3 Stocks to Buy After Major Insider Purchases

I am hardly at a loss for finding reasons for pessimism about the overall market at the moment. Market breadth is atrocious. One can also just look at the VIX and see how complacent most investors have become. Economic growth is slowing notably. After 4.9% GDP growth in the third quarter of 2023, growth slowed to just 1.4% in the first quarter. The Q2 growth projection at the Atlanta Fed’s GDPNow has moved from 3.9% in April down to a tepid 1.5% currently. Oil is moving up as we approach summer driving season and Hurricane Beryl could disrupt refinery operations along the Gulf of Mexico. The November election is going to be another divisive affair and, at this point, we can’t be sure who one of the nominees will be. The situation in Ukraine is going south and events in Israel could still escalate.

I am also finding that there is little interesting insider buying going on in this market. Of course, with the S&P 500 trading at 22 times forward earnings with this much uncertainty, I don’t blame insiders for being reluctant to step up to the plate. However, I am going to strike a note of optimism on Friday and profile a couple of interesting names that are seeing some insider purchases in recent weeks:

Let’s start with Nike NKE, whose stock got pummeled after the company’s quarterly revenues and forward guidance disappointed at the end of June. The stock just saw the first insider buying of 2024. A director took advantage of the 20% drop in the stock to add just over $225,000 worth of equity to his stake in the company. I am still a bit wary around the shares, given management’s recent comments about tepid consumer demand and the stock’s valuation doesn’t scream value yet either. That said, if more insiders step up to the plate in the coming weeks, I might bite the bullet and establish a position in this American icon.

Probably the most notable insider buying last month might have been around Zillow Group, Inc. Z, where a director added nearly two million shares in the stock to his holdings. The stock has fallen just over 20% in 2024 to date as the housing sector remains tepid after 2023 saw the lowest amount of existing home sales since 1995. Evidently, someone at the company believes coming cuts in the Fed funds rate will lower mortgage rates sufficiently to reignite housing activity. The stock does seem to have some technical support just under $40.00 and the director was scooping up shares in the low $40s. It the stock blips back to those levels, I will most likely establish a position via covered calls as I have used that strategy successfully on this name in the past.

Finally, the beleaguered Walt Disney Company DIS saw a just over $2 million insider purchase in May. It was the first significant insider buying in the stock in years. I'll share more on Disney in my weekend trade idea coming up.

At the time of publication, Jensen had no positions in any securities mentioned.