Insiders Just Bought $500M+ of These 8 Stocks — One Stands Out

Insiders are putting millions into stocks investors have been selling. And today, I'm ranking eight of those stocks from number eight to number one to work out which purchase are actually worth following. We've got a chief executive buying $10 million, four directors buying after a brutal sell-off, and a major shelter committing more than 600 million. But the biggest check does not win this ranking. I'm judging three things. how meaningful the buying is, whether the business is improving, and whether the price leaves us an attractive return. You'll get a clear verdict on every stock as we countd down. And by the end, you'll have my strongest overall candidate, my preferred income idea, and the purchase I would leave alone. We're going to start with number eight, where you can already pay less than the chief executive, and that is Intel Lit Bhutan. Well, in fact, he bought $10 million of shares at $95. The price is actually here below 91. You can see the attraction. The person running the company paid more than you would. So why does it finish last? Because the valuation already demands a substantial recovery. Forward adjusted earnings trades around 59 times. That is a demanding starting point for a company that's still trying to rebuild its profitability. Now the purchase itself does in fact deserve credit. It increased the reported holding by around 9%. This was participation in Intel's public share offering. However, rather than the separate purchase of existing shares on the open market, and now let's look at the growth table. The long-term earnings forecast is almost 70%. It sounds like an easy answer to the valuation problem, except recovering from depressed earnings can produce enormous percentages without enormous profits. And their profitability, that's sitting in A+. But look underneath it. Negative, in fact, net income margin, negative return on equity. The headline grade and the shelled experience can tell very different stories. I care about the underlining returns and Wall Street's average target is around $115. It does suggest upside. We can see around 28% but the range stretches from $75 on the lower end up to $200. So these analysts are describing very different versions of Intel's future. Now the bulk straightforward execution improves earning recover and the market starts valuing a stronger business. If that happens fast than expected, the shares could perform well. Ranking Intel last then doesn't mean recovery is impossible. The problem though is what we have to pay before that recovery is established. A high multiple gives you less protection if profits arrive later or at a lower level than the optimistic forecasts assume. The $20 billion share offering gives Intel more funding, but new shares also mean more owners sharing future earnings. Raising money can improve the company's position without automatically improving the investment case for each existing share. Now, what would move Intel up my list? Improving hash generation, better returns on investment, and a price that does not require so much of the recovery advance. I want execution to close that gap. Here's the verdict. Number eight, and a pass for me at the price today. The purchase is meaningful. The evidence that ordinary shelters are being offered an attractive deal. That's much less convincing. And number seven has a much less demanding earnings multiple and another very substantial management purchase. It beats Intel on price, but the money coming to the business is not the same as money left for shareholders. And before we dive in, just to let you know, today I've released my latest weekly article, uncovering five of the best opportunities. As always, you can click on the pin comment below, sign up, read these straight away, where we uncover severely undervalued stocks, as well as what's gone in the market over the last few days. And at number seven, we have Alibaba. Trading around $115 is down around 19% year to date and trading somewhere around the 18 region. So considered less expensive than Intel. It gives this recovery story a more reasonable starting valuation. And over the last 12 months is pretty much flat. Sitting today towards the lower end of the 52- week range. We get our first strong buy rating from Wall Street. Another buy from Seek Alpha, but again sitting in the weak range. And we can see in terms of the buyers, we have both director as well as CEO with reported purchase across two days exceeding $25 million combined. That's a significant expression of confidence from people who are directing the business. Now, why might management see value? Alibaba combines commerce with cloud and artificial intelligence. The group's forward revenue growth estimate is around 11%. There's a business here with opportunities beyond simply waiting for sentiment to improve. But shareholders need those opportunities to become better economics. The operating margin we can see here sitting around 5%. That's actually considerably lower than their 5-year average of 13. So a business can generate substantial revenue while competition and investment absorb much of the benefit before it