Should You Take Comfort From Insider Transactions At Schroder European Real Estate Investment Trust Plc (LON:SERE)?
A strong insider buying could indicate a bottom in these two stocks
Every investor knows that the way to make a profit is to buy low and sell high. This is a basic requirement of any economic trading system. The trick, however, is to know when the stock is low enough to buy in. The most important moment to buy is when the stock hits the bottom. This maximizes returns when the stock price rises again. There are a variety of possible clues that investors can use to find the price reason. Today we’re going to dive into insider buying trends. Insiders – the executives, board members and other insiders – not only run the company, they know the details. Legally, they are not allowed to trade or openly trade this knowledge, and disclosure rules by government regulators help keep the insiders honest. However, your honest stock deals can be very informative. These are the people with the deepest knowledge of certain stocks. So be careful when buying or selling, especially in bulk. In this case, we used TipRanks Insiders’ Hot Stocks tool to find two stocks that had fallen in price recently – and that decline coincided with some informative buying insider trades. Let’s take a closer look. Intercept Pharma (ICPT) With Intercept, a specialist in the treatment of chronic liver diseases, we are starting in the pharmaceutical sector. Intercept Pharma is working to develop a treatment for a variety of chronic and serious liver diseases, including primary biliary cholangitis (PBC) and non-alcoholic steatohepatitis (NASH). The company’s primary compound, obeticholic acid (OCA), was developed as an analogue of CDCA bile acid and may play a role in treating liver disease through the FXR receptor pathway. OCA, also known as Ocaliva, has received FDA and European approval for the treatment of PBC. Intercept has seen important changes in the past few months. First, the company has seen a top management drain. Effective January 1st, the company’s COO, Jerome Durso, took over as CEO. Earlier this month, CFO Sandip Kapadia announced that he would be stepping down on March 26th. His position will measure temporarily occupied by Rocco Venezia. On the business side, the company reported fourth quarter results in late February 20. The release showed significant increases in OCA’s global sales. Fourth quarter net sales reached $ 83.3 million, up 18% year over year, and full year revenue increased 25% year over year to $ 312.7 million. The company has forecast for $ 325 million to $ 355 million in net sales for OCA in 2021. On the negative side, the fourth quarter EPS net loss was worse than expected at $ 1.58 versus a projected loss of $ 1.47. While OCA sales increased year over year, quarterly sales were also below expectations. After the earnings release, the stock fell 19%. This loss was on top of the difficult 9 months for Intercept. The stock is down ~ 74% over the period. The losses began last June when the FDA rejected an application for approval of OCA for the treatment of NASH-related liver fibrosis. OCA is currently in an extensive Phase 3 trial for this condition with new applications for approval by the end of this year. No drugs are currently available to treat NASH and its complications, and Intercept estimates the market could reach $ 5 billion in annual sales. In terms of insider trading, we see that Srinivas Akkaraju bought from the Board of Directors 237,000 ICPT shares in three tranches between March 10th and March 12th. The total cost was $ 5.02 million and Akkarju’s stake in the company is now worth $ 13.95 million. Looking ahead, Wedbush’s Liana Moussatos remains cautiously optimistic. The 5-star analyst rates ICPT as an outperform (i.e. buy), and her price target of $ 88 implies an impressive uptrend of 331% over the next 12 months. (To see Moussatos’ track record, click here.) “We’re making several adjustments to our model. Management plans to re-submit the OCA / NASH-NDA to the FDA by YE: 21. As a result, we have postponed our US launch date for OCA / NASH from 07/15/2022 to 02/15/2023 in order to have enough time to meet FDA requirements and commercial preparations. We have reduced our estimated treatable PBC population from approximately 34,000 to 32,000 due to the impact of potential changes in OCA / PBC labeling in patients reaching the most advanced stages of PBC, ”noted Moussatos. Moussatos is the bullish outlier here; Wall Street’s analyst corps is clearly divided on this stock, as the breakdown of the 14 most recent valuations shows. This includes 6 buys, 7 holds, and 1 sell, making the consensus rating a moderate buy. The price of the shares is $ 20.40, and the average target price of $ 43.33 indicates an upward movement of 112% from that level. (See ICPT stock analysis on TipRanks.) Kinsale Capital Group (KNSL) If we change gears, we will switch to the insurance industry, where Kinsale Capital is a provider of insurance products for over and over lines. These are policies that customers take out to protect themselves from excessive risks or risks that are too high for their regular insurance company. Kinsale focuses exclusively on these high risk insurance products and maintains control of its claims and underwriting processes. Kinsale posted significant sales and earnings growth last year. Bottom line, fourth quarter revenue increased 51% to $ 139.33 million, and earnings per share of $ 1.65 per share, based on net income of $ 38.2 million, increased year over year by 109%. For the full year, Kinsale achieved revenues of $ 459.88 million, an increase of 45% over the previous year. Earnings per share for the full year rose from $ 2.86 in 2019 to $ 3.87 in 2020, up 35% year over year. The sales and earnings gains were due to growth in all of the company’s main areas of business. For both the quarter and the full year, Kinsale saw significant increases in gross written premiums, net investment income, underwriting result and operating return on equity. The company ended 2020 with $ 1.3 billion in cash and invested assets, up 44% from December 2019. Despite the solid results, KNSL shares have fallen over the past three months. The stock peaked in mid-December and has since lost 35%. The price decline did not stop Steven Bensinger of the company’s board of directors from increasing his stake. On March 10, Bensinger bought two tranches of shares totaling 3,500 shares and paid $ 607,000. This brings his full stake in the company to more than 30,000 shares valued at over $ 5.3 million. Wall Street likes this insurance company, and Casey Alexander, who covers the company for Compass Point, comes up with a solid bull case. “We continue to believe that the basic picture for KNSL remains positive. E&S premium growth continues to be strong (46% YoY) and underwriting is highly profitable, resulting in an industry leading combined ratio. KNSL also claims a technology-based cost advantage over competitors, which should lead to additional reserve redundancy. KNSL is moving into the insuretech space, but is moving cautiously as this new paradigm evolves, ”said Alexander. Alexander rates the stock with a buy and sets a price target of $ 225, which indicates an upward trend of 39% over the coming year. (To see Alexander’s track record, click here.) Solid results in a traditional financial sector like insurance will always get a thumbs up on Wall Street. So it’s no surprise that the consensus strong buy rating here is unanimous based on 3 recent reviews. The stock has an average price target of $ 235, which translates into an upside potential of 45% from the current share price of $ 161.94. (See KNSL stock analysis on TipRanks.) To find great ideas for trading stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, ‘a newly launched tool that brings together all of TipRanks’ stock insights. Disclaimer: The opinions expressed in this article are solely those of the presented analysts. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.