As the capital markets begin to digest the impending earnings season, many investors are scrambling to find the best plays for their hard-earned money. In order for a stock’s valuation to be boosted by its earnings report, it typically needs overly impressive results and guidance to woo traders to its shares. Figuring out which firm will smash its consensus expectations can be a daunting task, especially for those who have less free time to go about poring over companies’ financials.
That’s where TipRanks comes in. The platform offers insider trading tools, like the Insiders’ Hot Stocks and the Top 25 Corporate Insiders lists. These tools provide valuable insight into which people in the know have been making transactions, most importantly the indicative “Informative Buys.”
Insiders may make transactions in specific companies for a plethora of reasons, and it’s difficult for outsiders to know the driver behind each purchase. To clarify that, TipRanks delineates which purchases are Informative Buys. These are a type of trade made by an insider, in which the individual has applied his or her own capital to purchase shares in a stock. The insider’s confidence in the stock indicates a possibility that the valuation will soon thereafter make an upward move.
Insider trading is quite common, as TipRanks’ Insider Trading pages reveal. While not every insider is making obscene gains from these trades, TipRanks and Bloomberg News have reasoned that “purchases made by U.S. executives outperformed the S&P 500 over the ensuing 12 months by an average of five percentage points between 2015 and 2020.” Capturing these extra percentage points is something most long-term investors dream of.
It’s important to note that most kinds of insider trading are not illegal, and the trades themselves only need be submitted to the Securities and Exchange Commission (SEC) for approval and to be made public record. TipRanks’ unique algorithms aggregates these records and organizes them into an easily digestible format, so even everyday investors can follow insider trades.
By using TipRanks’ Daily Insider Transactions tool, we can identify recent Informative Buy activity. Let’s take a closer look.
CarParts.com
While the e-commerce boom has continued, CarParts.com (PRTS) has yet to see much upside. In tandem with the global semiconductor chip shortage impacting the auto industry, the online end-to-end retailer of aftermarket car parts has been reeling in a steady valuation decline. This slide has been relatively consistent since its most recent early-August peak, until it began climbing each day over the last week.
Indeed, over the last few trading sessions, the stock has seen considerable gains, closing Friday up nearly 7% since the start of that week.
Interestingly enough, there have been nine reported instances of Informative Buys of stock from three different senior ranking officers over the last five days. The most recent of those buys is a $10,000 purchase by CarParts.com CFO and COO, David Meniane. This insider has an average return of 611.5% per trade, so it’s safe to say he’s good at timing the market.
PRTS is estimated to report its Q3 earnings on November 2, 2021. After its previous Q2 report, Darren Aftahi of Roth Capital Partners wrote that he remains “optimistic PRTS can continue to see steady growth given strong demand and its tactical expansion with new distribution centers (DC) long term.” Additionally, Aftahi mentioned that the company is “operating virtually near capacity most days to meet demand,” and thus can still see upside come Q3, even after its wide prior earnings beat.
Considering the high ratings analysts have provided, and the recent slide in valuation placing the stock in a discounted position, it could appear to be an attractive entry. After all, the insiders seem to think so.
Texas Pacific Land Corporation
Over the last two months, oil as seen a tremendous bull run. OPEC has been refusing to increase production just as demand has been increasing, and the world supply continues to shrink, pushing prices up to long-term highs. Along with the commodity, the owners of the land from which it is procured have traditionally seen their stock valuations increase concurrently, with the exception of recent months.
One of the major land owners in Texas’ Permian Basin is Texas Pacific Land Corp. (TPL), which has seen its share valuation rise along with the spot prices of oil.
Upon scanning TipRanks’ Daily Insider Transactions page, one can identify that TPL has seen significant insider trading activity as of late. For almost each trading day over the last month, a member of TPL’s board of directors has been buying up between $24,000 and $29,000 worth of stock. That member, Murray Stahl, has been making nearly daily consistent Informative Buys, potentially in an attempt to capture the upward trend in oil prices.
According to TipRanks, the director currently holds $466,255,776 in company stock, and has been steadily consolidating his position since the beginning of the summer.
Texas’ Permian Basin contains massive amounts of oil and natural gas deposits, and has been tapped as a significant area of production for U.S. oil and gas.
While the commodities have increased in price recently, TPL has not. The stock has seen a marginal slide in valuation just as oil prices have begun to rise, making the patterm of Murray’s Informative Buys even more interesting.
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Insiders’ Hot Stocks, a newly launched tool that identifies stocks that exhibit ‘Strong Buy‘ indicators, based on insider trading.
Disclosure: At the time of publication, Brock Ladenheim did not have a position in any of the securities mentioned in this article.
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