Typically, when deciphering which are the best stock picks to consider, insider trading transactions present some enticing clues. Arguably, this is all the more important when those transactions are buy orders. The thinking goes that executives can dump their holdings for a variety of reasons, including those unrelated to the underlying business. But acquiring shares? That could only mean they have confidence in the company’s future trajectory.
Adding to this narrative, the market is currently suffering from a corrective cycle. As well, recession fears are mounting as inflation crimps household budgets, causing a reduction in spending. In turn, this dynamic bodes poorly for corporate revenues, likely causing mass layoffs. So, if execs acquire their own shares during this dour environment, the action implies the underlying stock picks could be lucrative.
Still, it’s important to not get carried away with banking on insider trading transactions. For one thing, tycoons have plenty of funds to burn so the consequences of getting it wrong are diminished. More importantly, even the best experts in the investing realm get their stock picks wrong.
Ultimately, though, insider trading is an important clue as to who has skin in the game.
|ASEPF||Alpine Summit Energy Partners||$6.45|
|SIX||Six Flags Entertainment||$29.25|
Augusta Gold (AUGG)
An exploration and development firm focused on Nevada-based mining projects, Augusta Gold (OTCMKTS:AUGG) recently enjoyed an insider trading transaction totaling $52,149 on May 30, 2022. The investor was unnamed, only listed by Barchart.com as an “American shareholder.” Still, despite the lack of details, the bullishness in Augusta Gold is certainly understandable.
Throughout history, gold has represented a universal safe haven for its intrinsic value and ability to withstand the debilitating effect of inflation. According to data from the Bureau of Labor Statistics, the purchasing power of the dollar declined by 11.3% between April 2020 to April 2022. Therefore, gold-related investments potentially offer protection from rising prices.
Still, let’s be honest with ourselves and recognize that over-the-counter traded gold stocks are incredibly volatile. Therefore, this is one of the stock picks to approach with extreme caution.
CSP Inc. (CSPI)
A specialist in the network infrastructure and solutions industry, CSP Inc. (NASDAQ:CSPI) might not be a household name, but fundamentally it received a shot of relevance thanks to its cybersecurity arm. With Russia’s invasion of Ukraine threatening the modern global order, it has never been more important for corporations and government agencies to protect their digital profiles.
Here, Joseph R. Nerges, who appears to be a major investor, acquired 7,050 shares of CSPI at a price of $8.51 on May 31. In total, the insider trading transaction amounted to a hair over $60,000. As with Augusta, CSP makes plenty of sense due to current events. Cyberbreaches have become alarmingly frequent and their ability to hurt key infrastructure has many agencies up at night.
Still, it’s one of the riskier stock picks, so be sure to exercise caution.
Voxx International (VOXX)
A leading global manufacturer and supplier of automotive and consumer electronics products, Voxx International (NASDAQ:VOXX) has more recently expanded into iris-based authentication solutions for the rapidly growing biometrics industry. With both commercial and personal activities rising sharply from the spring doldrums of 2020, VOXX seems like sensible speculation among intriguing stock picks.
Indeed, Beat Kahli, who is listed as a director, acquired 10,000 shares of VOXX stock at a price of $8.36. In total, the insider trading transaction amounted to $83,600. On the surface, the acquisition is tied to the fundamental catalyst of the return to normal. In addition, biometric security demand could rise if workers are recalled back to the office.
Still, the other side of the narrative is that Voxx is a micro-capitalization firm. Therefore, you should approach this one carefully.
Alpine Summit Energy Partners (ASEPF)
Alpine Summit Energy Partners (OTCMKTS:ASEPF) is a “U.S.-based energy developer and financial company focused on maximizing growth and return on equity via improved access to wellhead economics.” Its main focus is on the Giddings Field area in Texas. With hydrocarbon-based fuel prices shooting through the roof due to myriad catalysts, it’s no surprise that Alpine Summit has performed well this year.
Adding to the intrigue, Craig William Perry, Alpine’s chair and CEO, bought 17,000 shares of ASEPF at a price of $5.60. In total, the insider trading transaction amounted to $95,200. Following the acquisition, Perry has 39,300 shares to his name. Interestingly, on a year-to-date basis, ASEPF is up 45%, making it one of the best stock picks in the energy sector.
