The financial news frequently emphasizes stocks with heavy insider selling, premised on the assumption that insiders believe the stock is overpriced and that they are taking profits ahead of retail investors. However, most of the time, these sales are part of a previously disclosed plan and disclosed to the SEC months in advance.
This proves the saying that investors have many reasons to sell a stock, but the same is not necessarily true of insider buying. Typically, insiders have only one reason to buy a stock. That is, they believe it’s fundamentally undervalued.
When you combine an undervalued stock with a price below $20, you have a chance for impressive gains. That’s the case with the three stocks on this list. Plus, you can factor in the idea that these are mid-cap stocks that offer more potential for growth than more mature large-cap stocks but remove the risk that can be found in unprofitable small-cap stocks.
Transocean Is Well-Positioned for a Potential Oil Supercycle
Transocean Ltd. (NYSE: RIG) leases rigs and drilling equipment for oil companies. The company’s lease rate directly correlates to the price of oil at the time the contracts are originated. RIG stock is trading at $4.26 as of October 11, 2024.
However, even with a consensus Hold rating, analysts are forecasting a price of $6.88, which offers a 61% upside.
An insider has bought shares on two separate occasions since its second-quarter earnings report in July. The transactions amounted to $3.5 million shares of RIG stock.
But why should you believe the insiders? First, the macroeconomic picture is favorable. The Federal Reserve started its interest rate cutting cycle with an aggressive 50-basis point cut in September. Energy stocks are expected to benefit as lower rates tend to stimulate business activity which is generally bullish for oil.
Second, the company signed two high-value contracts which will have over 90% of its fleet committed through 2025. And the company is well-positioned for more contracts if offshore drilling projects become less regulated in 2025.
Crescent Energy Nears 52-Week High and New Highs Could Be Ahead
Another mid-cap stock in the energy sector is Crescent Energy Co. (NYSE: CRGY). The company has a different way of playing the energy sector because its business model focuses on acquiring resources rather than developing them. Its portfolio is heavily concentrated in the Eagle Ford and Uinta Basins.
Since the company’s second-quarter earnings report in August, different executives and insiders have purchased CRGY stock on four separate occasions.
The purchases seem well timed, as the stock was up 31% in the month ending October 11 and is nearing its 52-week high. The short-term catalyst for the stock is its inclusion in the S&P SmallCap 600 index, which usually brings with it a flurry of buying from institutional investors whose funds use the index as a benchmark.
That said, the longer-term catalyst for CRGY stock is similar to that of other oil companies: a resurgence in oil prices due to increased drilling activity in 2025 and beyond. Analysts give the stock a $16.20 price target, which offers investors a 20% upside.
Forget the Robo Taxi; Mobileye May Be a Better Short-Term Buy
When combing through the list of stocks with heavy insider buying on MarketBeat, Mobileye Global Inc. (NASDAQ: MBLY) instantly caught my eye. The company, which is partially owned by Intel Corp. (NASDAQ: INTC), is a leader in autonomous driving technology.
The company’s EyeQ chips power Mobileye’s flagship SuperVision platform, consisting of 11 cameras and autonomous vehicle maps that grow smarter over time.
MBLY stock went public in October 2022. The meme stock movement was over at that point, but for about a year, Mobileye delivered an impressive return for investors. It’s been a long fall from that point. In fact, the stock is down over 72% in 2024. The Mobileye analyst forecasts on MarketBeat show the stock with three uncomfortable sell ratings.
Still, the stock has a consensus Hold and a $26.85 price target, which provides an upside of over 107%. Autonomous driving may still be years away (the Robo Taxi isn’t set for production until 2027), but no matter who wins the White House, the move towards non-carbon transportation is not slowing down.