3 cheap stocks that insiders are buying: investors should avoid 1

Insider buying tells investors that a stock’s price is low, that something is wrong with the market, or that the company’s outlook is improving. Insider buying can signal that stock prices will turn around and start rising, but not always. This is a look at three small- and mid-cap stocks bought by insiders in the first quarter of 2024. Two are good stocks that investors may want to consider for their portfolios. One is a lower priced direct stock that investors should avoid.

Team Inc. has structural problems that insider purchases can’t cover

Team Inc. (NYSE: TISI) provides a range of high-tech testing, heat treating and inspection services that should be capable of generating profits. The energy sector alone is in a major spending cycle with oilfield services in a golden age, but the benefits are not for Team. This company continues to struggle with profitability in its operating segments and that is not expected to change anytime soon. However, insiders buy the shares, so they have some value. Insidertrades.com tracks eight purchases by four insiders, including three directors and a major shareholder.

The main shareholder is Corre Partners. Corre Partners owns more than 33% of the shares and has been buying them aggressively over the past year. Institutions other than Corre Partners own just 14% of the business; they sold in the first quarter at a rate 4 times greater than buying. No analysts track this stock, so there is little to drive it other than news, which is not interesting. The stock recently rebounded from a long-term low, but the gains are unlikely to last. This stock is under considerable pressure and risks delisting from the NYSE, which will undermine investor confidence.

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Grief, Inc. pays a solid dividend – insiders are buying it

Greif, Inc. (NYSE: GEF) produces industrial packaging for the global market. Its stock price has been on an upward trend since 2020, driven by demand, cash flow and substantial dividends. The company’s shares yield about 3%, trading near $65, and the payout is reliable. The company pays out less than 35% of earnings and has earnings growth prospects. Grief, Inc. has increased its distribution in recent years, so another increase is likely at the end of the fiscal year.

Four insiders have purchased GEF shares in seven transactions since January 1. Buyers include the CEO, CFO, VP, and treasurer, who offset some sales from another VP. The net result is an increase in insider ownership. Ownership is almost 3% and is exacerbated by institutions. Institutions own about 45% of the stock; activity surged in the first quarter and the balance shifted back to the purchase side.

Three analysts tracked by Insidertrades.com have current ratings on the stock and are leading the market higher. Revisions and updates over the last twelve months have raised the rating from Reduce to Moderate Buy and the price target by 1000 basis points. The consensus is for a 20% upside and the lower end of the range is above the current stock, suggesting a deep value opportunity.

Mercury systems at the bottom

Mercury Systems (NASDAQ:MRCY) The share price has been on a downward trend over the past year, helped by declining analyst sentiment. Analyst sentiment fell to Reduce from Moderate Buy, and the price target followed lower, but the bottom is here. The market is showing signs of bottoming and reversal, which aligns with a number of good press releases. The latest is a Navy-awarded contract worth $243 million over five years. That’s not enough to move the needle in terms of growth, but it helps support a growth outlook and a return to profitability by the end of this fiscal year.

Three insiders bought these shares in four purchases, making up for an almost equal number of sales, although the difference in value is substantial. Purchases offset sales by a ratio of nearly 4 to 1, and insider holdings rose to 1.8%. Institutional activity is significantly bullish, with net bullish activity for seven consecutive quarters, a peak in activity in the fourth quarter, and buyers leading sellers into 2024.

Companies in this article:

Agency	Current price	Price change	Dividend yield	P/E ratio	Consensus assessment	Consensus price target
Team (TISI)	$7.73	-4.3%	N/A	-0.45		N/A
Greif (GEF)	$66.00	+0.8%	3.15%	11.42	Moderate purchase	$79.33
Mercury systems (MRCY)	$29.29	+0.2%	N/A	-19.66	Reduce	$29.88