Whether you are an experienced trader or a novice, the oldest piece of advice in economics still holds true: buy low and sell high. The challenge is determining the right time to buy shares that are undervalued or to sell those that have been overvalued.
There are plenty of clues to cracking this code, but one of the clearest is insider trading patterns. Insiders are corporate employees, senior officials of companies, whose positions make them “informed”. Therefore, monitoring their trades, especially when buying in bulk, can provide valuable insights into the potential direction of the company.
Bundled deals are always worth a closer look, so we cracked the scope Hot Stock Insiders Tool from TipRanks to find two stocks that have both been the subject of $1 million-plus insider buys.
According to analysts, these stocks are rated Buy and offer significant upside potential. In addition, they have taken a beating in recent months, making them attractive investments for those looking to buy low and possibly profit from the recovery.
Cerevel Therapeutics Holdings Inc (cere)
We’ll start with Cerevel Therapeutics, a neuroscientist working on new treatments for neurological conditions like Parkinson’s disease, epilepsy, and schizophrenia. Cerevel’s work uses a combination of advanced biology and chemistry to understand neural circuits and the receptor pharmacology of the central nervous system. The company’s approach is based on finding highly specific solutions to the challenges posed by neuroscience-related diseases.
Cerevel was founded in 2018 through a partnership between Big Pharma giant Pfizer and Bain Capital. Since then, Cerevel has developed a diverse research pipeline that includes five clinical-stage drug candidates: investigational therapies targeting schizophrenia and psychosis, panic disorder, Parkinson’s disease, and dementia-related apathy. We will focus our attention on the four who will take the lead.
At the front is the drug candidate tavapadon, which is currently undergoing evaluation in a group of Phase 3 studies for the treatment of Parkinson’s disease. The drug has the potential to be a first-in-class selective D1/D5 partial agonist, both as monotherapy and adjunctive therapy. Data from the first of these studies, TEMPO-1, is expected in 1H24, with data from TEMPO-2 and TEMPO-3 to follow in 2H24.
Elsewhere in progress, Cerevel is conducting a Phase II proof-of-concept trial of darigabat, a new drug candidate with potential in treating both epilepsy and panic disorder. The Phase II REALIZE trial is looking at the drug for use against focal epilepsy, with data expected in the middle of next year. The company also recently began a Phase II proof-of-concept trial, testing darigabat for the treatment of panic disorder.
In addition, the company is working on CVL-871, a potential treatment that targets apathy associated with dementia. At present, the company is in the midst of a Phase 2a exploratory trial. However, the trial schedule is subject to re-evaluation due to ongoing challenges faced by clinical sites in accurately defining the appropriate patient population for this application.
Finally, the fourth pilot clinical program is centered around imraclidine, which is currently under evaluation in a pair of phase II trials for the treatment of schizophrenia. Known as EMPOWER-1 and EMPOWER-2, these trials demonstrated the efficacy of emraclidine as a once-daily drug, eliminating the need for titration. Enrollment in the studies was slower than expected, and data is now expected to be released in the second half of 2014; News of the delay has sent Cerevel shares plummeting this month, with the stock down 27% so far in August.
Cerevel’s share drop didn’t seem to worry insiders or Wall Street analysts. Indeed, we find Two “informative purchases” by company officers this month. The smallest, a $501,794 purchase of 21,880 shares, was made by Paul Burgess, president of business development and strategic operations. The largest purchase, 83,857 shares, was made by the company’s president and CEO, Ronald Reno, who offered approximately $2.01 million.
From the Street analysts, we can check out Stifel analyst Paul Matteis, who takes note of the data delay but maintains a bullish stance on Cerevel.
“Although the reported delay of emraclidine is disappointing, it doesn’t shock us, and in the end, we still believe that if pivotal trials replicate the compelling ph1b data in schizophrenia, the stock can go much higher from here…with a chief A new CFO/CFO in our expectation is management to take a fresh look at the business, and given many other programs are behind, it’s somewhat unsurprising to see emraclidine data being pushed around by a new team (from our reading) who are motivated to be more conservative And ideally, under-promise and over-deliver,” Mattis said.
The analyst summed up: “We think the stock’s upside is pretty clear: With five clinical-stage drugs pursuing big opportunities in neuroscience, there are multiple ways to win, and the risk/reward seems compelling to us.”
Along with these expectations, Matteis gives CERE shares a Buy rating with a $42 price target implying a solid 90% upside for the next 12 months. (To watch Matisse’s track record, click here)
Overall, CERE stock has 7 recent analyst ratings, including 3 Buys and 4 Holds for a Moderate Buy consensus rating. The average price target, $33.57, means an upside of 53% from the current trading price of $21.93. (be seen CERE stock outlook)
Zebra Technologies (plural)
We’ll switch gears now, and look at Zebra Technologies, which is a technology company with a niche in the retail sector. Zebra provides a suite of vital tools to facilitate modern retail, offering its customers a suite of products to price, label, track and trace merchandise. The company is known for making barcodes, RFID tags, scanners, and printers. In short, all the tools retailers need to keep their inventory chains and logistics up to date.
Zebra started in 1969, building electromechanical devices, and shifted to tagging and ticketing in 1982. It added RFID tags and tracking in 2004 and hasn’t looked back since. However, this month saw the stock drop sharply, losing 15%.
The share price drop came after Zebra released its Q2 2020 earnings report. On the top line, the company reported revenue of $1.214 billion, down over 14% year-over-year and missing expectations by about $100 million. Non-GAAP earnings per share of $3.29 per share was 1 cent ahead of estimates but down from $4.61 in the year-ago quarter. Investors were stunned by the results, and the stock fell in the aftermath.
The decline in Zebra shares appears to have had little impact on the number of company insiders who were involved recent purchases. Among them is Anders Gustafsson, CEO, who invested about $1 million to acquire 4,100 shares. In addition, CEO Bill Burns and director Richard Keyser bought 1,000 shares each for about $250,000.
Covering Stephens’ ZBRA stock, analyst Tommy Moll has noticed the share price drop this month but sees it as a buying opportunity. In his view, tough times for the company are likely at or near the bottom, and investors can expect better performance heading into next year.
Driving the earnings, ZBRA shares likely rallied on the notion that 2023 earnings will prove lower, despite a negative read and channel check late in the quarter. On earnings day, ZBRA reported a significant downgrade of guidance on (1) declining end market demand and (ii) removing channel inventory…and looking ahead, we expect positive catalysts from lower revenue in Q3 of ’23, and then visibility back to last year’s — revenue growth in second year of ’24, which could come over the next couple of quarters In the meantime, we expect stocks to rise modestly as leveraged investors consider an attractive entry point,” Moll wrote.
Putting some numbers on this situation, Moll gives a price target of $350 per share, indicating confidence in an upside of 33% on the one-year horizon. His rating here is Overweight (No Buy). (To watch Moll’s history, click here)
Looking at the consensus breakdown, 6 Buys and 2 Holds have been issued in the last 3 months. Therefore, ZBRA earns a Strong Buy consensus rating. Based on an average price target of $299, shares could rise 14% in the next year. (be seen ZBRA stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best stocks to buya 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.