While relevant, investors should be aware of the risks associated with OTC stocks.
VF Corp (VFC)
An interesting name to pop up among recent insider transactions, VF Corp (NYSE:VFC) doesn’t naturally strike investors as one of the potentially profitable stock picks. A global apparel and footwear company, VF Corp features brands like Vans, Dickies and Jansport. Although its products are immediately recognizable and popular, consumer sentiment has dropped to multi-year lows. This isn’t the time for opening wallets for discretionary purchases.
Yet W. Rodney McMullen, a member of the company’s board of directors, opened his wallet to acquire 3,000 shares of VFC at a price of $49.99. This insider trading transaction totaled a hair under $150,000 and occurred on May 31. Additionally, McMullen now has 28,125 shares of VFC to his name, implying strong confidence.
It’s not unreasonable as consumers have pivoted away from physical goods toward experiences like traveling and vacationing.
Opko Health (OPK)
A medical test and medication company focused on diagnostics and pharmaceuticals, Opko Health (NASDAQ:OPK) on paper seems like one of the relevant stock picks to consider. However, its specialization in addressing unmet patient needs may have hampered its revenue growth potential. Frankly, OPK isn’t performing well, with shares down a staggering 44% year-to-date.
Curiously, though, the crimson ink hasn’t deterred Dr. Phillip Frost, the company’s chair and CEO. On May 31, Dr. Frost acquired 50,000 shares at price of $3.02. In total, the insider trading transaction amounted to $151,175. Following the acquisition, Dr. Frost owns nearly 229.3 million shares.
The medical testing and pharmaceutical industries are volatile; therefore, I’m hesitant to say whether OPK is one of the viable stock picks. However, it’s at least encouraging that its executives are putting their money where their mouth is.
Applied Blockchain (APLD)
A high-risk, high-reward venture if there ever was one, Applied Blockchain (NASDAQ:APLD) is a builder and operator of next-generation datacenters, providing significant computational power for blockchain-based infrastructures and cryptocurrency-mining initiatives. While intriguing from a wider perspective, this year, the underlying narrative for APLD has been struggling.
With the implosion of cryptos relative to last year’s highs, Applied Blockchain has likewise suffered. On a YTD basis, APLD has hemorrhaged 84%. Nevertheless, Wesley Cummins, chair and CEO, is apparently holding on for dear life (HODL-ing), acquiring 170,383 shares at a price of $4.42. In total, the insider trading transaction tallies up to $753,144.
As well, Cummins now owns nearly 22 million shares. I’m torn, though, because while cryptos have achieved mainstream success, they may be headed toward an extended corrective period. Proceed therefore with caution.
Six Flags Entertainment (SIX)
Out of the implied stock picks on this list based on the context of insider acquisitions, Six Flags Entertainment (NYSE:SIX) comes across as the boldest in my opinion. As you know, the Covid-19 pandemic utterly disrupted non-essential businesses, leaving traffic volume-sensitive firms like Six Flags reeling. Even with society’s reopening, many investors have a dim view on SIX because of poor consumer sentiment.
For the record, SIX stock is down 33% YTD at time of writing. Undeterred, though, is Arik W. Ruchim, a director at the theme-park operator. Ruchim acquired 125,000 shares at a price of $29.63. In total, this insider trading transaction ran up to $3.7 million. Following the purchase, Ruchim owns almost 9.5 million shares.
Since consumers are eschewing retail products for experiences, this could be a bet that pans out. Still, don’t stay in the kitchen if you can’t handle the heat.
Billed as a cloud computing and enterprise software company headquartered in McLean, Virginia, Appian (NASDAQ:APPN) initially appears very relevant, specializing in building enterprise-level apps and workflows effectively and rapidly. So, why is APPN down 25% YTD, making it one of the poor choices among insider-transaction-based stock picks?
It might come down to the poor projections for the economy, with Appian’s clients perhaps deciding to cut overhead. If so, the belt tightening wouldn’t exactly do favors for the app developer. Still, one American shareholder is undeterred, buying 81,825 shares at a price of $47.50. In total, the insider trading acquisition amounted to nearly $3.9 million. As well, the shareholder now has 16.37 million shares.
For contrarians, APPN might work out. However, I’m concerned about the cost-cutting environment so I’ll personally be sitting on the sidelines.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.