Key Points
- Comtech is a technology play that insiders are buying.
- ADT insiders bought the dip, and so are the institutions.
- DiaMedica clears hurdle, insider buying surges.
Insider buying is almost always a good signal that a stock is undervalued, and today’s list includes 3 that also trade for less than $10 per share. The takeaway is that Comtech Telecommunications (NASDAQ: CMTL), ADT (NYSE: ADT), and DiaMedica Therapeutics (NASDAQ: DMAC) offer an opportunity for investors that insiders are capitalizing on. There is never guarantee stock prices will go higher, but it is widely accepted that insiders only buy when they think the stock price should improve.
Comtech Telecommunications Is Deep In A Turnaround
Comtech Telecommunications emerged as an insider-oriented play last year when it rose to the top of the listings for insider buying. A year later, it is still 1 of the most heavily bought stocks by insiders, and the company is on the cusp of a turnaround. Comtech has, over the past year, reorganized into a more-streamlined operation focusing on cost control, internal efficiency, and reinvigorating growth. Among the initiatives taken in calendar 2023 is suspending the dividend, which aided balance sheet improvement and the overall repositioning of its operations.
Twelve insiders have made 17 transactions in Comtech stock over the last 12 months. They are all purchases and have total insider holdings up to 4.4%. The purchasing activity increased after the dividend suspension and ramped to the highest levels in many years.
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This activity is bolstered by the institutions that have been buying on balance for 6 consecutive quarters and ramped following the distribution suspension. Institutions own about 75% of the company. The analysts don’t add much to the picture because there is only 1 with a current rating. The salient point is that this rating came out in late June 2023 and views the stock as a Hold with a price target about 20% above the recent action.
Tightly Held ADT Has Surge Of Insider Buying
Shares of ADT fell sharply in the wake of the Q1 earnings report and guidance, but buyers met the move. Buyers included 5 insiders ranging from an EV to an EVP, the CMO, the CFO, and the CEO bringing total holdings to about 2.5%. That’s not significant but is compounded by a high 85% institutional ownership. Institutional owners include Apollo Management Holdings, which owns more than 50% of the stock.
Among the reasons is the relatively safe 2.35% dividend yield which has been steady since its inception. Another reason is the outlook for smart home technology and the IoT, which AI now amplifies. AI services such as security will be among the most significant segments and fastest growing AI market.
ADT stock has 2 analysts with ratings, but only 1 can be called current. It was set in early May after the Q1 release and includes a price target reduction. That price target is $9 compared to the $8.50 consensus estimate or about 40% above the current market action. The company is expected to report in early August and deliver another quarter of YOY growth. The question is margin and if the AI boom will have a noticeable impact.
DiaMedica Clears Hurdle
Clinical trial outcomes are still uncertain, but DiaMedica has cleared a significant hurdle. Trials for the company’s lead candidate were put on hold following some adverse events, but the trials have been cleared to resume. The news was followed by filings that showed major insiders and execs were buying the stock. The company has a history of insider buying, but the activity ramped up with 3 execs and a major shareholder all buying. The activity has net holdings up to 6.5%, which may grow as the trial progresses.
The news has the stock in an uptrend. The bullish technical picture could lead the market into another 50% gain. The next major hurdle will be the $4.85 level; a move above that opens the door to $7.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| ADT (ADT) | $6.99 | +1.7% | 3.15% | 7.60 | Hold | $8.55 |
| Comtech Telecommunications (CMTL) | $4.39 | +8.9% | 2.28% | -0.93 | Moderate Buy | $6.38 |
| DiaMedica Therapeutics (DMAC) | $5.40 | +2.7% | N/A | -9.64 | Buy | $7.00 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
