After the recent seesawing action, it would be nice to know where the market is heading next, but that is anyone’s guess. The conflicting signs make for a difficult terrain to navigate across.
In the search for sound investments in such an environment, it helps to lean on those in the know and one such strategy involves tracking the moves of corporate insiders. After all, no one is better equipped to know the inner workings of companies than those operating from within.
If an insider has been picking up shares, it is usually a buy sign as it indicates confidence in the company’s trajectory. To level the playing field, these insiders are required to make such purchases public, and investors can track these opportunities.
The Investing Insights platform comes in handy here and we have pinpointed three “perfect 10” stocks which corporate officers have been snapping up as of late. There are other positive signifiers to follow; both stocks are rated as Strong Buys by the analyst consensus and are projected to pick up steam in the months ahead.
Energy Transfer LP (ET)
The first stock we’ll look at inhabits the energy sector. Energy Transfer (NYSE:ET) is a midstream company, operating in the area between the wellheads and the distributors. Midstream companies like ET make it their business to gather and transport crude oil, natural gas, and natural gas liquids from the production fields to the refineries, storage facilities, and import/export terminals. Energy Transfer has a network of assets, including pipelines, terminals, and storage tanks, connecting operating areas in Texas, Oklahoma, and Louisiana, as well as North Dakota and Appalachia.
The economic reopening that has proceeded apace this year – even as COVID hasn’t gone away – has been good for ET’s business. The company’s revenues, which were depressed through 2020, have rebounded significantly this year. While they peaked in 1Q21, at $17 billion, the 2Q21 top line of $15.1 billion is still better than any quarter in 2019 or 2020. EPS for Q2 came in at 20 cents, up 53% from the year-ago quarter.
Energy Transfer also recorded a stronger cash flow in 2Q21 than in the prior year’s second quarter. Distributable cash came in at $1.39 billion, compared to $1.27 billion in the prior year – a gain of 9.4%.
Sound financial results underpinned Energy Transfer’s dividend, with the company reiterating its $0.153 per common share dividend. At this rate, the payment annualizes to $0.612 per common share, and gives a yield of 6.6%. This compares favorably to the ~2% yield found in the broader markets.
Turning to the insiders, the recent move on this stock comes from Board member Richard Brannon. Brannon bought up 44,000 shares for just over $403,000 this month, and now holds a stake in the company worth well over $2.5 million.
Among the bulls is Raymond James analyst Justin Jenkins, who rates ET shares a Strong Buy along with a $13 price target. Investors could be sitting on returns of ~40%, should his thesis bear fruit over the next 12 months.
Backing his stance, Jenkins writes: “Another $1.5 billion was lopped off of debt balances in 2Q21, positioning ET for a pivot to overall capital allocation back to equity. Moving forward, day-to-day DAPL headlines can always pop up… but the focus should be on the completion of the ENBL deal and what ET can do with excess cash flow in 2022+. We aren’t betting against one of the largest and most integrated asset bases in a >$65/bbl WTI price scenario and still argue that the stock’s jarring ~7x 2022E EV/EBITDA multiple already prices in substantial externalities…”
Overall, Wall Street clearly likes this stock, as made clear by the unanimous Strong Buy consensus, based on 5 recent reviews. Meanwhile, the bullish price target of $14 suggests room for ~50% growth ahead. (See Energy Transfer stock analysis)
Agree Realty (ADC)
The next stock we are looking at is Agree Realty (NYSE:ADC), a retail property stalwart. With a focus on companies with a national footprint, the real estate investment trust (REIT) acquires, develops and leases properties to some of the US leading retailers. Its largest tenants include Wal-Mart (NYSE:WMT), Sherwin-Williams (NYSE:SHW), and TJX Companies (NYSE:TJX).
Seeing out Q2, the company’s portfolio showed ownership of 1,262 properties, spread across 46 states with gross leasable space of 26 million square feet. In the quarter, the company invested around $366 million in 59 retail net lease properties.
