ‘openness’ to the expansion, there appears to be reason for remaining upbeat on its prospects.
Meanwhile, with the shares having dropped so hard, it looks like two of Sarepta’s insiders have decided to pounce. Douglas Ingram, President and CEO of the company, and Richard Barry, a member of the Board, both made multi-million dollar buys on Nov 3. Ingram picked up 25,225 shares, for which he paid over $2 million, and Barry bought 50,000 shares, shelling out $3.94 million. Together, the two insiders spent almost $6 million on Sarepta stock.
Also bullish here is RBC analyst Brian Abrahams, who highlights Elevidys’ strong debut, while he also believes the shares remain undervalued. Following the recent trial data release and Q3 print, Abrahams wrote, “Elevidys more than doubled consensus in its first quarter of launch, aligned with our feedback around significant physician appetite for the drug and potentially boding well for its future trajectory. That being said, the primary focus for investors remains on the impact of EMBARK on the gene therapy’s future, with regulatory interactions and competitive data expected in the near term. No change to our fundamental view, which is that despite the rebound off its lows, shares still underappreciate the drug’s value even if relegated to 4-5 year olds only, with further upside on label expansion.”
These comments back up Abrahams’ Outperform (Buy) rating, and his $148 price target suggests room for a solid gain of 86% on the one-year horizon. (To watch Abrahams’ track record, click here.)
Overall, it’s clear that the Street likes Sarepta, too. The Strong Buy consensus rating is based on 12 reviews, with a 9 to 3 breakdown favoring Buy over Hold. The shares have a $121.45 average price target, implying a 53% upside from the current trading price of $79.45. (See Sarepta’s stock forecast.)
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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.