Recent market volatility is enough to make your head spin, and can cause plenty of confusion for retail investors seeking a solid market strategy. It’s tempting to look to the experts, but that raises another question: which experts are the best to follow?
Probably the best experts to follow are the corporate insiders. These are company officers, in upper management or the Board of Directors, who have both direct access to their company’s inner workings and a responsibility to their shareholders for bringing in profits. The combination makes their stock purchases a popular data point for investors seeking an expert opinion.
Investors can look to these moves, using TipRanks’ Insiders Hot Stocks tool. We’ve used that tool to do just that, find a couple of stocks whose price has dropped over the past year – and that drop has coincided with some ‘informative buy’ insider trades. Let’s take a closer look.
The first stock we're looking at, Luminar Technologies, works in the emerging autonomous vehicle sector, where it develops vision-based Lidar systems essential for self-driving cars. Lidar, or light detection and ranging, is the chief sensor technology allowing self-driving vehicles to see and sense their environment, to avoid obstacles and exploit traffic gaps. Luminar is working on advanced new Lidar systems, starting from the semiconductor chips but including sensors, transceiver/receivers, and processing electronics, to give autonomous vehicles the best perception capabilities possible.
This tech firm entered the public market in 2020 through a SPAC merger with Gores Metropoulos, in a deal that brought Luminar $590 million in cash and saw the LAZR ticker open on the NASDAQ on December 3 of that year. In the year since the SPAC combination closed, Luminar shares first spiked and then tumbled; the stock has lost 66% in the last 12 months.
Even though the stock is down, this new tech company has also been reporting rising revenues. In its most recently reported quarter, 3Q21, Luminar had $8 million at the top line, which implies 89% growth year-over-year. At that time the company was on track to finish 2021 in its previously set guidance range of $30 million to $33 million.
Another point that bodes well is a recent large-scale buy from a company insider. This purchase, earlier this week, was by Austin Russell, the company’s President and CEO. Russell spent over $892K to buy up 65,000 shares in Luminar.
Russell isn’t the only bullish on this stock. Cowen analyst Joshua Buchalter gives the stock an Outperform (i.e. Buy) rating, along with a $22 price target that indicates room for ~78% one-year upside. (To watch Buchalter’s track record, click here)
Backing this stance, Buchalter writes: “We believe Luminar is positioned to capture material value in the autonomous mobility space. The company is well capitalized, and its lidar hardware has passed the test of both traditional auto/trucking OEMs (Volvo & DaimlerTrucks) and the two leading autonomous processing companies (NVIDIA and Mobileye). Importantly, while still early in the hardware growth inflection, we believe investors are overlooking Luminar’s leap from components to a platforms provider through its software investments. In our proprietary forecasts, we estimate Luminar’s total hardware + software light vehicle TAM growing at a ~50% CAGR from 2022 to 2030 to >$30B."
Overall, there are 7 recent reviews of this stock, and the breakdown – 6 to 1 in favor of Buy over Hold – shows that Wall Street is with the bulls on this one. Shares are priced at $12.39 with a $28.67 average price target indicating room for ~131% growth this year. (See LAZR stock forecast on TipRanks)
Next up, Star Equity, is a holding company with subsidiaries and positions in the healthcare, construction, and investment sectors. The company’s healthcare division focuses on the design, development, manufacture, and marketing of medical imaging products and systems for mobile imaging services. The construction division works in modular building and structural wall panels, for both the commercial and residential real estate sectors. Star’s investment division manages the company’s various assets.
While the economy has been volatile in the last two years, buffeted by pandemic headwinds, Star has managed to keep the revenue stream solid. The company saw a revenue peak at the end of 2019, just before the pandemic; while the top line dropped off a bit after that, it has remained between $22 million and $30 million for the past 7 quarters. The most recent quarter reported, 3Q21, saw $28.8 million at the top line, down from $30 million in the year-ago quarter but up 11% sequentially. The company’s EPS loss moderate in Q3, from 74 cents per share in Q2 to 29 cents per share.
Star’s share price, which had mostly stayed between $2.50 and $3.50 for the past year, fell off a cliff this month. The fall in share price has mostly come as the broader markets have seen a sell-off, but the company on January 19 announced a public stock offering that saw 9.5 million shares go on the market $1.50 each. The offering raised $14.26 million in gross proceeds – but it also diluted shares and further depressed prices. The stock price is down 65% in the last 12 months; in January 2022 alone, it has fallen 49%.
But – the company’s officers bought heavily in the stock offering. Four of them, the COO, CFO, and two Board members, made purchases valued in the tens of thousands of dollars, while the largest purchase was made by Executive Chairman Jeffrey Eberwein. Eberwein has picked up 1,075,000 shares, spending just over $1.6 million on the buy.
These insiders are not the only ones bullish here. Tate Sullivan, 5-star analyst with Maxim Group, sees opportunity for investors here, in a company with sound business models.
“While we expect most companies will have higher raw material costs in 2022, STRR can introduce more variable price contracts for larger modular construction projects in New England. Also, we believe one part of STRR's construction business called EdgeBuilder can both increase pricing and pass through higher costs for raw materials," Sullivan opined.
"We maintain our Buy rating based on STRR's pipeline of construction orders, recent price increases, and gross profit margin continuing to expand in the Building & Construction segment, which is on track to represent 45% of company revenue in 2021, from 37% in 2020," the analyst summed up.
Sullivan's Buy rating comes with a $5.25 price target, implying a robust 307% one-year upside to the stock. (To watch Sullivan’s track record, click here)
All in all, the Moderate Buy analyst consensus rating on this stock is unanimous, as far as that goes; there are only two reviews on file, but they both agree that this is one to Buy. The shares are selling for only $1.29, and their average price target of $6.63 is even more bullish than Sullivan’s above, and suggests a 12-month upside of ~414%. (See STRR 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.