reaches investors. An analyst average price target sits at $187 indicating 62% upside. That's a large potential gain. The tempting conclusion is that management and Wall Street agree. So, the market must be getting it wrong with a range going from 95 at the lower end up to 238. And here's why I'm not jumping to the conclusion that the market must be getting it wrong. We can see forward earnings growth that's sitting at.9% much lower than the revenue growth expected around 11%. So, sales expansion is encouraging, yes, but the improvement in earnings that's just not yet caught up. And the cash figures, they're a lot more revealing. We can see here operating cash flow that was around 1112 billion. The reported free cash flow that was negative 6.8 billion. The investment spending makes that difference matter enormously. So for Alibaba, I would ask a simple question. When does spending start producing more cash than it consumes? Without a credible answer, a modest earnings multiple can disguise a very long wait for the financial payoff. And the recent equity raise adds another moving part. It brings in cash but also creates additional shares. We have to judge whether the value created with that cash will outweigh the dilution for existing owners is why Alibaba ranks above Intel but below the next company. The valuations less demanding yet there's still considerable uncertainty around the cash investors ultimate receive and the return on today's heavy spending. So my verdict number seven expected recovery watch this position rather than the purchase I would follow today. I want improving cash conversion before giving management's buying more weight than the investment demands of the business. And now we reach the biggest purchase in the episode. It ranks higher because the business is easier to understand and it's earnings more established. But even $600 million cannot make an expensive stock automatically cheap. But before the purchase, here's why I'm insisting on a valuation cushion. The rate outlook is contested. Joe Leva argues the economy needs higher rates. Listen to his position. Then the condition behind Tom Lee's bullish alternative. >> I believe Joe the Fed will raise rates. The Fed needs to raise rates. Uh the economy is healthy. Last year uh I think September. Yeah. >> That is the argument for a hike. Tom Lee though he sees a possible rally if the Fed holds steady. The condition matters. He's not saying stocks must rise, whatever the Fed does. >> And there's the seasonality issue. You know, September's a weak month. But I'm actually now thinking because of all this mounting concern, the market might surprise us to the upsides. And I think maybe September 15th, the Fed meeting is the pivot point. If the Fed doesn't cut, doesn't hike, which is our base case, I think actually the markets could rally very strong. The meeting spans September 15th and 16th with a decision on the 16th. These are competing scenarios. My response is to look for investments that make sense without needing the most favorable one to happen. Now, number six is Republic Services. Cascade Investment bought roughly $685 million across the seven transactions. This is the largest buying total in the episode, and it finishes outside my top five. That's not because the purchase is uninteresting. At around $222, we're close to Cascade's average entry price. The market's not already run far away from the price that the buyer paid. We can also see year to date they're up 5% over the last 12 months down 4% trading at the upper end of the 52- week range. I mean 52- week high not far off $235 with a double week buy from both C alpha as well as Wall Street. But also bear in mind that Cascade is an existing major shareholder, not Republic's management team. These additions increase an enormous position by roughly 3%. We should recognize the commitment without describing it here as a new all-in bet. And look, Republic collects and processes waste. Demand for that service is recurring. And we can see here their operating margin comes around 20%. This are much more established earning story than the two recoveries that we just covered. And that earns it a higher ranking. The problem arrives when we compare the growth with the price. Forward revenue that comes in just above 4%. Diluted earnings per share that's coming in 7.6. solid growth, but hardly unlimited growth. And then we look at the historical screen here. We can see they're trading 29 times Ford earnings, almost exactly the 5-year average, the same that we can see when looking at the yield. So despite the impressive buying, this is not an obvious opportunity to acquire Republic and an unusually discounted multiple. But the interesting thing is when we look at the blue tunnel from Simply Safe Dividends, which highlights the expected fair price intrinsic value, it sits today in the midpoint. So reasonable signal. But what I would say is this company extremely rare to see it undervalued. You'd have to go for a day or two. In fact, during the COVID drop otherwise, this one either trades at a premium as we can see in the recent period or in fact just in the reasonable signal. Now, the dividend here offers