Three major headwinds have combined to hit markets: persistently high inflation, the Fed’s rising interest rates in its ongoing battle to tame it, and growing concerns that a recession is just around the corner.
In such an unpredictable market environment, investors need to find a clear and reliable signal as to which stocks are the most attractive choices to weather the volatile conditions. One of the clearest signs of this comes from corporate insiders, corporate officials in high positions — CEOs, CFOs, board members — whose positions give them an inside view of company operations, along with more detailed knowledge to make predictions about the shares of their companies.
Being humans, like the rest of us, these insiders use that knowledge when trading their own stocks, and to keep the playing field level, regulators require them to disclose their insider trades promptly. And when insiders start buying their stock in million-dollar lots, investors can follow suit and make decisions based on the data.
Using TipRanks’ Insiders’ Hot Stocks tool, we found two stocks that show such large insider buys — information buys on the order of a million dollars. We can take a dive into the data and analyst commentary to get a clearer picture of why they are loading right now.
Masimo Corporation (MASI)
The first is Masimo Corporation, a healthcare company that designs, manufactures and markets noninvasive medical monitoring technologies, with a line of home monitoring and hospital automation devices. The company’s main products focus on pulse oximetry, the noninvasive monitoring of a patient’s blood oxygen saturation levels. Masimo is headquartered in Irvine, California, and its Masimo SET (signal extraction technology) helps monitor more than 200 million patients worldwide.
Masimo’s shares are down this year, about 51%, but most of that loss came in February, when news broke that the company had spent more than $1 billion acquiring Sound United, a non-healthcare company focused on audio technology. Investors were skeptical of the move, which didn’t appear to fit Masimo’s technology journey.
Since that announcement and the decline in its share price, the stock has remained fairly stable and the company has delivered revenue and earnings. In the most recently reported quarter, 3Q22, the company showed a top line of $549 million, up an impressive 78% year over year. This included healthcare revenues of $372 million and non-healthcare revenues of $222 million. Non-GAAP net income of $53.9 million, translated into $1 per diluted share, increased 6.3% over the same period a year ago. Both total revenue and diluted EPS were ahead of expectations.
On the product side, Masimo recently launched its W1 Watch, a personal health monitoring watch that keeps continuous records of key health data. The W1 is billed as the first in its class, a comfortable and wearable personal health tracker, adaptable for use by healthcare professionals for patient monitoring or by health-conscious individual consumers.
The company also unveiled its Stork baby monitoring system, which connects to home theater and audio systems to provide parents with easy monitoring anywhere in the home, and also connects Masimo products with purchase. by Sound United earlier this year.
Moving on to the insiders, we find out that the company’s CEO Joe Kiani has been buying MASI stock heavily. Last month he bought 39,778 shares for $4.97 million; He followed that up with a purchase last week of another 7,040 shares, for which he paid nearly $1.02 million. Kiani now owns a stake in the company worth $517.61 million.
After initially expressing some reservations about Sound United’s acquisition of BTIG, analyst Marie Thibault has come forward and is optimistic about the potential of the company’s products.
He writes: “We think the W1 watch makes sense as part of a telemonitoring ecosystem and that Sound United products help complement the home care setting. The Stork baby monitor seems like a natural fit, given MASI’s reputation in the wrist ox, physician familiarity with the brand, and parental preference for a safe, medical-grade product. With Stork, Sound United’s retail channels will be a major impetus for market entry. In our view, the revenue contribution of new consumer health products (one point CAGR of revenue over the period 2023-2028) has been set conservatively.”
Pursuing this position, Thibault rates the stock a Buy, with a price target of $180 suggesting a 21% one-year upside potential. (To look at Thibault’s track record, click here.)
There are 5 recent analyst reviews on this stock and they break it down 4 to 1 in favor of Buy over Hold to a Strong Buy consensus rating. The shares are priced at $148.09 and have an average price target of $166.40, which implies a 12% upside over a one-year horizon. (See Masimo’s stock forecast on TipRanks.)
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Victory Capital Holdings (GRP)
Next is Victory Capital, a holding company in the wealth management and investment sector, which operates through a network of subsidiaries. Victory provides a full range of services to its clients, including investment advice, fund administration and general asset management. Overall, Victory has approximately $161.5 billion in total AUM as of last November 30th. This is up from the third quarter total of $147.3 billion.
Last month, Victory reported its 3Q22 results. The top and bottom lines were both down slightly year over year, but both came in higher than estimates. Revenues were reported at $207.3 million, compared to $226.3 million in the year-ago quarter, while adjusted earnings, at $1.19 per diluted share, were down from $1.25 registered in 3Q21. EPS, however, was significantly above the $1.07 forecast, beating it by 11%.
Despite the year-over-year decline in revenue and earnings, the company’s board felt confident enough to authorize a 25-cent common stock dividend. This marked the fourth consecutive quarter with the dividend at this rate, and the $1 annualized payout gives an above-average yield of 3.7%. The company has gradually increased its dividend payout over the past 3 years.
Victory’s major insider buy came from company chairman and chief executive officer David Craig Brown, who bought 60,000 shares last week. These are now worth more than $1.63 million and have increased his stake in the company to just over $60 million.
Brown isn’t the only bull here; RBC Capital’s 5-star analyst Kenneth Lee is also optimistic about Victory’s prospects. After the third quarter press release, he wrote: “We are impressed that VCTR has continued to show resilience in margins, in a challenging quarter with significant market volatility. VCTR Adjusted EBITDA margin was 50.0% for the quarter, higher than our estimate of 48.8%. Recall, management’s long-term EBITDA margin guidance of 49%, which includes the potential impact of continued reinvestments (VCTR continues to build its digital capability, particularly within the direct investor business). We see that VCTR’s operating model, which has approximately 2/3 of variable operating expenses, allows the company to flex expenses during market downturns.”
Looking ahead for the stock, Lee sees reason for an Outperform (Buy) rating, while his price target, at $34, indicates confidence in a 25% upside over the next 12 months. (To look at Lee’s track record, click here.)
This wealth manager earns a Moderate Buy consensus rating from Street’s analysts, based on 9 recent analyst reviews, which include 5 to buy, 2 to hold, and 2 to sell. With a share price of $27.20 and an average price target of $30.56, this stock has 12% upside potential by the end of next year. (See Victory’s stock forecast on TipRanks.)
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Disclaimer: The views expressed in this article are solely those of the analysts featured. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.