Every investor wants to cut through the noise, and clear away the static of the market signals, but there are thousands of companies trading on the markets, and they put out all sorts of signs regarding their health, viability, and potential for success. Top investors will learn how to cut through that confusion to find that stock that are flashing the right signs – and show the highest potential for gains going forward.
A clear signal is needed, and one of the clearest is the pattern of insider buying. Insiders – the corporate officers, board members, and others ‘in the know’ – don’t just manage the companies, they know the details. Legally, they are not supposed to trade that knowledge, or to blatantly trade on it, and disclosure rules by government regulators help to keep the insiders honest. Their honest stock transactions, however, can be highly informative. These are the people with the deepest knowledge of particular stocks. So, when they buy or sell, especially in bulk, take note.
With the TipRanks Insiders’ Hot Stocks tool, retail investors can get a look at what these company bigwigs are doing in the market. The tools' filters let you sort insider trades through a variety of strategies, to find the rights ones to follow. We’ve gotten the process started, using the tool to find two stocks with Strong Buy rating from the analyst community, plenty of upside potential, and recent strong insider buys. Let's take a closer look.
We’ll start with KKR, a financial services company in the global investment sector. KKR offers asset management services to a worldwide clientele, and currently has over $73 billion put into 110 revenue-generating company investments in its portfolio, and over $470 million in assets under management. In 2021, assets under management rose an impressive 87% from 2020.
KKR’s portfolio has been successful at generating returns for the company and its shareholders. Total revenues in 2020 came in at $4.43 billion; in 2021, that sum jumped to $16.24 billion, increasing by nearly a factor of 4. Fourth quarter revenues alone reached approximately $4 billion. Some $2 billion of that was fee-related income, which rose 54% year-over-year. In all, it was a record year for the company.
The company also saw solid distributable earnings for the quarter, at $1.4 billion. This is the metric that feeds the dividend, and is watched closely by investors. While the dividend of 14.5 cents per common share yields only 0.9%, it is reliable, and KKR has been growing it steadily over the past three years.
Insider sentiment on KKR is positive, pushed that way by two recent ‘informative buys’ from Board member Matt Cohler. Cohler was appointed to the company Board in January of this year, and in the last week of February he purchased two tranches of stock in the company, one of 8,305 shares and another of 8,683 shares. Cohler spent a combined total of $999,296 on the buys.
While KKR shares are down in recent months, JMP analyst Devin Ryan sees this as an advantage, writing: “We believe the sell-off creates an attractive longer-term buying opportunity, particularly given the strength of the underlying business trends (nearly every relevant metric across the company is at a record). The firm will be in the market fundraising for 30+ strategies in 2022, which we estimate could drive ~$70-$80B of inflows (following $121B of capital raised in 2021), while QTD realizations already stand at $700M+, a level we view quite positively given we’re only about five weeks into the quarter. Bottom line, we believe that KKR continues to execute at a high level and that momentum remains quite elevated heading into 2022.”
In line with these bullish comments, Ryan rates KKR an Outperform (i.e. Buy), with a $92 price target that suggests an upside of 53% this year. (To watch Ryan’s track record, click here)
Overall, this fast-paced asset manager has picked up 9 recent reviews from Wall Street’s analysts, including 7 Buys and 2 Holds for its Strong Buy consensus rating. The shares are priced at $57.75 and have an average target of $87.44, for ~45% one-year upside. (See KKR stock forecast on TipRanks)
The second company we’ll look at, Doma, brings AI and machine learning tech to the real estate business. The company uses its tech solutions to streamline the closing mechanisms of real estate sales, bringing the ‘1890s process and 1990s technology’ up to date. Doma makes closing efficient and affordable, and reduces the processing time for title and escrow completions from days to minutes.
This unique real estate tech firm went public on Wall Street last summer, completing a SPAC merger with Capital Investment Corporation V on July 28. The DOMA ticker debuted on the market on July 29, and the company was able to realize $350 million in new capital from the business combination.
The shares are down 67% since the SPAC, a drop that includes a 29% loss recorded after the 4Q21 earnings release. That release showed the company’s third straight EPS loss as a public entity, and was said to have spooked investors. For the full year 2021, the EPS loss came to 64 cents, deeper than the 56-cent loss reported in 2020. Doma expects to achieve profitability in 2023.
Despite this somewhat gloomy picture of the stock, at least one insider was willing to put some serious coin on Doma. In an informative buy, Board member Mark Ein paid $799,128 to pick up over 332,000 shares.
This stock has its fans among the analysts as well. JMP analyst Matthew Carletti rates DOMA an Outperform (i.e. Buy), along with a $10 price target. Investors stand to pocket ~288% gain should the analyst's thesis play out. (To watch Carletti’s track record, click here)
Backing his stance, Carletti writes: "With the significant pullback in both the share price of DOMA as well as Insur/PropTech peers, we think it is also now constructive to look at the valuation of shares of DOMA in relation to the incumbent title insurer universe, from which we believe DOMA will take significant market share in coming years."
“Despite macro headwinds in the marketplace as volumes for both refinance transactions, and to a lesser extent purchase transactions, have slowed, Doma’s open order volume growth – a leading indicator for revenue – increased 21% yr/yr (+41% in 3Q, +36% in 2Q, and +24% in 1Q), illustrating to us that Doma’s faster, better, cheaper value proposition continues to resonate in the market place and should allow the company to continue to gain market share, even in a contracting macro environment,” the analyst added.
In general, the rest of the Street has an optimistic view of DOMA. The stock’s Strong Buy status comes from the 3 Buys and 1 Hold issued over the previous three months. Shares in DOMA are selling for $2.58 each, and the average target of $7.50 indicates a possible upside of ~191% from that level. (See DOMA stock forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched 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.
