Typically, when deciphering the best stock picks to consider, insider trading trades present attractive clues. This is probably all the more important when these transactions are buy orders. It is believed that executives can dispose of their holdings for a variety of reasons, including those unrelated to the underlying business. But buying shares? It can only mean that they have confidence in the future trajectory of the company.
In addition to this narrative, the market is currently suffering from a corrective cycle. As well, recession fears increase as inflation squeezes household budgets, driving down spending. In turn, this dynamic bodes ill for corporate earnings, likely leading to mass layoffs. So if executives acquire their own stocks in this austere environment, the stock implies that the underlying stock picks could be lucrative.
Still, it’s important not to get carried away with insider trading banking. On the one hand, tycoons have a lot of money to burn, which reduces the consequences of making a mistake. More importantly, even the best investing experts get their stock picks Wrong.
Ultimately, however, insider trading is an important clue to who has skin in the game.
||Alpine Summit Energy Partners
||Six Flags Entertainment
Augusta Gold (AUGG)
An exploration and development company focused on mining projects based in Nevada, Augusta Gold (OTCMKTS:AUGG) recently benefited from an insider trade totaling $52,149 on May 30, 2022. Investor was unnamed, only listed by Barchart.com as an “American shareholder”. Still, despite the lack of detail, Augusta Gold’s uptrend is certainly understandable.
Throughout history, gold has represented a universal safe haven for its intrinsic value and its ability to withstand the debilitating effect of inflation. According to data from the Bureau of Labor Statistics, the purchasing power of the dollar decreased by 11.3% between April 2020 and April 2022. Therefore, gold-related investments potentially offer protection against rising prices.
Nonetheless, let’s be honest with ourselves and recognize that OTC gold stocks are incredibly volatile. Therefore, it is one of the stock picks to approach with extreme caution.
CSP inc. (CSPI)
Specialist in the infrastructure and network solutions industry, CSP inc. (NASDAQ:CSPI) may not be a household name, but basically it’s gotten a shot at relevance thanks to its cybersecurity branch. With Russia’s invasion of Ukraine threatening the modern world order, it has never been more important for businesses and government agencies to protect their digital profiles.
Here, Joseph R. Nerges, who appears to be a major investor, acquired 7,050 shares of CSPI for $8.51 on May 31. In total, the insider trade amounted to a hair’s breadth over $60,000. As with Augusta, CSP makes a lot of sense due to current events. Cyberattacks have become alarmingly frequent and their ability to damage key infrastructure keeps many agencies awake at night.
Still, it’s one of the riskiest stock picks, so be sure to exercise caution.
Voxx International (VOXX)
One of the world’s leading manufacturers and suppliers of automotive products and consumer electronics, Voxx International (NASDAQ:VOXX) has more recently expanded into iris-based authentication solutions for the rapidly growing biometrics industry. With both commercial and personal activities on the rise sharply out of the spring doldrums of 2020, VOXX appears to be reasonable speculation among intriguing stock picks.
Indeed, Beat Kahli, who is listed as a director, acquired 10,000 shares of VOXX at a price of $8.36. In total, the insider trade amounts to $83,600. On the surface, acquisition is tied to the fundamental catalyst for returning to normal. Additionally, the demand for biometric security could increase if workers are called back to the office.
Yet the other side of the story is that Voxx is a micro-cap company. Therefore, you need to approach this one with caution.
Alpine Summit Energy Partners (ASEPF)
Alpine Summit Energy Partners (OTCMKTS:ASEPF) is a “U.S.-based energy developer and finance company focused on maximizing growth and return on equity through better access to the wellhead economy.” Its primary focus is the Giddings Field area in Texas. With hydrocarbon fuel prices skyrocketing due to a myriad of catalysts, it’s no surprise that Alpine Summit has performed well this year.
Adding to the intrigue, Craig William Perry, president and CEO of Alpine, purchased 17,000 shares of ASEPF at a price of $5.60. In total, the insider trade amounts to $95,200. Following the acquisition, Perry has 39,300 shares to his name. Interestingly, year-to-date, ASEPF is up 45%, making it one of the best stock picks in the energy sector.
