Amid Market Tumult, Insiders are Buying Up These Two Stocks

Capital markets have had a phenomenal run through earnings season, but now, with the excitement wearing off and new COVID-19 variants rearing their ugly heads, investors have been left spooked. The winter holiday season typically brings with it strong performance from retailers and travel industry players, but with each passing day, the typical is becoming more abnormal. Navigating these choppy waters is unfamiliar even to seasoned traders, so everyday investors can be left with their hands in the air when trying to pick stocks with potential for upside.  

However, there is a group of investors who have the power to outperform the market, and their trades are publicly available. Insiders, as they’re known, are individuals that either hold a 10% or more stake in a publicly traded company, maintain a senior officer role, or sit on a board of directors, so they often have access to information which might later affect a stock price.  

Insider trading has traditionally carried with it a derogatory connotation, although it is not necessarily against the law. Legally speaking, an individual defined as an insider must submit their transactions to the Securities and Exchange Commission (SEC) within two days, which later publishes a public disclosure for financial transparency reasons. Thus, their trades are made available to the public.  

Additionally, not all insider transactions are indicative of future stock price movement. TipRanks’ unique tools help users identify the trades worth paying attention to, aka the Informative Buys. This type of transaction is one wherein the insider allots their own private capital in order to increase and initiate a holding in the company. If an insider is buying in, a high level of confidence can be inferred, along with a potential future gain in share price.  

By sifting through Insiders’ Hot Stocks and the Top 25 Corporate Insiders pages, users can explore differing strategies and their outcomes, as well as what the most successful insiders have been up to.  

With all this in mind, let’s take a look at two stocks that have recently seen significant positive insider trading activity. 

Ball  

Founded originally in 1880, the Ball Corporation (BLL) has since diversified into several subsidiaries and spaces of expertise. The company focuses on the manufacture of packaging and metal products for several sectors, as well as aerospace component production.  

The stock has been historically involatile, declining only 1.36% over the last year. From its early pandemic lows, the stock has recovered in price and has even climbed higher. However, while the broader market saw a sweeping bull run over the past two months or so, BLL traded largely sideways.  

Perhaps this is going to change. Three days ago, an individual with insider status increased his holdings in BLL. Both a president and a member of the board of directors, Daniel William Fisher made two separate Informative Buys worth $938,770 and $938,841, respectively.

After these two purchases, Fisher now holds BLL stock worth $8,675,088. The fact that he increased his position by about 30% shows a strong level of confidence in Ball.  

Two days prior, Wall Street weighed in. Jeffrey Zekauskas of J.P. Morgan was cautiously optimistic on BLL. He believes that “Ball’s share price does not fully reflect its durable earnings prospects supported by a consolidated industry structure in North America and Europe, tight supply/demand balances, and improving long-term growth prospects.”  

Zekauskas noted that there is a lack of aluminum cans in the U.S. to meet demand, and customers are left with a smaller pool of suppliers to turn to. He does not anticipate this environment to wane in the near-term.  

The four-star analyst rated the stock a Buy, and assigned a price target of $105. This reflects a potential 12-month upside of 10.88%.  

Consumer Portfolio Services  

This Las Vegas-based specialized financing firm serves as an option for automotive dealers to help consumers with poor or sub-prime credit histories acquire a vehicle. Consumer Portfolio Services, Inc. (CPSS) saw its stock move significantly higher since the lows of the pandemic, gaining over 600% since its early April-2020 prices. More recently, CPSS climbed about 36% over the last two months.  

Despite its hefty run-up, several insiders are now buying in. Over the last 20 days, five separate insiders increased their holdings of CPSS. Nearly all are Senior Vice Presidents or members of the board of directors. In addition to these individuals, the CEO, President and member of the board, Charles E. Bradley, purchased $928,332 worth of company stock.  

After the transaction, Bradley’s current holding value is now valued at $25,686,698. The CEO of Consumer Portfolio Services has been outperforming the market for at least the last year. His trades have been correct 43% of the time, and he has averaged a return of 20.4% on each one. On TipRanks, Bradley is considered a four-star insider, coming in at the top 11% of insiders, out of more than 84,000 others.  

Bradley is not alone in his sentiment. The CEO’s confidence is met by TipRanks’ Smart Score, which has calculated CPSS as a 10 out of 10, denoting an Outperform rating. This metric comes as an aggregation of several other key sentiment factors on the stock, including positive technicals and News Sentiment, and bullish Blogger opinions.  

Meanwhile, in April of this past year, Wall Street analyst John Hecht of Jefferies Group had assigned a price target of $6 to CPSS. At the time, this had represented about a potential 12-month upside of 50%. While this target was lofty, CPSS has since blown beyond it and closed Friday at a price of $8.11 per share. The stock has had a tremendous run over the last year, and in particular the last month, although multiple insiders, including its CEO, still believe in a higher valuation for CPSS.  

Disclosure: At the time of publication, Brock Ladenheim did not have a position in any of the securities mentioned in this article.