Up, up and away they go. Kicking off the second half of the year with a bang, the S&P 500 followed up its best quarter in over 20 years by extending its winning streak to four sessions. That said, given the current climate of uncertainty, predicting what the remainder of 2020 holds can feel like a guessing game.
So, maybe it’s time to look at what the insiders are doing. Company owners, presidents and other officers, board members – have a direct line to information that the rest of us don’t usually see. Their positions put them in place to know what is about to impact their companies, and they have access to better legal and regulatory advice than the general public. It’s only natural – and very human – for them to use this information in their personal trading activities. To keep the playing field a bit more level, these people in the know are required to disclose their inside trades quarterly.
TipRanks collects that insider trading data, and puts it in the context of the larger markets. The Insiders’ Hot Stocks tool lets you follow the insiders, sorting the data by stock or by trading strategy. It’s a smart way to get an inside track, and to demonstrate, we’ve picked three stocks that have recently skewed strongly positive on the strength of insider trades.
T-Mobile US, Inc. (TMUS)
The first stock is a company you know. T-Mobile is the country’s third largest wireless carrier, by customer base, and the company started Q2 by taking ownership of competitor Sprint. This past quarter marked the first full quarter of activity by the combined entity, and TMUS shares rose an impressive 24% during the period.
Along with strong share appreciation in Q1, TMUS posted unexpectedly solid earnings. The earnings, reported back in May, showed EPS coming in at $1.23, which beat the forecast by 23%. Looking forward, T-Mobile has strong prospects for growth due to its commitment to increasing 5G coverage. As part of the Sprint merger, the company had to commit to expanding rural coverage and making 5G service available to 97% of the US population within three years.
In the wake of the successful Sprint merger, TMUS has seen a major insider buy. The purchase, by Director Ronald Fisher, was for 350,000 shares, for which he shelled out more than $36 million. It was a big move, and it swung the insider sentiment on the stock deep into positive territory.
Writing on T-Mobile and its prospects, 5-star analyst from Wells Fargo, Jennifer Fritzsche, says, “…in our view the true value of Sprint’s platform is access to greater scale and a deeper spectrum portfolio. With the combined Sprint asset mix, we believe TMUS has a 1-2 year head start for 5G relative to its peers. And despite the recent outperformance, we believe the valuation is more than justified considering the significant growth opportunity ahead to expand margins and grow market share.”
To this end, Fritzsche rates the stock a Buy, and her new $120 price target, up from $110, indicates a potential for 13% upside growth in the coming year. (To watch Fritzsche’s track record, click here)
Do other analysts agree with Fritzsche? As it turns out, most do. With 10 Buys and 2 Holds assigned in the last three months, the word on the Street is that TMUS is a Strong Buy. Its recent share appreciation has pushed the stock price close to the average price target in recent weeks. The stock is selling for $106.01, and the average price target of $111.61 implies room for another 5% growth this year. (See T-Mobile stock analysis on TipRanks)
Arcimoto, Inc. (FUV)
The next company on our list, Arcimoto, is an Oregon-based ‘green economy’ player. Arcimoto has developed, and is marketing, a series of low-weight, high-efficiency electric vehicles. The company’s name for the line, Fun Electric Vehicle, is also the source of its stock ticker, FUV.
Over the past year, Arcimoto has expanded its EV designs to include delivery vehicles and rental fleet options. The company was forced to suspend manufacturing operations during the coronavirus crisis, but has since reopened its assembly facilities.
In a move to raise capital and expedite recovery from the pandemic’s impact, Arcimoto put 1.7 million shares of common stock on the market at the end of June. The move grossed $8.5 million, the proceeds of which will be used for general working capital, including acceleration of manufacture and delivery of pre-ordered vehicles.
The offering was an opportunity for insiders, as well as the public, and three company officers made significant purchases in recent days. Mark Frohnmayer, company President, bought 78,531 shares for an estimated $334,000, and two board members, Jesse Grant Eisler and Joshua Scherer, also made six-figure purchases. These were informative buys, the first in a year, and have moved the company’s insider sentiment far more positive than its sector average.
Amit Dayal, 4-star analyst with H.C. Wainwright, is bullish on Arcimoto, rating the stock a Buy and writing, “We once again reiterate the 'multiple shots on goal' aspect of the company's market positioning, where one vehicle platform has the flexibility to serve multiple applications and markets. Accordingly, pushouts in vacation oriented sales should, in our opinion, be compensated with pickup in delivery applications... The company's cash burn was lowered during the lockdown but should be expected to ramp with production picking up.”
Dayal’s $7 price target suggests that FUV has room for 3% growth over the next 12 months. (To watch Dayal’s track record, click here)
Recent share appreciation – the stock rose an eye-opening 378% in Q2 – has pushed FUV above the average price target, too fast for most analysts to adjust their outlooks. Shares are currently selling for $6.82, so the $5.38 average price target puts the downside potential at 21%. The Strong Buy analyst consensus rating is unanimous, based on 4 recent positive reviews. (See Arcimoto stock analysis on TipRanks)
Principal Financial (PFG)
Last on our list is Iowa-based Principal Financial Group, an $11 billion asset management and insurance company. PFG shares are still down 26% year-to-date, having only partially recovered from losses in February and March.
One thing the ‘corona quarter’ could not do was derail the company’s dividend. PFG paid out a generous sum in both Q1 and Q2, giving an annualized payment of $2.18 per share and an impressive yield of 5.4%.
There has been one recent informative insider purchase of this stock in recent weeks. Board member Daniel Gelatt bought a block of 28,148 shares, paying a disclosed $999,823. His move pushed overall insider sentiment on PFG into positive territory, just above the sector average.
Piper Sandler analyst John Barnidge covers this stock, and points out that PFG has so far managed to avoid a direct blow to its insurance operations from the COVID-19 epidemic – and in a curious way, its vision and dental policies have brought a benefit to the company. Barnidge writes, “As of 1Q20, the company has not yet experienced any known CV19 deaths in its life insurance products and only a limited amount of claims on benefit products, primarily short-term disability. PFG continues to benefit from dental & vision claim tailwinds from a lack of ability to make appointments… PFG could potentially see more of a benefit from a lack of claims in dental & vision than actual direct impact from CV19 claims.”
Barnidge’s Buy rating on the stock is supported by his $43 price target, suggesting a one-year upside potential of 5%. (To watch Barnidge’s track record, click here)
While Barnidge is bullish, Wall Street is still cautious here. The analyst consensus rating on PFG is a Hold, based on 7 reviews. The reviews break down as 2 Buys, 4 Holds, and 1 Sell. Shares are currently priced at $40.79, and the average price target of $43.57 implies a modest 7% upside potential. (See Principal Financial stock analysis on TipRanks)