I'm Eyeing These Two Stocks Amid Rare Insider Action
These stocks have seen some recent love, so here's how I'm approaching them.
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Equities rebounded in trading on Friday thanks to some dovish commentary from a Federal Reserve member. This boosted the probability of a rate cut in December to near 70% according to the futures market, from 40% on Thursday. It was not an impressive rally, outside of small caps as the Russell 2000 climbed 2.8% on Friday. Nvidia (NVDA) continued to decline, despite blow out Q3 results and guidance after the bell on Wednesday. Cryptocurrencies also couldn’t get a bid and are in a bear market.
Valuation metrics still point to a significantly overbought equities market viewed from a historical lens. One of many bearish signs for investors is the anemic level of insider purchases, compared to insider selling. But we're still seeing a few interesting situations where insiders are stepping up to the plate. I highlighted one of these around Upstart Holdings (UPST) on Sunday’s covered call trade idea. In this article, I tee up two other stocks seeing a vote of confidence for insiders.
I have had a small position in Sonoco Products Company (SON) since early this summer. The holding hasn’t done much in that time and I have already rolled the options on this covered-call position once already. Sonoco is in an important but boring business. It is a global provider of packaging products to consumer and industrial end markets. The company is trying to transform itself from a jack-of-all-trades packaging company to one with a few big, core business segments. Toward that end, Sonoco made a major acquisition in Europe late in 2024.
While the stock has drifted down a tad since I first established a holding in the stock, insiders are maintaining their faith in Sonoco’s transformation as company officers added more than $900,000 to their stakes in October. Sonoco is a slow growing enterprise in a mundane business but should be able to deliver earnings growth in the mid- to high-single digits over the next few years while it pays down debt from its recent acquisition. But that seems more than priced into this equity that trades for just over seven times earnings and sports a just over five percent dividend yield.
I haven’t pulled the trigger yet with Butterfly Network, Inc. (BFLY), but likely will establish a small position in this manufacturer of portable ultrasound imaging solutions. I have always been intrigued with the company’s potential but that has not been realized due mainly to poor execution. Butterfly Networks has just brought in a new CFO and CTO to help right the ship, and the company is moving toward offering more higher-margin software and focusing on recurring revenue streams. The company’s balance sheet is in firm shape and an insider purchased just under $7 million worth of shares last week.
At the time of publication, Jensen was long SON and UPST.