limited cushioning if the valuation falls. The yield only sits around 1.2%. So, this is primarily a compounding investment where you need years of growth to justify the entry price and build your return. Now, the analyst average price target comes to $246. That's roughly around 10% above today's value. Yes, it's positive, but it doesn't suggest an enormous gap between the current price and the expected outcome. Now, for my ranking, Republic wins on business confidence and loses on entry price appeal. I'd move it higher if the price fell while the growth outlook held or if sustainable growth strengthened without the valuation running ahead. So, it gives us a clear decision. Number six, a quality business. I would wait to buy at a better price. I'm not following the biggest check simply because it creates the strongest headline. Notice how different this is from Intel. With Intel, I need stronger evidence of the recovery. With Republic, I'm more comfortable with the business. It's the price that I want to improve. Now, the next stock offers less growth, but a far lower earnings multiple and a divid above 6%. That moves it ahead of Republic, but there's a reason it stops at number five. And at number five, it is FISA where we can see here two different directors and chairman CEO adding around $3 million combined. We've got several buyers committing capital rather than a single isolated transaction carrying the entire story. And look, the attraction is immediately visible around $28 and a dividend yield above 6% and a forward multiple that sits in fact below 10. Compare that with Republic, you're paying much less for earnings and receiving considerably more income. The position changes strengthen the signal. We can see Bura added roughly 10% to the holdings. Block more than doubled his and Buckley established a new holding which is different from adding a small amount to an existing position. So why is FISA only fifth? Because the growth outlook remains weak. Forward revenue and diluted earnings growth are both slightly negative here. A low multiple is less surprising when investors expect the business to shrink. And look, it also sits close to its own historical earnings multiple. FISA looks inexpensive beside the wider market but not exceptionally inexpensive besides FISA's past. We need a reason the future deserves a better valuation and we also see a reasonable signal when we look at the blue tunnel over the last 5 10 years. The main thing really to see is the underlying fundamentals from 2022 collapse. Question is can this recover back to those levels. Now there is something encouraging further down the table and that's the forecast improvement in free cash flare. If delivered that would strengthen the income case is a better reason for interest than simply admiring a high yield and my own valuation offers no overwhelming bargain signal. We can see in fact if you just wanted to look at the DCF well that comes in considerably low at $21. We have the multiple sitting at 28 and the dividend model at 32. Combined estimate is not that far off the current market price and Wall Street their average target sits just shy of $29. That's only slightly if not pretty much sitting at today's value. It points for Fiser at least towards an incomeled proposition rather than expectation of a dramatic near-term rerating. Now yes, management buying makes the situation worth watching. What it cannot tell us is when revenue stabilizes or how quickly the next earnings improvement arrives. Those are developments that would make the low multiple more interesting. So overall, FISA gets the number five slot, an income watch list candidate, but not my preferred purchase among these eight. It beats Republic on price and yield. It loses ground because the growth outlook offers less support. But look, if priority is current income, you may rank it higher than a growth investor would. My preference is to find income alongside a more constructive operating outlook. We still have that comparison coming. Verse number four has a smaller yield but a stronger buying pattern for directors stepping in after an earning shock. Their timing makes this more interesting provided the price drop has gone far enough. And at number four is Dick Sporting Goods. Now this chart tells you why investor nervous a sharp drop than a partial recovery at around $136. The market's already made a substantial downward reassessment over the last year as well. It's down 35% trading near 52- week lows. Another double buy, but still on the weaker side. Now for Dicks, we can see four directors buying roughly $3.7 million combined after the results. The timing matters. They were buying with a disappointing update already public rather than buying beforehand and then being overtaken by new information. And what are they backing? A distinction between the core Dicks business and the wider group. Stephanie Link highlighted the core comparable sales performance. Listen to that figure because it helps explain why the situation isn't uniformly bad. >> Dicks itself came up with a 4.9% comp >> with margin expansion. >> Core comparable sales grew 4.9%. However, Foot Locker's comparable sales fell