Every investor knows that the path toward profits lies in buying low and selling high. That’s a basic precept of any economic trading system. The trick, however, is recognizing when the stock is low enough to buy in. The prime moment to buy is when the stock hits bottom; that will maximize returns when the share price starts to rise again.
There are a multitude of possible clues investors can use to find the price bottom; today, we’ll be looking at insider buying trends.
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.
So let’s put this into practice. We’ve used the Insiders’ Hot Stocks tool at TipRanks to find stocks with recent ‘informative’ insider buys – and we’ve further sorted those to find three whose share price is down over 40% this year. Furthermore, these stocks have both gotten plenty of love from the Wall Street analysts. Each has a potential upside, based on analyst price targets, of more than 90%.
We’ll start with a company in the medical research field, Iovance Biotherapeutics. This firm focuses on an innovative approach to cancer treatment, using tumor infiltrating lymphocyte techniques to attack malignancies. Put shortly, in layman’s terms, the company is developing a method of using the patient’s own immune system to attack tumors, through immune cells (lymphocytes) which naturally enter and attack cancerous growths.
Iovance’s pipeline is both active and varied, with an even half-dozen drug candidates at various stages of the clinical trials progress, and two of the candidates have multiple trials underway simultaneously against different cancers, as monotherapies and in combination with established drugs.
However, the stock plummeted over 50% in a single day late last month after the company published clinical data from cohort 4 of its pivotal trial on its leading drug candidate lifileucal. The study is evaluating the drug as a treatment for advanced melanoma. The current data release showed a 29% objective response rate in patients, while an earlier cohort in the same study showed a 36% objective response rate. Investors were put off by the lower success rate recorded in cohort 4, and that was reflected in the stock’s price.
At the same time, management remains optimistic, notes that lifileucal is meeting the study goals, and reiterates that the company still plans to proceed with the Biologics License Application process with the FDA in August of this year.
A look at the insider trading shows the extent of management’s optimism. There has been a spate of insider buying in recent days, and one of those trades stands out in particular. Wayne Rothbaum, of Iovance's Board of Directors, placed a major purchase last week, spending $6.59 million to buy up 1 million shares of IOVA.
JMP analyst Reni Benjamin is also bullish on this stock, and lays out a clear case for buying in, as the potential gains clearly outweigh the risks.
“With the positive feedback from the FDA regarding the potency assay matrix, positive results in frontline melanoma in combination with pembro as well as second-line as a monotherapy, a BLA submission expected in 3Q22, continued advancement of solid tumor trials, including combination studies with checkpoint inhibitors in early-stage disease, and a strong cash position of $516.0MM, we believe Iovance represents a unique investment opportunity and would be buyers of shares," Benjamin opined.
Benjamin put his money where his mouth is, with a $25 price target on the stock suggesting a robust 232% upside for the next 12 months. Unsurprisingly, Benjamin rates the shares an Outperform (i.e. Buy). (To watch Benjamin’s track record, click here)
Overall, Wall Street hasn’t downshifted on this stock, as indicated by the 11 recent analyst reviews and their 10 to 1 breakdown favoring Buys over Holds. The stock is selling for $7.53 and the average price target stands at $26.22, implying a 248% one-year upside potential. (See IOVA stock forecast on TipRanks)
Now we’ll change direction, and look into Wheels Up Experience, a company in the commercial aviation business. Specifically, Wheels Up operates an app that connects passengers with operators of private jets, making charter or private jet travel available to a wider audience than just the highly wealthy. Wheels Up member users can tap into a network of more than 1,500 private aircraft, all verified and safety-vetted.
In the first quarter of 2022, Wheels Up reported a strong year-over-year revenue gain of 24%, reaching a total top line of $325.6 million. This was driven by increase of 26% in the app’s active membership, which reached 12,424 in the quarter. The company’s live flight legs, a measure of travel undertaken, came in at 17,626, up 15% from the year-ago quarter.
Despite this growth in passenger use, the stock is down by approximately 44% year-to-date. A look at the earnings will underscore the investors worries.
Wheels Up reported a net loss of $89 million in 1Q22, up by $56.8 million year-over-year. On a per share basis, the net loss deepened from 17 cents in 1Q21 to 36 cents in this most recent report. While Wheels Up is gaining members and users, and expanding its reach in terms of total flights, the company is still having trouble turning a profit.
That did not stop insider David Adelman, one of the company’s directors, from spending $647,500 to buy up a set of 250,000 shares last week. This purchase follows a similarly-sized buy back in March of this year.
5-star analyst Aaron Kessler is also confident about this company's future. In his coverage of UP for Raymond James, Kessler writes: "We are optimistic the company can return to high single digit contribution margins exiting 2023. Our positive fundamental view is based on: 1) a large and growing private aviation TAM; 2) Wheels Up is a leading on demand private aviation marketplace; 3) membership-based model drives predictable revenue base; and 4) our expectation for 15%+ long-term revenue growth and 10%+ long-term EBITDA margins.”
Kessler’s long term outlook is bright for this company, and he backs it with an Outperform (i.e. Buy) rating and a $5 price target that implies a one-year upside potential of ~91% for the stock. (To watch Kessler’s track record, click here.)
So we have one 5-star analyst coming out for the bulls on this one – but what does the rest of the Street make of UP's prospects? The stock has picked up 7 recent analyst reviews, and they include 4 to Buy, 2 to Hold, and 1 to Sell, adding up to a Moderate Buy consensus view. With a trading price of $2.62 and an average price target of $5.40, the stock has a potential upside of 106% for the next 12 months. (See UP 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.
