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Stock Analysis & Ideas

These 2 Stocks are Hot on Insiders’ Radars

Right in the middle of the earnings season, some of the big names from the technology and finance sectors have already reported earnings, while some of the most sought-after companies are yet to report.

With a plethora of good performances coming from the earnings season, investors are spoilt for choice. It becomes every bit as difficult to eke out the most promising performers from the average ones. At such times, looking at a company’s insider confidence signal could help us improve our investment choices.

TipRanks collates information on corporate insider transactions of listed companies, which allows us to gain an insight into how confident the insiders are about the company’s health. Invariably, insiders have an edge in knowing a company’s exact performance trajectory, which is difficult for investors to gauge.

According to TipRanks’ Insiders’ Hot Stocks tool, below is a snapshot of the returns generated from insider trading stock strategies since 2009 (each stock was held for one month).

Seeing the attractiveness of the returns generated, let us look at two companies that are currently hot on the insider’s radar.

Affirm Holdings (AFRM)

Affirm is one of America’s largest buy now, pay later (BNPL) players, offering a platform for digital and mobile-first commerce.

The sector is being dragged down by the current rising interest rate environment, which reduces the real value of money for the players. Plus, the inflationary threat has been playing a spoiler and keeping customers at bay.

Despite the dwindling outlook, one of Affirm’s major shareholders, the Government of Singapore Investment Corporation (GIC Pvt .Ltd.), has been usurping the AFRM stock for the last two weeks.

According to regulatory filings, after the series of informative buy calls, the GIC effectively owns around 16.33 million shares of Affirm. Of these, about 11.83 million shares are held by Jasmine Ventures Pte. Ltd, which is controlled and managed by GIC Special Investments Pte Ltd (GIC SI), a wholly-owned subsidiary of GIC.

These stock purchases were followed by individual uninformative buy calls from other company executives yesterday, including Affirm’s Chief Financial Officer, Chief Legal Officer, VP & Controller, and Chief Compliance Officer.

Affirm is scheduled to report its third-quarter results on May 12, 2022, and the insider buying spree definitely holds high value now, implying that the company is expected to outperform expectations. Recently, Affirm raised the guidance for Q3 and FY22 key metrics, showcasing the robust quarter it has witnessed and the expectation to outdo it in 2022.

Meanwhile, Wall Street analysts are cautiously optimistic about the AFRM stock, with a Moderate Buy consensus rating based on seven Buys, four Holds, and one Sell. The average Affirm Holdings price target of $63.83 implies a whopping 112.1% upside potential to current levels. Meanwhile, its stock has lost a massive 68.4% of its value year-to-date.

Notably, TipRanks’ Insider Trading Activity shows that Insider Signal is currently Positive on Affirm, with corporate insiders buying $126.6 million worth of shares in the last quarter.

Warner Bros. Discovery (WBD)

After joining forces and creating the world’s largest media powerhouse, Warner Bros. Discovery is hot on the insiders’ radar.

Despite shutting down CNN+ immediately after the merger, insiders engaged in a stock-buying spree seem highly optimistic about the stock’s future trajectory.

Recently, Director Robert R. Bennett disclosed in a Form 4 filing, informative buying of 53,000 shares of WBD at prices ranging from $18.53 to $19, for an aggregate price of $1 million. Bennett effectively owns around 367,047 shares of WBD as of date.

Similarly, Director Paul Gould undertook an informative buy call and added 5,000 shares of the WBD stock at an average price of $18.249, affecting his total holding to 761,206 shares as of date.

A couple of other insiders, including WBD’s CEO and President, CFO, and Chief Corp Affairs Officer, have also added the stock to their portfolios, signaling the enthusiasm they hold for the company’s bright performance.

Meanwhile, Wall Street analysts are cautiously optimistic about the WBD stock, with a Moderate Buy consensus rating based on six Buys, four Holds, and one Sell. At the time of writing, the average Warner Bros. Discovery price target was $35.67, which implies a huge 85.11% upside potential to current levels. However, year-to-date, WBD stock is down 23.9%.

Impressively, TipRanks’ Insider Trading Activity shows that Insider Signal is currently Very Positive on Warner Bros. Discovery, with corporate insiders buying $2.7 million worth of shares in the last quarter.

Points to Ponder

On one hand, it remains to be seen how the newly formed media giant WBD will perform, and what role the catalysts of each side will play in its performance. Insiders, however, are very bullish about the company’s growth potential.

On the other hand, despite current headwinds, it is impossible to ignore a sovereign wealth fund like GIC’s strong conviction in the Affirm story.

These insider insights provide a strong case for both companies, which could be used as beneficial advice along with the other TipRanks tools to make lucrative investment choices.

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