and management reduced the operating income outlook for both businesses. The sales strength is useful evidence, but it doesn't cancel the weaker profit outlook. And we can see Mark B here in fact adding more than $2 million and increasing the position shown by over 150%. R Eddy's addition was sizable relative to his holding too. So these were not all token purchases. And unlike Republic Dix has moved below its historical forward earnings multiple roughly 11 times against 13. You're getting a lower valuation as compensation for taking on a less comfortable earnings outlook. And that in turn does give us an undervaluation signal. Although, as you can see, the actual fundamentals have also taken a dip. Zoom out to the last 5 10 years. This one's actually traded in both an undervalued level and at a premium in just the short term. But look at the growth figures. Revenue year, that's up more than 50% with acquisitions affecting the comparison. Forward earnings growth though, that is in fact slightly negative. As we can see here, a bigger group does not automatically mean more earnings per share. and analysts average $166 around 21% above today's price. Low estimate though we can see 99. There is recovery potential but also disappointing scenarios. The purchase needs to respect both. So why does it beat FISA? A strong cluster of buying after a known shock alongside an actual reset in the historical valuation. FISA offers more income but less evidence here that investors have already repriced the business aggressively. What keeps Dicks out of my top three is the earnings direction. I want to revised expectations to become a flaw that the business can deliver against rather than another step on the way to further cuts. My verdict number four, expective turnaround candidate. I would take the buying seriously, but I want evidence of stabilization before treating the rebound as a durable recovery. The director's confidence is a signal, not the conclusion. And we've separated expensive quality, weak growth, and a trouble turnaround. The top three offer more constructive forward growth. Number three has one of the biggest analyst upside estimates. And in number three, we have Vistra trading $137. It's down 15% year to date over the last 12 months, down 26. And its place comes from the business outlook. Not a huge insider commitment. This is primarily a growth opportunity trading pretty much 52- week lows where we get a strong buy from Wall Street by but week one from Seek Alpha. And we can see that the chief executive Jay Burke in fact buying around $270,000 worth of shares. Now these purchase increases reported holding by only around 0.2%. Supportive yet but not really decisive. The operating outlook here though is more compelling. Forward revenue growth sitting around 12% and earnings growth projected around 14%. That is a clearer growth proposition than FISA or DIX where the earnings forecasts are much less encouraging. and Vistra generates electricity and serves retail customers. The investment case is that demand supports attractive earnings from that business. The crucial word attractive growing electricity consumption only help shareholders if the economics work after both costs and the investment. And we can see here forward earnings sit around 13 times below the 5-year average. The combination, positive expected growth and a lower historical model is why Vista reaches my top three despite only really modest insider purchase and analysts average $217. That's nearly 60% above today's price. That is an eye-catching gap, but I'm not ranking Vistra third because an analyst target gives us permission to expect that return. The reason is that earnings growth could do more of the work. With FISA, we need stabilization. With DIX, we need the turnaround to hold. Vista's forecast already describes expansion though it still has to deliver. Here though the limitation management guides to adjusted free cash flow before gross spending that is not automatically cash left after every investment needed to sustain the strategy. Those are different amounts available to investors. Viscra though still ranks higher because my ranking covers the whole investment not just the trade. Its growth outlook and valuation together make a stronger case while the insider purchase is supporting evidence rather than the main argument. My verdict number three, an attractive growth candidate for further purchase research. I want a valuation built on cash after the relevant investment spending. I wouldn't size a position around the most optimistic price target. And what would strengthen the case? Well, earnings delivery and evidence that new investment earns worthwhile returns. What would weaken it? spending repeatedly rising faster than the cash and profits investors were promised that spending would generate. Now number two sacrifices some growth excitement for substantial current income. It also has a much bigger insider check. The surprise is that this stock has already rallied sharply which makes the entry price the central argument. And at number two we have energy transfer already up around 29% year to date over the last 12 months while up 21%. So, this is