That’s all the freedom we can hope for – the freedom to choose our prison.“ – L.M. Montgomery, The Blue Castle
The market finally broke a six-week losing streak last week. A punk Jobs Report on Friday confirmed the most likely next move from the Federal Reserve is an interest rate cut. This will probably happen at the September Fed meeting according to the current consensus.
Mexico and U.S. avoided new tariffs making an agreement before the first set of tariffs were to take effect on Monday. That should get the market off to a positive start when we start off a new trading week tomorrow.
So, which stocks are insiders still buying in this tumultuous environment? Here are three that caught our eye.
Tocagen (TOCA) sees some new insider buys after a recent plunge in its stock price. Two directors, the CFO and CEO, have scarfed up nearly 60,000 shares in the stock since May 24th in a half dozen transactions. This developmental gene therapy concern plunged after the company reported some news around a Phase 3 trial.
The trial is continuing without modification. Most analysts remain sanguine even if investors haven’t been since news broke. H.C. Wainwright ($14.50 price target), Cantor Fitzgerald ($20 price target), and Chardan Capital ($10 price target) all reiterated Buy ratings the day after this trial announcement. Citigroup resumed coverage on Tocagen the following week with a Buy rating and $24 price target.
Leerink Partners seems to be lone analyst holdout at the moment. The day after the stock plunged, the analyst firm lowered its price target to $5 from $11. Leerink’s analyst noted:
the Independent Data Monitoring Committee’s recommendation to continue TOCA 5 trial aligns with her base case. A study failure announcement by year end is now likely, and believes the IDMC’s recommendation to continue the study „has definitive negative read-through to a final outcome‚.
Insiders are evidently taking the optimistic side of the bet on this ‚battleground stock‘ among analysts. It should be noted that this is the first insider buying in this name since April of 2017.
Next up is another small healthcare name, Avanos Medical (AVNS). The company’s CEO bought almost $140,000 of new shares on May 30th. It was the first new insider buying in this medical technology firm since late in 2018. This firm provides minimally invasive interventional pain therapies, closed airway suction systems, and enteral feeding tubes.
The stock trades pretty much at the same level it did when the company first came public late in 2014. On May 7th, the firm reported Q1 results that slightly beat both the top and bottom line consensus. The company recently sold its Surgical and Infection Prevention business and announced it plans to use the proceeds to retire approximately $130 million in debt on May 9th. It sold this business in late 2017 for $710 million and had already paid down other debt. They changed their name it appears from Halyard Health to Avanos in the process.
Source: Company Presentation
The remaining Avanos business is now a pure play on medical devices in pain management and chronic care. A good snapshot of the company is provided above. The current market capitalization of the company is just over $1.9 billion. The median analyst price target on AVNS is $50.00 a share.
Finally, we have Athenex (ATNX). This ‚Tier 4‘ biotech concern is focused on developing various therapies for the treatment of cancer and related conditions. A director bought nearly $40,000 in new shares on June 6th. This is only notable because a beneficial owner added nearly $1.3 million to his stake in May and the CEO added over $500,000 to his holdings in March.
Source: Company Presentation
The company has a diverse pipeline. Its lead candidate is Oraxol, a novel oral formulation of standard chemo drug paclitaxel added to a P-gp pump inhibitor, and that is targeting metastatic breast cancer. Athenex recently addressed its current funding needs, raising $100 million in a private placement a month ago.
The company is based in China although it has R&D and other facilities in upstate New York. Partly due to this, the company gets relatively sparse coverage on Wall Street despite an over $1.2 billion market cap. Insiders seem to be signalling the shares are undervalued given recent purchases.
And those are three small-cap healthcare concerns seeing recent and notable insider buying.
Prison is like high school with knives.“ – Raegan Butcher
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Disclosure: I am/we are long TOCA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.