Q2 also saw the company delivering a set of results which slightly beat Street expectations. Quarterly revenue has been steadily rising for the past couple of years, and rose by 43.5% year-over-year to $82.55 million, beating the Street’s call by $0.84 million. FFO (funds from operations) managed a 1 cent beat – coming in at $0.89.
Agree stock, however, has underperformed the broader market in 2021, with shares trading at roughly the same price as at the year’s onset, and corporate members have been making their moves.
The insider buying activity shows a flurry of recent purchases. Some of the company’s top brass including President and CEO Joey Agree, Executive Chairman Richard Agree and Director John Rakolta have over the past week collectively bought shares worth $2,023,417, all purchased in the $67-$68 price range.
These actions will not be surprising to RBC’s Brad Heffern, who highlights several reasons to back the stock.
“We see ADC’s portfolio of net lease assets as one of the highest quality in the space, with top tier investment grade tenants who are largely public and leaders in their respective industries,” the 5-star analyst wrote. “When combined with a peer-leading acquisition pace and low cost of capital, we think ADC is well positioned for mid-to-high single digit annual AFFO/sh growth for years to come.”
As such, Heffern rates Agree an Outperform (i.e. Buy) backed by an $80 price target. The figure implies ~20% upside potential from current levels.
Most on the Street agree on Agree. Of the 7 reviews posted during the past 3 months, 1 says Hold while all the rest say Buy, naturally culminating in a Strong Buy consensus rating. The average target is just above Heffern’s; at $81, the figure suggests investors will be sitting on returns of 21% over the one-year timeframe. (See Agree stock analysis)
Accelerate Diagnostics (AXDX)
We’ll round out our look at insider buys with Accelerate Diagnostics (NASDAQ:AXDX), a lab services company aiming to improve the speed and accuracy of medical blood work. The Delaware-based company is an in vitro diagnostics provider offering solutions to the identification of drug resistant organisms and hospital-acquired infections. Accelerate offers medical providers several fast and accurate platforms: the Pheno system, the PhenoTest BC kit, and the Accelerate ARC module.
The company’s platforms use parallel computing and machine learnings to stay ahead of the curve and offer customers (medical practices and physicians) test results made possible through microbiology and analytical chemistry, and powered by AI, parallel computing, and machine learning.
In mid-September, the company announced FDA clearance of improvements to the Accelerate Pheno system. The improvements expand the platform’s antimicrobial susceptibility testing (AST) menu when testing for bloodborne infections.
In the second quarter of this year, Accelerate reported a 33% gain in net sales, from $2.1 million to $2.8 million, year-over-year. The company ran a net loss of $21.7 million, or 36 cents per share, a loss in-line with previous reported quarters.
AXDX shares have fallen steadily from their peak in February of this year, and the stock is down 44% in the last 12 months.
Turing to the insider share purchases, we find four informative buys from director Jack Shuler. Shuler is a major investor in Accelerate, and owns more than 10% of the company. His recent stock purchases totaled over $2.3 million, for 429,531 shares.
Looking at the stock for Craig-Hallum, analyst Alexander Nowak writes: “Utilization was up in the quarter and labs are reopening to conversations about antimicrobial infections… Q2 was partially disrupted by the Delta variant as hospitals somewhat shift attention though barring prolonged setbacks, management remained optimistic in its mid-2021 inflection… While recovery conditions remain fluid as new COVID variants emerge, there is a sense that AXDX is ‘almost there’ in its recovery story. With data showing Pheno can improve antimicrobial infection care and golive/organizational strategies revamped, we still think AXDX is poised to revolutionize the microbiology lab.”
Based on the above, Nowak rates AXDX a Buy and his $15 price target indicates confidence in a 157% upside for the next 12 months.
Looking at the consensus breakdown, 2 Buys and 1 Hold add up to a Moderate Buy analyst consensus. The average target of $12 implies an upside of 106% from the current trading price of $5.83. (See AXDX stock analysis)
To find more ideas for stocks trading at attractive valuations, visit Investing Insights.