not another beaten down recovery trade. I rank it highly because it combines substantial income with positive forward operating growth trading pretty much at 52- week highs. Although, for the first time today, we get a double strong buy from Wall Street Qu seeing out for very respectable buy 4.3 out of five. And we can see here that K Warren bought 1 million units for just over $21 million. James Perry added roughly a quarter of a million. Now, these transactions put significant fresh capital work near the prices that we're actually examining today. And at roughly $21, the annualized distribution is $1.36. The yield sits around 6.3 6.4% comparable with FISA, but with a very different growth outlook. Forward revenue, well, that sits around 14%. Forward EBIT DAR, that sits around 7. I would focus on earnings rather than assume every extra dollar of revenue reaches investors. Still, the operating outlook, I'd say, is fairly constructive. The business moves and handles energy across an infrastructure network. I want to understand activity levels, contractual economics, and financing costs. The investment K should come from those economics with distribution supported by the cash they generate. And a reality check on Warren's purchase. It increase his enormous reported holding by about a quarter of 1%. The dollar amount, yes, it is impressive, but the addition is modest relative to what he already owns. And this historical chart probably is what stops me calling this an obvious bargain. The yield is below the 5year average 6.3 versus 7.8. The forward distributed cash flow multiple is 7.7 versus a historical 5.8. And that's actually why we get a potential overvaluation signal when we look at the blue tunnel. Look at the last 5 years. Last time this was a reasonable signal was 2023. Last time this looks slightly undervalued was 2022. And the other thing to point out here is when we look at the growth, well, we can see lower free cash flow per share expected. Investment can help explain that, but the spending still needs to earn its keep. Growth projects, debt reduction, and distributions all compete for available cash. What I would say is before purchasing, I check distribution coverage, leverage the investment plan together. A yield becomes attractive when the business can support it without undermining the balance sheet. So why is energy transfer second place ahead of ISRA? For this ranking, I prefer the substantial current income alongside positive operating growth. Viscra, it does offer more growth excitement, but most of its appeal depends on future spending translating into shareholder value. And why ahead of FISA, similar income, but a more constructive growth outlook does make the business interchangeable. It explains why energy transfer is my preferred income candidate from this particular group. My verdict, number two, an income candidate with price discipline. I'd research it ahead of FISA, but I wouldn't chase it because Warren bought. Also, these are partnership unit. Now, number one pays actually no dividend, has a far worse chart, and carries an immediate operational risk. It wins my research priority because the price and expected growth create the most interesting potential mismatch in the group today. And at number one, we have Boston Scientific around $48 and it's down nearly half year to date, negative 49%. It leaves my purchase research because it's growth in valuation, not because it's the safest and there is an important condition. But look, over the last year, that's down 54% trading near 52 week lows. We get a strong buy from Seek Alpha, I believe the first today, and a near strong buy 4.5 from Wall Street, currently at 4.4. The purchase here total roughly $9.3 million. Chief executive M. Mahoney accounts for around 9 million. Increasing the holding by around 13% is a meaningful addition rather than a token purchase. And the estimates for their growth, well, it still shows around 10% forward revenue and around 11% when we look at their earnings against a share price that has these forecasts raise a worthwhile question. How much lasting duration has the market already priced in? And look, Boston and Scientific make medical devices. The attraction is an established business still forecast to grow now available at a much lower earnings multiple. The question is whether the latest disruption changes those forecasts. I mean the forward earnings multiple today sits around 14. Compare that with Republic near 30, Intel near 60. Those are different businesses, but Boston Scientific does not need the same valuation premium to support its investment case. But here's the detail that could change the conclusion. Mahoney bought on August the 3. The cyber security incident was identified on August 25th. His purchase happened before that disruption. So it can't validate management's response to it. Now the company says manufacturing and order processing and shipping were disrupted. Those are core commercial activities. The question is whether this becomes a temporary interruption or causes a more lasting hit to sales costs and customer relationships. Now there was actually a more encouraging update on August 30th. management