Every investor wants to find the best stocks to fill up a profitable portfolio – but with the voluminous data generated by millions of trades in thousands of stocks every day, finding the best stocks is something of a challenge. It’s a challenge that investors can meet, however, by following the corporate insiders.
These insiders are the top officers of their companies, C-suite officers like CEOs and CFOs and COOs, along with members of the Boards of the Directors. Their positions give them a close-in view of the companies’ inner workings and also make them responsible for bringing in profits for shareholders.
The combination of responsibility and deep knowledge gives the insiders an edge when it comes to trading their own companies’ shares – and it also colors the way they buy or sell. Investors should always remember that the insiders sell for a multitude of reasons – but they only buy for one: they believe the shares are primed for appreciation.
With that in mind, we’ll use the Insiders’ Hot Stocks tool from TipRanks to pull up the details on two stocks that are showing strong insider buying in recent days, on the order of $1 million or more in single transactions. Insider buys of this magnitude are a clear sign for investors that here is a stock worth a closer look. In addition to the solid insider signal, each of these stocks has a Buy rating from the Wall Street consensus. Here are their details, along with recent analyst comments.
Mobileye Global (MBLY)
We’ll start with Mobileye, a technology company deeply involved in the automotive sector. Mobileye works with driver assistance and automotive sensor technologies, creating systems that offer drivers top-end tools to enhance road safety. The eponymous Mobileye sensors help the driver keep a safe distance from other vehicles, road shoulders, lane markers, and other potential hazards. The company has worked with more than 50 original equipment manufacturers in the industry and has seen its technology installed in more than 125 million vehicles around the world.
Mobileye’s technology can be retrofitted to existing vehicles or installed in the factory, and the sensors are scalable for vehicles of all sorts. The driver-assistance tech was based on a simple idea: that cameras could become the centerpiece of a life-saving system – and the idea has borne out. Today, Mobileye is also moving into the autonomous vehicle field, adapting its sensors to provide superior vision for self-driving cars. Options available for both driver-assist and autonomous vehicles include front cameras, 360-degree camera coverage, and LiDAR sensors.
A look at Mobileye’s history provides an interesting context. The company first went public in 2014 until its buy-out by Intel in 2017. It re-entered the public markets through an IPO last year, and since then has consistently reported earnings in the range between $450 million and $570 million per quarter.
In its most recent release, for 3Q23, Mobileye’s top line came to $530 million, up almost 18% year-over-year and beating the forecast by north of $2 million. At the bottom line, Mobileye’s adjusted diluted EPS, the non-GAAP measure, came to 22 cents per share, a total that was up 7 cents per share year-over-year and beat the estimates by 5 cents.
When we turn to the insider trades on Mobileye, we find that Board of Directors member Claire McCaskill has made the most recent large purchase. Earlier this month, she bought 27,819 shares, paying almost exactly $1 million for the purchase. Her buy pushed the insider sentiment on this stock strongly positive and bumped her holding in Mobileye to than $2.9 million.
For Deutsche Bank analyst Emmanuel Rosner, all of this adds up to a company with plenty of potential for investors. He writes, “We believe MBLY remains the best secular story in the autos group, reflecting the very strong adoption curve potential of SuperVision globally in the next few years. MBLY is likely nearing announcements of more design wins in the next 5-6 months, which could serve as large potential positive catalysts. With near-term volatility in SuperVision shipments now reflected in 2023 and 2024 guidance, we think the near-term overhang from top-line uncertainty should be removed.”
Looking forward, Rosner sees an even better picture for investors who are willing to stay all-in on the stock. As he puts it, “Longer-term, we believe Mobileye is still at the start of meaningful revenue and earnings acceleration, as automakers and mobility providers adopt its cost effective turnkey solutions which scale up to even-higher levels of autonomy beyond the near-term.”
Taken together, these comments support Rosner’s Buy rating on the stock, while his $50 price target points toward a 36% upside potential for the next 12 months. (To watch Rosner’s track record, click here)
Overall, MBLY shares have a Strong Buy consensus rating from the Street, based on 14 analyst reviews with a 13 to 1 split favoring Buys over Holds. The stock’s current trading price of $36.66 and its average target price of $50.92 combine to predict ~39% one-year upside.
Fifth Third Bancorp (FITB)
The second stock we’ll look at is Fifth Third Bancorp. This company, the parent/owner of Fifth Third Bank, traces its roots to the 1850s, and its name to the 1909 merger of Third National Bank and Fifth National Bank. Today, Fifth Third is an important banking company in the wide regions east of the Mississippi, with nearly 1,100 branches and over 40,000 fee-free ATM machines spread across 11 states. The company boasts an $18 billion market cap.
On the service side, Fifth Third offers a wide array of personal, business, and commercial banking products, from personal checking and savings, to insurance policies, to business accounts and commercial checking, to wealth management services and financial planning.
All of this is big business, and Fifth Third’s last earnings report, for 3Q23, reflected that. The bancorp reported $121.6 billion in average portfolio loans and leases for the quarter, up a modest 1.7% year-over-year, while the average deposits for the quarter grew by more than 3% to reach $165.6 billion. At the bottom line, the banking company had a net interest income of $1.44 billion, down slightly from the $1.5 billion reported in 3Q22, and a net income available to common shareholders of $623 million, down 1.3% from the prior year. The company’s diluted earnings per share came to 91 cents, 9 cents better than had been expected.
The company’s earnings fully covered the quarterly dividend payment of 35 cents per common share. This payment annualizes to $1.40 per common share, and gives investors a yield of 5.3%, well above the current inflation numbers.
Looking at FITB’s insider trading, we find a major purchase from C. Bryan Daniels, of the company’s Board of Directors. Daniels bought 64,500 shares of the stock, for which he paid just over $1.5 million. The purchase brought Daniels’ full stake in the company to $8.82 million.
Aligning with Daniels’ positive move, Goldman Sachs’ Ryan Nash also acknowledges FITB’s favorable prospects. The analyst is generally impressed by the company’s third-quarter performance and uses that as a starting point for his comments on the stock.
“Overall this was a solid quarter, in our view, with a decent PPNR beat on slightly higher revenues (fees and NII) and lower expenses, while credit costs came in well below expectations (slight reserve release vs. expectations of a $60mn build)… In terms of the stock, based on our conversations, we believe positioning was somewhat mixed as investors weighed the solid execution vs. the balance sheet being positioned for lower rates and we are likely in a higher for longer. However, when we put it all together, we think this was one of the better 3Q print and guides we’ve seen in regionals QTD,” Nash opined.
For Nash, this makes a foundation to support a Buy rating on FITB, while his $32 price target implies an upside potential of 25% for the year ahead. (To watch Nash’s track record, click here)
All in all, the 15 recent analyst reviews on Fifth Third Bank break down to 10 Buys and 5 Holds, for a Moderate Buy consensus rating. The stock is currently trading for $25.49 and its $30.86 average price target suggests it will appreciate by 21% in the coming months. (See FITB stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.