What about the markets today? The week started with the S&P 500 officially falling into bearish territory, and on Wednesday the Federal Reserve carried out its most aggressive rate hike in nearly 30 years – 75 basis points, or 0.75% – indicating that the he inflation, which stands at an annualized 8.6%, is now Economic Enemy #1, even at the risk of recession. It is certainly not an investment-friendly environment.
But there are stocks worth revisiting, if investors know what signs to watch for. A clear signal comes from corporate insiders, corporate executives who must steer their businesses through these treacherous market currents. They are responsible for more than their own wallet; Boards and shareholders rely on them to generate profits and share appreciation, or to properly prepare their companies for denials. Therefore, they do not trade their own stocks lightly and when they buy en massethese purchases should attract the attention of investors.
TipRanks has the tools to track insider trading. A popular data sorting tool, Insiders’ Hot Stocks, offers several sorting options for investors looking to find and track stocks with strong insider buying. We’ve pulled out the latest details on two controversial stocks that are showing both strong recent losses and strong insider buying. We will add comments from Wall Street analysts to get a better view of these positions.
Maxim, Inc. (MMS)
The first stock we’ll look at, Maximus, is basically a staffing agency. The company provides management and administrative services to government agencies on a contractual basis. Maximus’ activities are centered in the United States, but they also operate in the United Kingdom, Canada and Australia. Maximus is an administrative service provider for a number of major US welfare programs, including Medicaid and Medicare.
Maximus has seen a steep decline in share value in recent weeks, despite posting generally healthy financial results for its second quarter of fiscal 2022. The quarter, which ended March 31, recorded revenue of $1.18 billion, up about 22% annually. over-year. Diluted EPS, at 80 cents, was down from the $1.29 reported in the year-ago quarter — but beat the 71-cent forecast by a 12% margin.
What has investors concerned, however, are the company’s directions. Full-year revenue guidance was unchanged at $4.5 billion to $4.7 billion, but EPS guidance of $3.00 to $3.50 was seen as somewhat low. The midpoint of the EPS range, $3.25, was well below the expectation of $5.23.
On a positive note, MMS declared its Q2 dividend at 28 cents per common share. This annualizes to $1.12 and yields a return of 1.8%, roughly equal to the market average. The key point of this dividend is its reliability – Maximus has maintained payouts and slowly increased them over the past 13 years.
On the insider trading front, there were three large purchases of MMS shares by corporate officers this week. Company CEO Bruce Caswell spent just over $500,000 to buy 8,300 shares, while board member John Haley bought 18,000 shares for $1.085 million. Another company director, Raymond Ruddy, bought 17,341 shares, for just over $1 million. Stock watchers should note that Ruddy has a 60% success rate when trading his own company’s stock and has returned 10.5%. (To view Ruddy’s track record, Click here)
Covering this government contractor stock for Raymond James, analyst Brian Gesuale is cautiously optimistic about the future. He writes: “The MMS’s reaction to the print appears to price in many…concerns, and any prospect of a ‘recession’ gives the stock a defensive coat creating some optimism that it could perform relatively well against a basket. or more macro sensitive actions. Unfortunately, it looks like FY24 will be the first year the consolidated business can grow significantly from the shadow of COVID. Market sentiment is also likely to change if the midterm elections tilt in favor of Republicans.
These comments are accompanied by an outperform (i.e. buy) rating from the analyst, although he admits that his rating should be considered “soft”. Gesuale sets a price target of $80 on the stock, suggesting an upside of around 34% year over year. (To see Gesuale’s track record, Click here)
Some actions go unnoticed, and Maximus is one of them. Gesuale’s is the company’s only recent analyst review, selling for $59.89. (See Maximus stock predictions on TipRanks)
Avis Budget Group (CAR)
Let’s shift our focus now, from government work to car rental, where Avis Budget Group is one of the long-established names in the industry. The company owns the major global brands Avis, Budget and Zipcar, as well as a range of smaller regional car rental brands in Europe, South America and Australasia. Combining its brands, Avis has more than 11,000 rental locations in 180 countries, with a fleet of 600,000 vehicles. The company generated $9.1 billion in global revenue last year.
Avis’ strong performance continued, as seen in 1Q22 results. At the top, revenue of $2.4 billion was up 77% year-over-year, while adjusted EPS came in at $9.99 per diluted share, the second impression the highest of the last two years. The company also reported high vehicle utilization rates – 68.9% in the US market, 63.2% internationally – indicating both strong business and plenty of vehicle reserves to meet demand. or for running cars during repair and maintenance. The company had $900 million in liquid assets at the end of the quarter.
The company does not pay a dividend, but its board has authorized increases to the existing stock buyback program. The increases, $1 billion in March and $2 billion in May, will allow Avis to aggressively support stock prices; there is $2.3 billion available in the current authority.
Investors should note that CRTO shares peaked in April of this year, and since then they have fallen around 50%. A tough market and choppy seasonality amplified by the uneven global recovery from the COVID crisis have all combined to make Wall Street a little wary of this stock.
That didn’t stop Bernardo Hees, executive chairman of the board, from gobbling up Avis shares recently. Since the second half of May, Hees has purchased more than 83,000 shares, spending a total of $14.79 million on stock. He made the purchases in three tranches, spending between $4.89 million and $4.95 million for each. Hees’ average return when buying Avis shares was an impressive 53%.
This car rental company also receives the green light from Jefferies analyst Hamzah Mazari who writes: “What to do with CAR stocks: Buy more if you think CAR can operate at structurally higher margins and maintain growth at a longer-term figure, which will lead to structurally higher multiples in the future. We also believe that balance sheet catalysts continue to be underestimated.
Analyst commentary on stocks doesn’t get much more bullish than that, and Mazari backs that up with a Buy rating and $333 price target that indicates robust upside potential of 103% in the months ahead. (To see Mazari’s track record, Click here)
Overall, the street take offers an interesting paradox; CAR stock currently enjoys a Consensus Hold rating, based on 3 holds, 2 sells and a single buy. However, there are some nice projected gains here; at $241.67, the average target suggests the stock will rise about 47% in the coming year. (See CAR stock forecast on TipRanks)
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Disclaimer: The views 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.