There are many variables that move individual stocks and the broader markets. From economic data releases and Fed policy statements to corporate earnings reports and social media influences, stock prices can fluctuate for a wide variety of reasons.
Then there is insider trading activity. This is when company executives or board members make trades in the business they live and breathe. Many investors consider the insider signal to be one of the most valuable indicators of where a stock is headed.
When formulating an investment decision, it can be helpful to combine multiple information sources to help strengthen or weaken an opinion. For example, when insiders and sell-side analysts are simultaneously bullish, this is often a potent combination. Here we discuss a few such cases.
How is Agilon Health Stock Doing Since its IPO?
Agilon Health (NYSE:AGL) is a recent IPO that is less than two months into its trading history. Yet the company has already impressed the Street—and been the subject of some early insider buying.
Headquartered in Long Beach, California, Agilon Health helps medical practices establish their own Medicare-focused line of business. Its Total Care Model offers physicians an alternative to the traditional fee-for-service reimbursement model through an innovative payment and care delivery platform tailored to senior care. Agilon is still very much in the early growth stage but has expanded its footprint to 16 physician groups across 17 U.S. communities.
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Sell-side research firms have been overwhelmingly bullish. Eight have launched coverage of Agilon and each one calls the stock a 'buy'. Price targets range from $37 to $42 which at the average represents 13% upside from current levels. It wouldn't be surprising to see these targets bumped higher considering the stock is already up 23% from its public market debut.
It has helped that a pair of board members have made Agilon purchases. On the stock's third trading day, Clay Richards bought nearly a half million dollars' worth at a price of $23. The same day, fellow director Michelle Gourdine bought 5,000 shares at the same price. Agilon Health has a way to go to prove itself in the market, but the vote of confidence from insiders and the Street has helped it get off to a strong start.
Is the Rackspace Technology Selloff a Buy Opportunity?
Earlier this month, Rackspace Technology (NASDAQ:RXT) reported first-quarter results that beat on the top and bottom line. Then management provided outlooks for the current quarter and full year. For the full year, the midpoint earnings expectation was a penny shy of consensus and revenue was less than 1% below the Street. Pretty minor, right? Not according to the market which pummeled the stock down 21%.
Soon thereafter, three Rackspace executives stepped in and purchased some less expensive shares. President and CFO Amar Maletira added to his 1 million-share plus position. CEO Kevin Jones did the same to bring his direct holding to 777,679 shares. Ditto for Chief Operating Officer (COO) Subroto Mukerji. In all three cases, the May 14th purchases were executed at prices under $19. Rackspace has continued to rally since.
Corporate insiders haven't been the only ones backing the cloud computing services company. Seven sell-side firms have called the Rackspace drop a buy opportunity. Even better, all 11 analysts that cover the stock currently have 'buy' ratings with price targets ranging from $23 to $28.50.
Despite the minor near-term disappointment, investors should be bullish on Rackspace's long-term opportunity in the manage services and cloud infrastructure space. It is a market that is expected to surpass $500 billion as enterprises increasingly embrace the benefits of private and public cloud platforms. Rackspace has a growing global presence in the market and generates more than 90% of its revenue from recurring service contracts. It makes sense that insiders and analysts have their head in the clouds.
Will the APi Group Stock Rally Continue?
APi Group (NYSE:APG) is a mid-cap engineering and construction play that has seen its stock double from its April 2020 IPO. They say timing is everything and the Minnesota-based company curtained timed its public launch well near the COVID-19 bottom.
However, APi Group hasn't merely ridden the tide of the broader market recovery. Its safety and industrial services have generated solid revenue growth over the past year amid a rebound in demand from the energy, utility, infrastructure, telecom, and manufacturing sectors. The company has a nice base of long-standing customers in North America and an emerging presence in Europe.
It has also received a lot of support from insiders along the way. Over the last three months, there have been eight insider buys compared to two sells spread across a mix of senior executives and directors. Most recently, CFO Thomas Lydon bought approximately $50,000 worth of APi Group on May 25th. This brought his direct position to 109,929 shares to go along with the more than half-million shares held in his profit-sharing plan.
Like Mr. Lydon, analysts also think APi Group has room to run. All four firms that cover the stock have 'buy' ratings with price targets ranging from $22 to $25. Earlier this month, Robert W. Baird reiterated its buy rating on the heels of the company's first-quarter earnings report.
So, three very different companies with one powerful thing in common—bullish sentiment from both insiders and the Street.
Companies in This Article:
|Company||Current Price||Price Change||Dividend Yield||P/E Ratio||Consensus Rating||Consensus Price Target|
|APi Group (APG)||$22.35||flat||N/A||-18.94||Buy||$22.00|
|Rackspace Technology (RXT)||$20.86||flat||N/A||-15.23||Buy||$27.95|
|agilon health (AGL)||$36.80||flat||N/A||N/A||Buy||$41.38|