Insider buying is picking up with shares of all sectors and industries go on sale. While the list of insider stocks is long, the top three names in July are: Occidental Petroleum, Rocket Companies, and Comtech. These are the top names because their activity is not only high, but also distinguished by unusual features that indicate a higher potential for stock valuation. The upside is that in terms of dollar value, the number of insiders buying, and the number of trades, these companies outperform all the others.
Occidental Petroleum Makes the List Again
Western petroleum (NYSE: OXY) has been in the news for a string of insider buys by investment guru Warren Buffet. Mr. Buffett and Berkshire Hathaway made 4 purchases of Occidental Petroleum shares in July, causing the total up to 11 transactions over the last 3 quarters for a total number of shares of just over 20%. This puts Berkshire Hathaway in a unique position and it is a position the company usually uses for success. Total institutional and corporate ownership, including Berkshire Hathaway, is over 86% and growing.
In terms of Occidental Petroleum’s value and dividend, its stock trades at a discount to peers, which together trade well below the broad market average. The discount for peers is partly due to dividends well below those of peers like Exxon Mobil, but there is a mitigating factor. The company cut its dividend at the start of the pandemic and has yet to bring it up to that level. In light of the unexpected gains posted for the 2nd quarter, there’s a good chance there will be a dividend hike and it could be a big one. The payout is currently $0.13 per share per quarter and was once $0.79, a difference of more than 400 percentage points.
Rocket Companies retrieves some insider trades
Rocket Companies (NYSE: RKT) is bought by two of his insiders, CEO Jay Farner and CEO Mattew Rizik. The two made 26 purchases in July totaling $2.85 million in shares, bringing total insider holdings to 94%. This is an overwhelming ratio of equities and is compounded by the 3% institutional ownership and 32% short-term interest rate, making it a close and oversold name in the market. At face value, ownership numbers have set the stock to implode under the weight of short selling or higher due to results. As it is, the company’s earnings and earnings are on the decline and analyst sentiment is mixed. Analysts rate the stock as a “hold” but consider it fairly valued at current levels. The outlook for Q2 results isn’t rosy either, but the bar is low, so there’s a chance of outperformance, which could lead to a short rally and squeeze.
High Yield Small-Cap Comtech is bought
Comtech (NASDAQ: CMTL) is a high-yield small-cap that produces components for the telecommunications and satellite industries. The stock is returning almost 3.5% after the stock price correction and at least the insiders have started buying it. In total, 5 insiders made 6 purchases in July for a total of $289,000 or about 0.1% of the current market cap. The purchases are remarkable, not only because of the size of insider purchases, but also because this is the first insider activity in years and total holdings are approaching 6%. Positive outlook or not, the insiders think something is up, so the news could be good in the coming months and could include an improvement in the supply chain, improved profitability or a better-than-expected outcome from recent deals.