EEvery investor wants to cut out the noise and eliminate the static from market signals, but there are thousands of companies trading the markets and they’re giving off all kinds of signals about their health, viability, and potential for success. The best investors will learn to overcome this confusion to find the stocks that show the right signs and have the greatest potential for future gains.
A clear signal is needed, and one of the clearest is the insider buying model. Insiders – corporate executives, board members and others “in the know” – don’t just run companies, they know the details. Legally, they’re not supposed to trade that knowledge, or blatantly trade it, and disclosure rules by government regulators help keep insiders honest. However, their honest stock trading can be very informative. These are the people who have the most in-depth knowledge of particular stocks. So when they are buying or selling, especially in bulk, take note.
With TipRanks Insiders’ Hot Stocks tool, retail investors can get a glimpse of what these corporate bigwigs are doing in the market. The tools’ filters allow you to sort insider trades across a variety of strategies, to find the right ones to follow. We kicked off the process, using the tool to find two stocks with strong buy ratings from the analyst community, significant upside potential, and recent strong insider buying. Let’s take a closer look.
KKR & Co. (KKR)
We’ll start with KKR, a financial services company in the global investment industry. KKR provides asset management services to a global clientele and currently has over $73 billion invested in 110 income-generating corporate investments in its portfolio, and over $470 million in assets under management. In 2021, assets under management increased by 87% compared to 2020.
KKR’s portfolio has been successful in generating returns for the company and its shareholders. Total revenue in 2020 was $4.43 billion; in 2021, that sum grew to $16.24 billion, growing by almost a factor of 4. Fourth-quarter revenue alone was around $4 billion. Some $2 billion of that amount was fee-related revenue, which was up 54% year-over-year. All in all, it was a banner year for the company.
The company also posted strong distributable profits for the quarter, at $1.4 billion. This is the metric that drives the dividend and is closely watched by investors. Although the dividend of 14.5 cents per common share only yields 0.9%, it is reliable and KKR has increased it steadily over the past three years.
Insider sentiment on KKR is positive, pushed in that direction by two recent “informative buys” from board member Matt Cohler. Cohler was appointed to the company’s board in January this year and in the last week of February he purchased two tranches of company stock, one of 8,305 shares and the other of 8 683 shares. Cohler spent a combined total of $999,296 on the purchases.
While KKR shares have fallen in recent months, JMP analyst Devin Ryan sees an upside, writing, “We believe the selloff creates an attractive longer-term buying opportunity, particularly given the strength of underlying business trends (nearly every metric across the business is at an all-time high). The firm will be in the market to raise funds for more than 30 strategies in 2022, which we believe could generate approximately $70-80 billion in inflows (after $121 billion in capital raised in 2021), while QTD achievements are already at $700M+, a level we view as quite positive considering we’re only about five weeks into the quarter. Bottom line, we believe KKR continues to perform at a high level and the momentum remains quite high heading into 2022.”
Consistent with these bullish comments, Ryan rates KKR an outperformer (i.e. a buy), with a price target of $92 suggesting a 53% upside this year. (To see Ryan’s track record, Click here)
Overall, this fast-paced asset manager has garnered 9 recent reviews from Wall Street analysts, including 7 buys and 2 taken for its strong buy consensus rating. The shares are priced at $57.75 and have an average target of $87.44, up around 45% year over year. (See KKR stock predictions on TipRanks)
Doma Holdings (DOMA)
The second company we’ll be looking at, Doma, is bringing AI and machine learning technology to the real estate industry. The company uses its technology solutions to streamline the mechanics of closing real estate sales, updating the “1890s process and 1990s technology”. Doma makes closing efficient and affordable, and reduces processing time for titles and escrow from days to minutes.
This unique real estate technology company went public on Wall Street last summer, completing a SPAC merger with Capital Investment Corporation V on July 28. The DOMA ticker debuted on the market on July 29 and the company was able to realize $350 million in new capital. of the business combination.
Shares are down 67% since the SPAC, a drop that includes a 29% loss posted after the release of 4Q21 results. The release showed the company’s third consecutive EPS loss as a public entity and reportedly spooked investors. For the full year 2021, the EPS loss was 64 cents, larger than the 56 cent loss recorded in 2020. Doma expects to reach profitability in 2023.
Despite this somewhat gloomy stock picture, at least one insider was ready to put a serious coin on Doma. In an informative buy, board member Mark Ein paid $799,128 to buy over 332,000 shares.
This title also has its fans among analysts. JMP analyst Matthew Carletti rates DOMA as an outperformer (i.e. a buy), as well as a $10 price target. Investors could pocket a gain of around 288% if the analyst’s thesis materializes. (To see Carletti’s track record, Click here)
Supporting his position, Carletti writes: “With the significant pullback in DOMA’s share price as well as Insur/PropTech peers, we believe it is also now constructive to examine the valuation of DOMA’s shares relative to the market. incumbent title insurer universe, of which we believe DOMA will gain significant market share in the coming years.”
“Despite the macro headwinds in the market as refinancing and, to a lesser extent, buy trade volumes slowed, Doma’s open order volume growth – a leading indicator of revenue – grew 21% annually (+41% in Q3, +36% in Q2 and +24% in Q1), illustrating to us that Doma’s faster, better and cheaper value proposition continues to resonate with the market and should allow the company to continue to gain market share, even in the context of a shrinking macro environment,” added the analyst.
In general, the rest of the street has an optimistic view of DOMA. The stock’s strong buy status comes from the 3 buys and 1 hold issued in the previous three months. DOMA shares are selling for $2.58 each, and the average target of $7.50 indicates a possible upside of around 191% from this level. (See DOMA stock forecast on TipRanks)
To find great stock trading ideas at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ stock information.
Warning: The opinions expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.