The stock market can be intimidating, but retail investors have developed a wide range of strategies for coping. From sticking with a favorite stock to following a well-liked expert, most investors have a ‘trick’ for finding the right place to put their money.
Following insiders, the corporate officers responsible to shareholders for the well-being of their companies, is one of the more successful strategies. Insiders have access to information that the general public hasn’t seen – frequently, information that can influence investment choices. According to a Harvard study, stocks that insiders have purchased will, on average, earn returns 6% higher than the norm over a one-year period.
Clearly, the insiders’ info gives them an advance line, one that makes their stock choices better informed. In order keep the playing field level, Federal regulators require that insiders publish their trades regularly. Retail investors can use that published trading info to see what the insiders are doing – and which stocks they are buying up.
Bearing this in mind, we used the Insiders’ Hot Stocks tool from TipRanks to point us in the direction of “Strong Buy” stocks the insiders are snapping up. We found two names flashing signs of strong insider buying that warrant a closer look.
AppLovin Corporation (APP)
Mobile tech company AppLovin offers a software platform and tools for mobile app developers and marketers to optimize their efforts at scale. The platform supports marketing and monetization, and lets developers build apps for a competitive advantage. The company’s products include advertising, analytic, and marketing platforms for mobile developers and publishers.
The software side of the business is not AppLovin’s only source of revenue. The company has reported that, last year, 49% of total revenues came from business customers using the software; the other 51% came from end-user consumers making in-app purchases. AppLovin is active in the mobile gaming industry, and has a portfolio of mobile games.
The company is not new to the mobile world, having been in business since 2012. In April of this year, it took the leap to the public markets, putting APP shares on the NASDAQ, at price of $80 each, and netted $1.8 billion.
In other good news for AppLovin, the company last week released its first quarterly earnings report as a public entity. Revenue was up 132% yoy to $604 million, for a company quarterly record.
Turning to the insider action on APP, we find that President and CEO Herald Chen picked up 25,000 shares this week, paying over $1.52 million. His was not the only major purchase here by an insider; board member Vivas Eduardo laid down almost $1 million for a bloc of 16,883 shares. The two purchases swing the insider sentiment on this stock strongly positive.
5-star Credit Suisse analyst Stephen Ju sees enormous potential for AppLovin. Noting that the company currently skews heavily toward the gaming market, he writes, “The majority of publishers and advertisers on AppLovin’s network are currently mobile game operators. However, there is no structural reason for this to continue. Over the long term, as AppLovin begins to more meaningfully address the non-gaming apps in the ecosystem, we expect the company to be able to address the entire current ~$101 billion market across in-app display, video, and others. Furthermore, with ~60% of mobile installs related to non-gaming apps in 2020, this could theoretically increase the potential addressable volume by a factor of more than 2x.”
The analyst summed up, "We maintain our Outperform rating on the following: 1) operations in the fastest-growing segment in video games, 2) software to offer more diversified exposure to mobile games secular growth theme, and 3) optionality toexpand TAM to non-gaming apps."
Ju's Outperform (i.e. Buy) rating on the stock comes with a $95 price target that implies a 40% one-year upside potential. (To watch Ju’s track record, click here)
This newly public stock has attracted 8 positive reviews in the last few weeks, overbalancing the lone Hold for a Strong Buy consensus rating. AppLovin’s shares are trading at $67.90, and their $75.11 average target suggests ~11% upside from that level. (See AppLovin stock analysis on TipRanks)
Cable One, Inc. (CABO)
Let’s change pace, and move from digital apps to broadband cable for the next stock. Cable One is an integrated broadband communications company, with two brands and over 980,000 residential customers in 24 states. The company offers connectivity in high-speed internet, advanced wi-fi, cable TV, and landline phone service. Service packages for business customers are scalable to meet the needs of small- and mid-market companies.
Cable One reported solid results in 1Q21, with the top line revenue growing 6.2% year-over-year and reaching $341.3 million. The gain was driven by an 18% increase in residential services; business services grew at 4.3% yoy. The company’s adjusted EBITDA came in at $180.4 million, for a year-over-year gain of 14.4%. Cash flow was also strong, with cash from operations growing 38.4% yoy to $164 million.
In other events of interest to investors, in May, the company announced that it had secured an $800 million term loan facility. This additional credit was put in place in connection with the closing of an acquisition move. Cable One acquired Hargray communications in a transaction completed on May 3. The acquisition cost $2.2 billion and was financed through a combination of cash and credit.
On the insider front, CFO Stephen Scott Cochran spent over $500,000 to buy 300 shares in the company. His transaction moves the needle on insider sentiment for this stock into positive territory.
Turning to the analyst community, Wells Fargo analyst Steven Cahall believes the company has a lot going for it and a bright future.
“CABO is a pure growth stock with a high multiple that reflects its ability to grow residential broadband customers when others are slowing. That's the exact trend that played out in 1Q21… We continue to like CABO's net add trajectory with Q1 additions of +22k, +3% sequentially and +12% y/y. CABO said the trends have continued into Q2 with April being the best month of the year thus far. We think the strength is broad-based: within CABO's footprint and at affiliates including NextLink, MBI and Hargrays," Cahall opined.
The analyst summed up, "CABO remains our favorite in the space and one of our favorite stocks overall in our coverage.”
To this end, the analyst makes CABO one of his Signature Picks, with an Overweight (i.e. Buy) rating and a $2,210 price target that suggests room for 24% upside growth this year. (To watch Cahall’s track record, click here)
Overall, there are only 3 reviews on file for CABO shares – but they are all positive, making the Strong Buy consensus rating unanimous. The stock is selling for $1,785.26 and its $2,111.67 average target implies an 18% upside for the next 12 months. (See CABO stock analysis at TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
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.