Sometimes, following a leader makes the best investment strategy. And corporate insiders have long been popular leaders to follow. Their combination of responsibility to their stockholders and access to ‘under the hood’ information on their companies gives their personal investment choices an air of authority.
The most important thing about these insiders is that whatever else they do, they are expected to shepherd their companies to profitability. Shareholders want a return on investment, Boards of Directors want accountability, and company officers are held to both standards. So, when they start buying up their own company’s stock, it’s a sign that investors should investigate further.
Government regulators, in an effort to level the informational playing field, have required that insiders regularly publish their stock transactions, making it a simple matter for investors to follow them. Even better, TipRanks collates the information in the Insiders’ Hot Stocks page, and provide tools and data filters to easily browse through raw data. We’ve picked three stocks with recent informative buys to show how the data works for you.
Beyond Air, Inc. (XAIR)
We’ll start with Beyond Air, a company in the healthcare sector performing clinical-stage research on both medical devices and biopharmaceuticals. The company focuses on medical uses of nitrous oxide (NO), a common gas derived from the two largest components of ordinary air – nitrogen and oxygen. Beyond Air is investigating the use of nitrous oxide in the treatment of a variety of respiratory conditions, including lung infections and pulmonary hypertension, as well as the use of gaseous NO in the treatment of solid tumor cancers.
The company's lead product, the LungFit Therapeutic Platform, is a ventilator device that derives gaseous NO from the air, mixes with wit ambient air, and delivers the blend through a ventilator or a face mask at concentrations of 1 to 400 ppm. The device is intended for hospital use, as a treatment for persistent pulmonary hypertension in newborns (PPHN). LungFit’s premarket approval application (PMA) is pending with the FDA. The PMA is for the LungFit PH ventilator compatible. The company has presented positive data from early tests of this device, and expects to launch commercially in 4Q21.
Other applications of the LungFit platform, for applications to conditions like acute viral pneumonia, bronchiolitis, and Nontuberculous mycobacteria (NTM) lung infection are at earlier stages of the clinical testing process, but results have been promising. A human trial for the solid tumor treatment program is scheduled for the end of calendar year 2021.
Turning to the insiders, we see two solid purchases over the past week. First, CEO Steven Lisi laid down $134,000 for a bloc of 25,000 shares in his company. The second large buy was from Robert Carey, who’s 350,000 share purchase cost over $1.87 million. These are ‘informative buys’ that swung the insider sentiment on the stock strongly positive.
Among the supporters is Truist analyst Greg Fraser who sees the LungFit PMA for PPHN as key here.
“The FDA review of LungFit PH for the treatment of persistent pulmonary hypertension of the newborn (PPHN) is on track, and management continues to expect approval in late 3Q and launch in 4Q. Following the quarter, we tweaked up our operating expense estimates. We continue to see significant upside for the stock as XAIR executes on the LungFit PH launch and advances its pipeline,” Fraser wrote.
In line with these comments, Fraser rates XAIR stock a Buy, and his $12 price target implies a one-year upside potential of 97%. (To watch Fraser’s track record, click here)
Survey says… Wall Street agrees. A grand total of four out of four ratings published in the past few weeks say XAIR is a Strong Buy. The shares are priced at $6.08 and their $10.93 average price target suggests ~80% upside from that level. (See XAIR stock analysis on TipRanks)
Cerevel Therapeutics (CERE)
We’ll change our focus slightly, to look at Cerevel Therapeutics. Where Beyond Air uses common components of the atmosphere around us to create a therapeutic system, Cerevel works on treatment for neurological diseases using an approach based on expertise in neurocircuitry combined with a focus on neurological receptor selectivity. The company is researching medications for severe neurological conditions that currently lack effective treatments. The pipeline includes drugs under investigation for conditions such as Parkinson’s, epilepsy, anxiety, and schizophrenia.
