Active traders use many fundamental or technical signals to set up their trades. Stocks exhibiting heavy insider buying can be one of these signals. Insiders may sell stock for a number of reasons, but there is usually only one reason they buy stock: the belief that the stock is undervalued.
It’s not uncommon for one or two insiders to purchase a stock at any given time. But when a single insider makes multiple purchases, or even more notably, when multiple insiders buy shares, it sends a signal that there may be news that traders should take note of.
Most insider buying or selling transactions are conducted under the United States Securities & Exchange Commission’s (10b5-1 Exchange Act rule. This allows, but does not require, corporate insiders and companies to buy and sell stock without being aware of non-material information (i.e. insider trading).)
Using a stock screener and filtering for those stocks with heavy insider buying in the last 30 days yielded these three top companies that investors should be paying attention to.
Retractable Technologies (RVP)
Retractable Technologies (NYSEAMERICAN:RVP) tops this list with 10 insider buys in the last 30 days. All buys were made by the company’s CEO, Thomas Shaw. According to the Form 4 SEC filings that accompanied each purchase, some of this buying was for family members for whom Mr. Shaw has investment control. That indicates it may be part of a strategy.
The Texas-based company designs, develops and manufactures safety syringes and other medical safety products including insulin and allergy syringes, blood collection tube holders and IV safety catheters. Shares of RVP stock spiked in 2020 and 2021 due to increased demand during the global coronavirus pandemic.
But revenue and earnings have dropped sharply since 2022. That’s pushed RVP stock back into penny stock territory and its down 37.44% in the last 12 months.
But is the stock undervalued? In its favor is that the company’s total current assets of $88.8 million well exceed its liabilities of $12.1 million. And a possible catalyst for the stock is the fact that its VanishPoint safety syringes were not part of a Federal Drug Administration regarding suspected performance problems with syringes manufactured in China. ) safety advisory
Texas Pacific Land (TPL)
Texas Pacific Land (NYSE:TPL) is another company with 10 cases of insider buying in the last month. As with Retractable Technologies, only one person made all the buys. Murray Stahl, a director with the company, was responsible for all 10 transactions.
Texas Pacific Land owns 868,000 acres of land in West Texas making it one of the largest landowners in the state. Most of those acres are in the Permian Basin which is familiar to oil stock investors. As Will Ashworth analyzed for investors, most of the company’s revenue comes from its ties to the oil and gas industry. Since it collects oil and gas royalties, it would benefit from an expected increase in oil and gas prices.
However, being tied to the oil and gas sector is a double-edged sword. While TPL stock is up 135% in the last five years, it’s down over 27% in the last 12 months. Nevertheless, this is a fundamentally solid company with an ample amount of cash on its balance sheet. Plus it has a dividend that pays out $13 per share on an annual basis.
The company expects earnings to grow over 16% in the next 12 months. For investors who can overlook the share price of over $1,500 and a forward price-to-earnings (P/E) ratio of 28x, TPL may be worth a look.
Opko Health (OPK)
Opko Health (NASDAQ:OPK) has nine cases of insider buying in the last month. Unlike the first two stocks on this list, multiple insiders are buying OPK stock. So far, however, that’s not doing much for the stock. It’s down 38% in the last 30 days.
The biotechnology company is in the diagnostic and pharmaceutical preparations businesses. The good news is that the company’s short-term assets are greater than its liabilities. That’s particularly important because the company is not yet profitable and earnings have declined in the last year.
That being said, analysts are bullish on OPK stock. Each of the six analysts that have issued a rating give the stock a Strong Buy rating with a price target of $4.33, a 341% increase from the price on Jan. 22, 2024.
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On the date of publication, Chris Markoch did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.