Downturns can bring a lot of pain, but they can also create a lot of opportunity as falling stock prices begin to make entry costs more attractive. Before taking advantage of these opportunities, however, investors need to find a recognizable signal that will set them apart.
A popular signal to track is insider buying, trades made by high-ranking corporate executives whose positions give them an “insider’s” lead on the likely prospects of their company – and therefore, the prospects for the action.
These leaders hold high positions and are responsible for generating profits for the company’s shareholders and boards of directors, and for ensuring the future performance of the shares. Having this responsibility and having their insider information does not prevent them from trading their own company’s stock – and to level the playing field, federal regulators require insiders to regularly publish their trading activity. Retail investors can track these trades through the Insiders’ Hot Stocks data tool on TipRanks.
We opened up the database, to get a head start on insider tracking. Using the insider trading tool, we pulled out the details of two stocks that have recently been the subject of significant trades by company executives. These aren’t garden variety trades either, they’re multi-million dollar stock moves, the kind that can change the needle on sentiment – and send the clear signal that retail investors love. have. It also doesn’t hurt that both stocks are admired by the analyst community enough to earn a consensus “Strong Buy” rating.
Day One Biopharmaceuticals (DAWN)
We’ll start with Day One Biopharma, a small cap player in the medical research biopharma scene. This clinical-stage research company differentiates itself by focusing on the development of new treatments for childhood cancers, particularly genetically defined childhood cancers. This is a field with many openings, as in the past 25 years only 12 new pediatric oncology drugs have been approved.
Day One aims to have the next drug approved in its field, and it has a promising candidate in DAY101, the subject of its clinical trial programs. DAY101, or tovorafenib, is a type II pan-RAF kinase inhibitor currently in no less than four clinical trials.
The most advanced of these is the pivotal FIREFLY-1 study, in the treatment of relapsed low-grade pediatric glioma. The company released data from this Phase 2 trial earlier this month, showing an overall response rate (ORR) of 64% and a clinical benefit rate (CBR) of 91% for the first 22 patients. The drug has been studied as monotherapy. Day One plans to initiate a pivotal Phase 3 clinical trial on this research pathway and has scheduled patient dosing to begin in 3Q22.
Also on the clinical side, Day One in May announced that the first patients had received one dose in a Phase 1b/2 study of tovorafenib in combination with pimasertib for the treatment of RAF-impaired solid tumors. Both drugs in this trial showed promise when used in pediatric patients; this study aims to leverage this in a study of adolescents and adults. The company will start the study with 25 patients aged 12 and over, with the phase 2 trial evaluating additional expansion cohorts.
These premier trials are supported by Day One’s cash position. Day One had over $262 million in cash at the end of the first quarter of this year. In addition, the company has, over the past month, carried out a significant capital increase through a public sale of shares. The public offering brought in gross proceeds of $172.5 million.
And that brings us to insider trading. Two institutional investors bought shares worth a total of $29.5 million, but board member Michael Gladstone also made a large purchase. His purchase of 766,667 shares cost him just over $11.5 million and brought his total stake in the company to $12.27 million.
Day One also has its fans among Wall Street analysts. Covering this stock for Wedbush, analyst Robert Driscoll sees the company’s recent data releases as the key point.
“Overall, although the data is interim, we are impressed and believe the data appears to validate the unique profile of tovorafenib, which remains on track to show primary data in Q1 2023 which we believe will be sufficient for approval. First, although a formal comparison is precluded by caveats between trials, including differences between enrolled patients and response endpoints, we note that efficacy is currently significantly greater. higher than historical data on standard chemotherapy, including in treatment-naïve patients,” Driscoll said.
Based on the above, it’s no wonder Driscoll reiterated his outperform (ie buy) rating on DAWN stocks. With a price of $35, the analyst thinks the shares could double over the next twelve months. (To see Driscoll’s track record, Click here)
Many promising lines of research and big money will always receive a positive biopharma review – and the Strong Buy Day One consensus is unanimous, based on 3 recent analyst reviews. The stock is selling for $17.45 and its average target price of $37.50 indicates upside potential of around 115% going forward. (See DAWN stock forecast on TipRanks)
HireRight Holdings (THS)
From biopharmaceuticals, we will shift gears and shift lanes to human resources. HR is a critical part of any company doing business today, and HireRight provides HR departments with the solution needed for background checks, compliance and risk management issues for over 40,000 B2B customers worldwide. . HireRight was a leader in human resource screening on the Internet and posted strong numbers last year of around 110 million staff screenings generating 29 million reports.
We’ve heard a lot of news in recent months about how the labor market has rebounded from the worst of the COVID crisis, as well as headlines about workers’ newfound mobility. Both were reflected in HireRight’s 1Q22 earnings report. The company saw a 33% increase in revenue year over year to $198.7 million. Revenues also posted strong gains. Total operating profit increased approximately 3.5 times on an annual basis, from $5.7 million to $20 million, while diluted EPS increased at a similar rate, from 12 cents a year ago at 37 cents in the current report.
On the insider trading front, HireRight saw big buys from investment firm Stone Point Capital – but the trade that caught our eye was that of board member James Carey. Carey, whose purchase helped boost insider sentiment here, has spent more than $22.2 million to buy 1,504,981 shares of HRT in recent weeks.
In his coverage of HireRight for Jefferies, analyst Hamzah Mazari posed the rhetorical question, “What to do with HRT stocks?”
Going into a response, he says unequivocally, “Buy more if you think HRT can achieve longer-term organic high-single digit to double-digit growth, and the business can execute on technology initiatives and automation leading to margin catch-up compared to its peers. The company expects to complete its technology and automation investment initiatives by the end of 2023, and we believe we will see additional benefits from technology investment as HRT rolls out applications in phases.
Following his bullish stance, Mazari gives HireRight shares a Buy rating and a price target of $23 which implies a 57% upside going forward. (To see Mazari’s track record, Click here)
Overall, with 5 recent analyst reviews on record, all positive, HireRight enjoys a unanimous consensus strong street buy rating. The shares are priced at $14.65 and have an average target of $21.20, suggesting 12-month upside potential of around 45%. (See HireRight 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.