said it was working towards partially restoring shipping for some products this week. That's progress in the plan, not confirmation that operations have fully recovered. And that distinction is the entire reason my number one is conditional. If the disruption is contained and growth outlook broadly survives, the valuation becomes more interesting. If those earnings estimates fall substantially, the apparent cheapness, well, that can disappear. And you can see when we look at our DCF, we have 6% growth, 8% discount rate, and 3% terminal perpetual growth. It produced a value of around $58. And that gives us something concrete to test against the price. Because look, that essentially comes to a 21% margin of safety, meaningful, but not an enormous cushion against every possible problem. And if we go one step further and change this to 9%, well, you can see in fact we're pretty much talking no margin of safety sitting around fair value. That sensitivity stops me buying solely because the model here is green. So why does this be energy transfer for overall research priority more room for a recovery in the valuation alongside positive expected growth? ET offers better current income but it's strong rallies already priced in more improvement. My verdict number one a conditional recovery candidate. I'd investigate this first but require evidence that shipping is resuming and the earnings damage is manageable before turning that preference into a purchase decision. If in fact disruption proves more lasting, I would lower the ranking. That is a clear condition, not a reason to ignore the risk. The best opportunity on the short list still has to pass the final investment check. So here is where the ranking leaves us. Intel is eighth. Too much recovery required at the valuation with Alibaba in seventh. A less expensive recovery, but the investment spending still needs to become better cash returns. Republic is sixth, a business I like more than its entry price. FISA fifth, substantial income but weak expected growth. Neither moves to the top simply because the influential buyer is adding shares. Dix is fourth, the most interesting purchase cluster with turnaround risk still unresolved. Vista is third, a stronger growth case provided the spending produces attractive returns. Those are different opportunities with different conditions to monitor. Energy transfer is second and my preferred income candidate here. Boston Scientific is first for overall purchase research conditional and operational recovery. That's my ranking of investment appeal, not a prediction of next month's best performer. Now, you don't need to buy all eight or any of them because insiders did. Use the buying to find the opportunity, then demand that the business and price justify it. That is where the useful work begins. And in terms of the valuation work, well, I can just give you a quick run through for RSG. I see around a 6% margin of safety. You can see the price actually not too dissimilar from Wall Street 237. Wall Street expecting 246. But if you solely want to look at the DCF, it does come in lower. In fact, we've used a 10% growth rate. Reverse DCF isn't actually too dissimilar, indicating solely on the DCF, RSG, that looks 5% overvalued. But on a blended situation, we get a 6% MOS. For Boston Scientific, we get a 21% margin of safety. If we take a look here, we've used a six tank growth rate. Reverse DCF coming in 3.4. So at today's price, it gives 26% potential upside. For FISA, I see that around 4% above today's price. We can actually look at the DCF that's coming in a lot lower at $21. Again, Blended does it higher, but neither cases actually show any margin of safety. Alibaba will only a 5% margin of safety even though Wall Street actually see it much higher, 61% upside. We've used a growth rate of 5% reverse DCF coming in at 4.3. if you believe we've been too conservative, whilst 10% does give large upside at 53%. Energy Transfer does come in with a large margin of safety of 26%. But bear in mind the disparity between the two models and this isn't a company that we can typically use the DCF for. We then have Vistra with a 26% margin of safety. Wall Street, this is one of the largest upsides today, expecting 60%. Digs coming in at 19% margin of safety, although DCF coming in much lower, in fact lower than today's price. If we take a look, we use a 10% growth rate, reverse DCF coming in higher at 13. Well, Intel, it did come in last in terms of ranking with a 67% premium. We've got $54 as the intrinsic price with a growth rate of 15% market currently pricing in 26. Even using the more optimistic at 20 that indicates 23% overvaluation. So, let me know your own overall thoughts. What would you put first? The income from Energy Transfer, the growth from Vistra, or the recovery in Boston Scientific? Tell me your choice. and the reason I'm interested in what you would weigh differently. If you enjoyed the episode as well, don't forget to smash the like button, hit the subscribe and bell button, and click on the pin comment below if you want to read all of these articles straight away. More importantly, have a great day. I'll see you all on the next one.