Insider buying tells investors that a stock’s price is cheap, the market has something wrong, or the business outlook is improving. Insider buying can signal that share prices will reverse course and begin moving higher, but not always. This is a look at three small to mid-cap stocks insiders bought in Q1 2024. Two are good plays that investors may consider for their portfolios. One is a stock heading for lower price points that investors should avoid.
Team Inc. Has Structural Issues Insider Buying Can’t Cover
Team Inc. (NYSE: TISI) provides a range of high-tech testing, heat-treating, and inspection services that should be in position for profits. The energy sector alone is in a major spending upcycle with oilfield services in a golden age, but the benefits are not for Team. This company continues to struggle with profitability across its operating segments, and there is no expectation that it will change soon. However, insiders are buying the stock, so it has some value. Insidertrades.com tracks eight purchases from four insiders, including three directors and a major shareholder.
The major shareholder is Corre Partners. Corre Partners owns over 33% of the stock and has been buying it aggressively for the last year. Institutions other than Corre Partners own a slim 14% of the business; they sold in Q1 at a pace 4X greater than buying. No analysts track this stock, so there is little to drive it other than news, which is uninspiring. The stock recently rebounded from a long-term low, but the gains are unlikely to last. This stock is under significant pressure and faces delisting from the NYSE, which will undercut investor confidence.
Grief, Inc. Pays A Solid Dividend: Insiders are Buying It
Greif, Inc. (NYSE: GEF) manufactures industrial packaging for the global market. Its stock price has trended upward since 2020, driven by demand, cash flow, and substantial dividends. The company stock yields about 3%, trading near $65, and the payout is reliable. The company pays less than 35% of earnings and has an outlook for earnings growth. Grief, Inc. has increased its distribution for the last few years, so another increase is likely at the end of the fiscal year.
Four insiders bought GEF stock in seven transactions since January 1st. Buyers include the CEO, CFO, VP, and Treasurer, which offset some sales by another VP. The net result is an increase in insider ownership. Ownership is nearly 3% and compounded by the institutions. Institutions own about 45% of the stock; activity spiked in Q1, and the balance shifted back to the buy-side.
Three analysts tracked by Insidertrades.com have current ratings on the stock and are leading the market higher. Revisions and upgrades over the past twelve months lifted the rating from Reduce to Moderate Buy and the price target by 1000 basis points. The consensus forecasts a 20% upside, and the low end of the range is above current action, suggesting a deep value opportunity.
Mercury Systems at Rock Bottom
Mercury Systems (NASDAQ: MRCY) share price trended lower over the last year, aided by diminishing analysts' sentiment. The analysts' sentiment has fallen to Reduce from Moderate Buy, and the price target followed it lower, but the bottom is in. The market shows signs of bottoming and reversal, which aligns with a series of good news releases. The latest is a contract awarded by the Navy worth $243 million over five years. That’s not enough to move the needle regarding growth, but it helps to underpin an outlook for growth and pivot back to profitability by the end of this fiscal year.
Three insiders bought this stock in four purchases, offsetting a near-equal number of sales, although the value differential is substantial. Purchases offset sales by nearly 4-to-1 and have the insider holdings up to 1.8%. Institutional activity is noticeably bullish, with net activity bullish for seven consecutive quarters, activity spiking in Q4, and buyers leading sellers in 2024.