The company’s leading drug candidate is Tavapadon, an investigational treatment for Parkinson’s disease. Tavapadon has three ongoing Phase 3 trials (TEMO-1, -2, and -3), and the company has also begun dosing patients for TEMPO-4, and open-label extension trial of tavapadon. Cerevel expects to have data readouts from these trials in 1H23.
The company's second pipeline candidate, CVL-871, is a D1/D5 partial agonist in development for treatment of dementia-related apathy. Investigational New Drug (IND) application was submitted in Q1, and just last week, the FDA granted fast-track designation to the drug candidate. If everything goes as planned, data from a Phase 2a trial is expected in H2:22.
The notable insider move here comes from Gabrielle Greene, a Board member, who purchased 21,084 shares last week. She shelled out $275,000 for the bloc of shares, and now has a holding in CERE worth $451K.
Jefferies analyst Michael Yee sees a positive big picture here, writing: “We like CERE's large portfolio of unique CNS assets that can create long-term value in a world where most biopharma have de-emphasized and moved away from neuro – allowing opportunity for focused biotechs like CERE. The company has multiple programs in the clinic across various stages with many catalysts over 12-18m which makes it ideal for longer-term investors. And the recent $125M financing allows more capital to be deployed across the earlier stage pipeline too now.”
All of this adds up to a sound foundation for the stock, according to Yee. The analyst rates CERE a Buy and his $22 price target suggests it has room for ~75% upside this year. (To watch Yee’s track record, click here)
CERE has slipped under most analysts’ radar; the stock’s Moderate Buy consensus is based on just two recent Buy ratings. With shares trading at $12.56, the $24.50 average price target suggests room for ~95% upside. (See CERE stock analysis on TipRanks)
Geo Group (GEO)
Let’s change pace, and move from healthcare to real estate. Geo Group specializes in secure facilities and community reentry centers – in short, prisons and mental health facilities. The company works in all phases of the real estate end – from design and development to financing and operation of the facilities, and provides rehabilitation, post-release support, and electronic monitoring, and community-based services. The company is based in Florida and operates in North America, the UK, Australia, and South Africa.
Geo Group reported $576.4 million in Q1 revenues this year, down 4% year-over-year. While the top line was down, earnings were up. EPS came in at 41 cents, nearly double the 21 cents reported in the year-ago quarter.
In recent months, Geo Group has seen some negative headlines, including a non-renewal of contract by the US Marshall’s service for detention facilities in Queens, New York. The Queens facility non-renewal involves the loss of $19 million in annual revenue. On the positive side, Geo Group continues to operate holding centers for Immigration and Customs Enforcement. The company is careful to state that it does not operate ICE facilities involved in the detention of minors.
On the insider front, we see a clear case of confidence. CEO George Zoley spent $1.123 million to pick up 166,664 GEO shares last week.
5-star analyst Joe Gomes, in his coverage of GEO for Noble Capital, sees the company on firm footing, despite the contract loss.
“We continue to expect GEO to see an ongoing recovery from COVID impacts throughout the year. Management's guidance includes the impact of the loss of the BOP contracts, but only the loss of the USMS Queens facility. These negatives are partly offset by activation of ICE facilities in late 2020 which should achieve normalized operations over the course of 2021,” Gomes opined.
The analyst summed up, "GEO shares present a favorable risk/reward opportunity in our view. While COVID and the political rhetoric remain headwinds, we believe the Company's real estate assets and high quality contracts eventually will be properly valued."
To this end, Gomes gives GEO shares an Outperform (i.e. Buy) rating along with a $15 price target. Investors could be sitting on gains of ~107%, should Gomes' forecast play out as anticipated. (To watch Gomes’ track record, click here)
Overall, the two most recent reviews of GEO are a Buy and a Hold, making the analyst consensus view a Moderate Buy. The stock is priced at 7.26, and its $11.63 price target implies a 60% growth potential in the next 12 months.(See GEO stock analysis on TipRanks)
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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.