Like consumers, investors are always after a good bargain. Therefore, many like to seek out undervalued companies with low stock prices. Although a low stock price can have the makings of a 'bear trap', sometimes there are true bargains to be found.
And since corporate insiders are investors like the rest of us, they too are known to pounce when a stock is trading below its perceived value. When insiders buy when a stock is cheap, the market takes notice of a potential inflection point in the company's growth prospects.
Let's take a look at three stocks that have recently piqued the interest of company insiders. All are trading below $15—but may not be on the clearance rack for much longer.
Does New Residential's CEO Have a Big Stake in the Company?
New Residential Investment (NYSE:NRZ) is a real estate investment trust (REIT) that true to its name specializes in the residential property market. But rather than developing and owning properties the company is involved in lending, servicing, appraising, and other mortgage-related activities.
Over the past 12 months it has been nothing but buying activity from insiders which makes sense considering REIT has been stuck well below its pre-pandemic level in that span. But more recently, a curious purchase by President & CEO Michael Nierenberg suggests New Residential may be on the comeback trail.
On April 19th, Mr. Nierenberg, who is also the Chairman of the Board, purchased 100,000 shares of New Residential at $10.10 as part of the company's secondary public offering. This brought his direct ownership to more than 350,000 shares. He also has several indirect interests in the stock through a series of trusts and custodial accounts for his children.
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The $1 million purchase was a powerful statement from a CEO that has been in that role at the company since 2013. New Residential has since trended higher ahead of its first-quarter earnings report on May 5th. If it can show continued progress with its post-pandemic business model, investors will be more than happy to scoop up this 7.7% dividend yielding REIT.
Will Molecular Templates Stock Recover?
An insider of a different sort has been active in Molecular Templates (NASDAQ:MTEM). The Austin, Texas-based biotechnology company develops therapies for cancer and other diseases through its proprietary engineered toxin body (ETB) drug platform.
A major shareholder of Molecular Templates is Biotech Target NV, a somewhat mysterious SEC-registered investment entity that is domiciled in Curacao and is an insider of several upstart biotech firms. Over the last 6 months, the investor has been building a huge stake in Molecular Templates. The 14 buy orders have brought its position to more than 9.5 million shares representing nearly 20% of the small cap's outstanding shares.
Molecular Templates stock is no stranger to trading at low prices. It has experienced a pair of reverse stock splits since its 2005 IPO, most recently a 1-for-11 split in August 2017. But since then, the stock moved higher reaching a pre-pandemic peak above $19.
However, it plunged 25% to a new low earlier this month after the company announced that it discontinued developing its lead asset MT-3724 as a prospective treatment for hematological malignancies. Since then, Biotech Target NV has entered six more buy orders over a span of three weeks totaling more than $10 million. It'll be interesting to see if the insider continues to average down on its large stake.
Is Verrica Pharmaceuticals Stock a Buy?
Staying in the biotech industry, Verrica Pharmaceuticals (NASDAQ:VRCA) is another low-priced stock that one particular insider has taken a liking to. Late last month, board member Paul Manning purchased 739,830 shares of the West Chester, Pennsylvania-based company for his revocable trust account at a price of $14.75.
Mr. Manning is no stranger to acquiring Verrica Pharmaceuticals. He holds a direct interest in the stock to the tune of nearly 8.1 million shares which represents more than 30% of the shares outstanding. He has an indirect interest in an additional 1.7 million-plus shares through two separate investment groups where he is an executive.
The sizeable stake in Verrica Pharmaceuticals is a big vote of confidence in the biotech's growth prospects. The medical dermatology company develops treatments for a range of rare skin diseases and conditions. Its lead candidate, VP-102, is being studied as a treatment for molluscum contagiosum, a highly contagious viral skin disease most often seen in children.
It certainly provides a level of comfort to shareholders that Mr. Manning and other insiders have significant 'skin in the game'. Since its June 2018 Nasdaq debut at $20 per share, Verrica Pharmaceuticals has struggled to finds it way in the market. A series of mixed clinical developments and financial reports have led to ups and downs that have ultimately kept the stock in a sideways pattern. But after stringing together five straight months of gains from November 2020 to March 2021, and the ongoing backing from its key stakeholder, Verrica Pharmaceuticals may finally be getting off the ground.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| New Residential Investment (NRZ) | $0.00 | -100.0% | ∞ | 4.82 | N/A | N/A |
| Molecular Templates (MTEM) | $0.35 | -10.9% | N/A | -0.13 | N/A | N/A |
| Verrica Pharmaceuticals (VRCA) | $0.81 | +15.0% | N/A | -0.44 | Hold | $9.60 |
