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[Editor’s Note: “5 Stocks to Buy With Heavy Insider Buying” is regularly updated to include the most relevant information available.]
Over the past several weeks, I have consistently pointed to record-high levels of insider buying as a bullish indicator that it’s time for you to start looking for stocks to buy.
Why? Two big reasons. Insiders are good at picking bottoms, and they are equally as good at picking winning stocks.
On the first point, just look at this chart from Bloomberg. Insiders are often early in calling stock market bottoms. But they are seldom wrong. Insiders bought big before the markets turned around in the early 2000s, and before markets bottomed in 2009.
On the second point, according to Nejat Seyhun, a University of Michigan finance professor, stocks with significant insider buying don’t just tend to go higher; they also tend to outperform the market by a wide margin.
Big picture: When insiders start buying, you should follow suit.
With that in mind, let’s answer a very important question. What stocks which insiders bought big in March and April should you be buying right now?
Consider these five stocks to buy now, all of which had big insider buying in March and April:
- Cardlytics (NASDAQ:CDLX)
- Carnival (NYSE:CCL)
- GameStop (NYSE:GME)
- Groupon (NASDAQ:GRPN)
- Darden (NYSE:DRI)
Stocks to Buy: Cardlytics (CDLX)
Source: Pavel Kapysh / Shutterstock.com
My favorite stock to buy on this list is payment card data company Cardlytics.
As I’ve said in my previous coverage of Cardlytics, this is a winning company perfectly aligned with the secular Big Data megatrend. Specifically, the company leverages the vast world of credit and debit card data to create data-driven bank loyalty and rewards programs that pair the right marketers and promotions, with the right consumers. These programs boost consumer spending (banks win), give consumers relevant promotions (consumers win) and improve marketing promotion conversion rates (marketers win).
In other words, Cardlytics has used Big Data to create a win-win-win situation in the bank rewards programs world.
Cardlytics is still in the early stages of its huge growth narrative. The company has partnered with three major banks to have data on one out of every two card payment swipes in the U.S. Over the next several years, Cardlytics will leverage all of that data to attract more marketers to its rewards programs, which will lead to better promotions and opportunities for consumers, more spending from those consumers and bigger commissions for Cardlytics.
As all that happens, this company’s revenues, profits and stock price will soar — a long-term proposition which makes the recent dip in CDLX stock look like nothing more than an opportunity.
Investment fund manager Clifford Sosin agrees. His fund, CAS Investment Partners, has purchased almost $50 million worth of CDLX stock since mid-March, increasing the fund’s stake in the company by nearly 40%.
It’s a big bet that should pay off. Long term, CDLX stock will go way higher from here.
Source: Ruth Peterkin / Shutterstock.com
Major U.S. cruise line operator Carnival has been at the epicenter of the novel coronavirus pandemic.
That’s because two of the company’s ships, the Diamond Princess and the Grand Princess, turned into one of the most followed coronavirus stories in March after several passengers on both ships caught the virus. After weeks of quarantining and a few hundred confirmed cases of Covid-19, the Diamond and Grand Princess cruises turned into a lesson for the rest of the world. Cruise ships pose a peculiar danger during a pandemic.
The pandemic will fade. At first, memories will linger. Carnival’s demand will be relatively weak in the first half of 2021. But, once we have a vaccine and the pandemic is more than 12 months behind us, people will start going on cruises again as much as they did back in early 2020. Carnivals’ revenues and profits will rebound back to pre-Covid-19 levels.
So will CCL stock.
Board member Randall Weisenburger think so, too. In early April, he bought $10 million worth of CCL stock. Around the same time, the Public Investment Fund of Saudi Arabia took an 8.2% stake in Carnival.
Those bets may not pay off right away. CCL stock is due for turbulence for a lot longer — probably for the next few quarters. But, by 2022 or 2023, this stock will be way higher than where it sits today.
Source: Emil O / Shutterstock.com
For several years, Wall Street has written off GameStop as following in the footsteps of Blockbuster, and ultimately being doomed for bankruptcy amid a broader shift from physical video game sales to digital video game sales.
Wall Street has been right. GME stock has done nothing but go lower, lower and lower since since 2015, with shares falling from $45, to below $5.
But there’s a strong argument supporting the “buy the dip” thesis here and now.
The coronavirus pandemic has plunged GME stock into dirt-cheap levels. This pandemic won’t last. It will pass by the holiday season, when new Xbox and Playstation consoles launch. These new console launches will spark supercharged video game demand, lead to huge physical console sales and physical video game sales, and power a big revenue and profit surge at GameStop. That surge will carry GME stock higher, especially from today’s depressed levels.
Insiders apparently agree with this thesis. GameStop’s CEO bought more than $100,000 worth of stock in mid-April. The CFO bought over $20,000 worth of stock. Meanwhile, Scion Asset Management — headed by Michael Burry, the “Big Short” guy who called the 2008 housing bubble — upped its stake in GameStop from 3.7%, to 5.3% amid the coronavirus panic.
Long term, GameStop’s future is bleak. But, over the next 12 months, it’s as rosy as it has been in over five years. As such, I do think GME stock can run higher from here into the end of the year.
Source: Ken Wolter / Shutterstock.com
Groupon made the right pivot at the wrong time.
In late February, in its fourth-quarter earnings announcement, management shared that Groupon would retreat from the “good selling” aspect of its business to focus on the “experience selling” aspect. That’s the right move. The market for coupons on shirts, shoes and chairs is small and largely irrelevant. The market for coupons for theme parks, hotels and restaurants is much bigger and more relevant.
Then March happened. The coronavirus pandemic brought daily life in America to a screeching halt. No one went outside, let alone went on Groupon to look for a theme park coupon.
GRPN stock has plunged from $3 to $1 over the past roughly two months.
But, over the next few months, this pandemic will pass. Consumer hysteria will retreat. Behavior will normalize. People will start going to restaurants, theme parks and hotels again. Demand for Groupon’s experience-oriented savings programs will rebound. So will GRPN stock.
The insiders think so, too. Amid the panic, two board members have together bought about $1 million worth of GRPN stock — which is quite sizable for a company with a $550 million market capitalization.
All in all, it does appear that Groupon’s smart experience-focused pivot will begin to bear fruit in the back-half of 2020. As it does, beaten-up GRPN stock will bounce.
Shares of Darden have collapsed amid the coronavirus pandemic, and the rationale is simple.
Darden owns a bunch of restaurants, like Olive Garden, Seasons 52 and Yard House. Restaurants everywhere are closed right now. Yes, Darden has a curbside pick-up business for these restaurants that is keeping some revenue coming in the door. But not much. Comparable sales in April are down about 45%.
DRI stock, not surprisingly, is also down about 45% from its February highs.
Here’s the bull thesis: Once the pandemic passes, consumers will go back to restaurants. Over the past few weeks, thanks to antibody testing, the science surrounding Covid-19 has started to change. It now shows that the virus has a mortality rate more in line with the flu that originally thought, or about 0.1% to 0.5%, depending on the study.
If this recent research holds up, public perception of the virus will go from “if I get it, I will die,” to “if I get it, it’s probably not the end of the world.” This perception shift will spark quicker-than-expected normalization in consumer behavior, which will lead to a big rebound in restaurant traffic and in Darden’s sales and profit trends.
The insiders agree. Darden’s CEO, COO and four other board members have collectively bought $4 million worth of DRI stock in April.
I think those purchases will pay off handsomely in the back-half of 2020, as the world starts going back to restaurants again.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been recognized as one of the best stock pickers in the world by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he did not hold a position in any of the aforementioned securities.
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