Drops can bring a lot of pain, but they can also bring a lot of opportunity, as lower stock prices make entry costs more attractive. Before investors can take advantage of these opportunities, however, they must find a recognizable signal that will help them differentiate themselves.
A popular signal to follow is the insider buys, the trades made by high-ranking corporate officials whose positions give them the “inside” track of their company’s likely prospects – and thus the stock’s prospects.
These officers hold senior positions and are responsible for reaping profits for both shareholders and boards of directors, as well as ensuring future stock performance. Having that responsibility and having their inside information doesn’t stop them from trading their own company stock — and to level that playing field, federal regulators require the insiders to publish their trading activities regularly. Retail investors can track these trades through the Insiders’ Hot Stocks data tool on TipRanks.
We opened the database to get a head start in following the insiders. Using the inside trading tool, we gathered the details of two stocks with recent strong trades from the company officials. This isn’t garden variety trading either, these are multi-million dollar stock moves, the kind that can turn the needle on sentiment — and send the clear signal retail investors like. It also doesn’t hurt that both stocks are admired by the analyst community, enough to earn a “Strong Buy” consensus rating.
Day One Biopharmaceuticals (MORNING GLOW)
We start with Day One Biopharma, a small-cap player in the medical research biopharmaceutical scene. This clinical-stage research company distinguishes itself by focusing on the development of new treatments for childhood cancers, in particular genetically defined cancers in children. This is a field with many openings, as only 12 new pediatric oncology drugs have been approved in the past 25 years.
Day One aims to have the next approved drug in its field, and it has a promising candidate in DAY101, the subject of its clinical trial programs. DAY101, or tovorafenib, is a type II pan-RAF kinase inhibitor currently undergoing no fewer than four clinical trials.
The most advanced of these is the pivotal FIREFLY-1 study, in the treatment of recurrent low-grade glioma in children. The company released data from this phase 2 study earlier this month, showing an overall response rate (ORR) of 64% and a clinical benefit of 91% (CBR) for the first 22 patients. The drug was studied as a monotherapy treatment. Day One plans to initiate a pivotal Phase 3 clinical trial on this research track and is scheduled to initiate patient dosing in 3Q22.
Also on the clinical path, Day One announced in May that the first patients had been dosed in a Phase 1b/2 trial of tovorafenib in combination with pimasertib for the treatment of RAF-altered solid tumors. Both drugs in this study have shown promise when used in pediatric patients; this study aims to use this in a study of adolescents and adults. The company will begin the study with 25 patients aged 12 years and older, with the Phase 2 portion of the study evaluating additional extension cohorts.
These industry-leading surveys are supported by Day One’s cash position. Day One had more than $262 million in cash on hand at the end of the first quarter of this year. In addition, the company made a major capital increase in the past month through a public sale of shares. The public offering brought in gross proceeds of $172.5 million.
And that brings us to insider trading. Two institutional investors bought shares worth a total of $29.5 million, but board member Michael Gladstone also made a significant purchase. His purchase of 766,667 shares cost him just over $11.5 million, increasing his total stake in the company to $12.27 million.
Day One also has fans among Wall Street analysts. Analyst Robert Driscoll covers this stock for Wedbush, seeing the company’s recent data releases as the key point.
“Overall, although interim data, we are impressed and believe that the data appears to validate tovorafenib’s unique profile, which remains on track to show topline data in Q1:2023 that we expect to be sufficient for approval. First, although a formal comparison is precluded by cross-trial caveats, including differences in enrolled patients and response assessment criteria, we note that efficacy is currently significantly higher than historical standard of care chemotherapy data, including in treatment-naïve patients,” Driscoll opined.
Based on the above, it’s no wonder Driscoll reiterated his Outperform (ie buy) rating for DAWN stock. With a price tag of $35, the analyst thinks stocks could double in the next 12 months. (To view Driscoll’s track record, click here†
Plenty of promising research tracks and a lot of money will always get a positive message about biopharmaceuticals – and Day One’s Strong Buy’s consensus is unanimous, based on 3 recent analyst reviews. The stock is selling for $17.45 and the average price of $37.50 points to ~115% upside potential going forward. (See DAWN stock forecast on TipRanks)
RentRight Holdings (HST)
From biopharma, we shift our gears and change lanes to human resources. HR is an essential part of any company doing business today, and HireRight provides HR departments with the necessary solutions to background screening, compliance and risk management issues for more than 40,000 B2B customers worldwide. HireRight was a leader in web-based HR screening and had strong numbers last year, on the order of 110 million employee screenings generating 29 million reports.
We’ve heard a lot of news in recent months about how the job market has recovered since the worst of the COVID crisis, as well as headlines about new-found mobility among workers. Both were reflected in HireRight’s Q22 earnings report. The company posted a 33% year-over-year revenue increase, reaching $198.7 million. Income also showed strong gains. Total operating income grew about 3.5x year-over-year, jumping from $5.7 million to $20 million, while diluted earnings per share grew at the same pace, from 12 cents a year ago to 37 cents in the current report.
In the area of insider trading, HireRight has seen major purchases from investment firm Stone Point Capital — but the trading that caught our eye was by board of directors James Carey. Carey, whose purchase helped drive strong insider sentiment here, spent more than $22.2 million in recent weeks buying up 1,504,981 shares of HRT.
In his coverage of HireRight for Jefferies, analyst Hamzah Mazari posed the rhetorical question, “What to do with HRT stocks?”
To answer this question, he says without hesitation: “Buy more if you think HRT can achieve organic growth from high single digits to low double digits over the longer term, and run the company on technology and automation initiatives that lead to margin The company expects to complete its technology and automation investment initiatives by the end of 2023, and we feel we will see increasing benefits from technology investments as HRT rolls out applications in phases .”
Echoing his optimistic stance, Mazari gives HireRight stock a buy rating and price target of $23, implying a 57% gain going forward. (To view Mazari’s track record, click here†
Overall, with 5 recent analyst reviews on record, all positive, HireRight can bask in a unanimous Strong Buy consensus rating from the street. The stock is priced at $14.65 and has an average target of $21.20, suggesting a 12-month upside potential of ~45%. (See HireRight stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are those of the recommended analysts only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.