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Insiders Are Buying These 3 Stocks

Jul. 13, 2019 9:00 AM ET|Includes: BlueLinx Holdings Inc. (BXC), CAMP, CHTR, DIS, SBGI

There is no point in using the word 'impossible' to describe something that has clearly happened.” ― Douglas Adams

The market continues to churn upward and hit all-time highs on a regular basis in recent weeks.  This week equities were buoyed somewhat by growing confidence that the Federal Reserve will soon cut interest rates by a quarter of a percent.  Overall, the market indices were flattish on the week.

With stocks in elevated territory, which shares still have interest to insiders?  Today, we take a look at three stocks seeing recent and notable insider buying.

Let's start with CalAmp (CAMP).  This concern is a communication equipment provided headquartered just south of Los Angeles that has a market camp just under $400 million.  The company provides mobile resource management telematics devices for the Internet of Things market as well as other telematics products, including asset tracking units, mobile telematics devices, fixed, mobile wireless gateways, and routers.

On July 2nd and July 3rd, a director purchased just over $550,000 in additional shares for his core holdings.  This is the first insider purchase in this equity in some three years.  In addition, Northland Securities last week issued the first Buy recommendation on the stock since May 1st.  It upgraded the stock to an Outperform and raised its price target three bucks a share to $20 price target on CAMP.  The analyst firm also provided the following commentary on the company.

We could see the categories blend over time, such as is starting at Twilio and Ooma. SOTP and Rule of 40. IoT companies have non-SaaS elements, such as hardware and consumer services. We use a sum-of- the-parts (SOTP) approach to determine implied SaaS valuations for such business segments. The tables attached show those values. The median Rule of 40 (SaaS growth plus EBITDA margin) metric across all companies covered is 33 and the median EV/SaaS value under an SOTP is 5.8x. Additionally, we believe the Rule of 40 is the best barometer for valuing SaaS businesses. Companies in the broader SaaS group and that have a metric in the 20-30 range garner about 5.4x CY19 revenue today. Broader SaaS comps are attached too, segmented by major Rule of 40 ranges. CAMP Attractive.” 

Northland's action followed CalAmp's Q1 earnings beat on June 27th.  On July 1st, another SA contributor put out his upbeat assessment on the stock.

Monday, before the opening bell, we published a trade idea utilizing a simple covered call strategy.  It will return just over 15% in 20 weeks even if the underlying biotech stock does nothing.  That trade idea got off to a good start this week as the underlying equity had a good week in a flat market (above).

If you are registered to receive our weekly free reports, you would have received that trade idea in your 'in' box as of Monday morning.  If you are not signed up yet for this free service, just click HERE to download that latest report. This action will also ensure you receive all future free reports as published as well.  This upcoming Monday we are putting out a covered call idea we believe will generate a 40% return in approximately 15 weeks.

Next up is Sinclair Broadcast Group (SBGI) which has been in the news of late.  This week the company announced preliminary Q2 results and a multi-year pact with Charter Communications (CHTR) for continuing to carry its broadcast TV and Tennis Channel stations.   The company is in the middle of a  proposed $9.6 billion acquisition of 21 Fox regional sports networks from Disney (DIS).  The Charter deal is provides a term extension for the currently carried FOX regional sports networks once they are acquired from Disney.

The Executive Chairman seems to be on board with the company's direction.  On July 10th, he added over $20 million to his already considerable holdings via numerous transactions.  Analysts also seem sanguine about Sinclair's prospects.  Both B Riley FBR and Evercore ISI upgraded the stock to a Buy in early May.  After preliminary Q2 results came out this week, Benchmark reissued its Buy rating and $90 price target. 

An article from another SA contributor in late June had an intrinsic value of $78 a share for SBGI.  The stock has had a healthy move so far in 2019 but it seems several analysts and at least one insider seem to believe further upside could be ahead.

Finally, we have building materials concern BlueLinx Holdings (BXC).  This company based just outside of Atlanta distributes structural products, including plywood, oriented strand board, rebar and remesh, lumber, spruce, and other wood products used in the building trade.

In the first insider buying of 2019, a beneficial owner of the company added nearly $1.4 million to his core holdings on July 5th and July 8th.  The company in its Q1 report stated it expects its recent Cedar Creek acquisition to be completed by the third quarter.  BlueLinx also envisions achieving a run rate of $50 million in synergies from that purchase by 2020.

With 30-Year mortgage rates now back down near a two-year low after spiking to just over five percent last summer, housing activity should be stronger in the second half of 2019 than it was in the first half provided the jobs market continues to be robust.  Despite a nearly $200 million market cap, this company gets beyond sparse coverage from wall street.  I can find no ratings for 2019 on the stock.  However, based on these recent purchases, at least one insider is signaling he believes the company's prospects are bright.

And those are three interesting names seeing recent and notable insider buying even as most of the market indices are at or near all-time highs.

When dealing with people, remember you are not dealing with creatures of logic, but with creatures bristling with prejudice and motivated by pride and vanity.” ― Dale Carnegie

Don't forget to take advantage of the special offer we made last weekend for The Busted IPO Forum. The Busted IPO Forum model portfolio has crushed the return of the Russell 2000 (31.09%versus 3.79% (as of 07/12/2019)) since its launch in late summer of 2017. Click HERE to get your free two week trial and receive 20% off your first year of membership. We have extended this special offer until the market reopens on Monday. Several new investment recommendations into the model portfolio will be published over the next few weeks as well.

Thank You & Happy Hunting,

Bret Jensen

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