While relevant, investors should be aware of the risks associated with OTC stocks.
VF Corp (VFC)
An interesting name to pop up among recent insider trades, V.F. Corp. (NYSE:VFC) does not naturally strike investors as one of the potentially profitable stock picks. A global apparel and footwear company, VF Corp offers brands such as Vans, Dickies and Jansport. Although its products are instantly recognizable and popular, consumer sentiment fell to multi-year lows. Now is not the time to open portfolios for discretionary purchases.
Yet W. Rodney McMullen, a member of the company’s board of directors, opened his portfolio to acquire 3,000 shares of VFC for $49.99. This insider trading transaction totaled a hair under $150,000 and took place on May 31. Additionally, McMullen now has 28,125 shares of VFC to his name, implying strong confidence.
This is not unreasonable, as consumers have shifted away from physical goods to experiences like travel and vacations.
Opko Health (OPK)
A medical testing and drug company focused on diagnostics and pharmaceuticals, Opko Health (NASDAQ:PKO) on paper seems like one of the relevant stock picks to consider. However, its specialization in addressing unmet patient needs may have hampered its revenue growth potential. Frankly, OPK is not doing well, with shares down 44% year-to-date.
Curiously, however, the crimson ink didn’t deter Dr. Phillip Frost, the company’s president and CEO. On May 31, Dr. Frost acquired 50,000 shares at a price of $3.02. In total, the insider trade amounts to $151,175. Following the acquisition, Dr. Frost owns nearly 229.3 million shares.
The medical testing and pharmaceutical industries are volatile; therefore, I hesitate to say whether OPK is one of the viable stock picks. However, it is at least encouraging that its leaders put their money where they say.
Applied Blockchain (APLD)
A high-risk, high-reward business if there ever was one, Blockchain applied (NASDAQ:APLD) is a builder and operator of next-generation data centers, providing significant computing power for blockchain-based infrastructure and cryptocurrency mining initiatives. While intriguing from a broader perspective, this year the underlying narrative of the APLD has struggled.
With cryptos implosing from last year’s highs, Applied Blockchain has also suffered. On a YTD basis, APLD has an 84% hemorrhage. Nonetheless, Chairman and CEO Wesley Cummins is seemingly holding out for life (HODL-ing), acquiring 170,383 shares for $4.42. In total, the insider trading transaction amounts to $753,144.
Additionally, Cummins now owns nearly 22 million shares. I am torn though, because even though cryptos have seen mainstream success, they could be heading for an extended period of correction. So proceed with caution.
Six Flags Entertainment (SIX)
Of the implied stock picks on this list based on the context of insider acquisitions, Six Flags Entertainment (NYSE:SIX) comes across as the boldest in my opinion. As you know, the Covid-19 pandemic has completely disrupted non-essential businesses, leaving traffic-sensitive businesses like Six Flags reeling. Even with the company reopening, many investors have a low opinion of SIX due to poor consumer sentiment.
For the record, SIX stock is down 33% YTD at the time of writing. However, Arik W. Ruchim, director of the theme park operator, is undeterred. Ruchim acquired 125,000 shares at a price of $29.63. In total, this insider trading transaction amounted to $3.7 million. Following the purchase, Ruchim owns nearly 9.5 million shares.
Given that consumers are shunning retail products for experiences, this could be a bet that plays out. However, don’t stay in the kitchen if you can’t stand the heat.
Billed as a cloud computing and enterprise software company headquartered in McLean, Virginia, Appian (NASDAQ:APP) initially seems very relevant, specializing in the efficient and rapid creation of enterprise-level applications and workflows. So why is APPN down 25% year-to-date, making it one of the poor picks among insider trading-based stock picks?
This could boil down to poor projections for the economy, with Appian customers perhaps deciding to cut overhead. If so, tightening the belt would be doing the app developer a disservice. Yet one US shareholder was undeterred, buying 81,825 shares at a price of $47.50. In total, the insider trading acquisition amounted to nearly $3.9 million. In addition, the shareholder now owns 16.37 million shares.
For opposites, APPN might work. However, I’m concerned about the cost-cutting environment, so I’ll personally steer clear.
As of the date of publication, Josh Enomoto had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.