I'm Getting All 'Nerdy' Today on Two Underdog Stocks I Like
Recent insider purchases tell a story about these small cap names. Plus, the market lowdown.
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In this column I will highlight two stocks in my portfolio that have seen some recent insider buying in what I continue to feel is a substantially overbought market. I will finally touch on gold, oil, and the gross domestic product.
First, the stocks.
I will start with Nerdy, Inc. NRDY. This online learning company has been one of the biggest laggards in my portfolio so far in 2024. I have mitigated the losses by employing covered calls to establish the position. But the stock’s performance has nonetheless been disappointing.
The company is currently focused on increasing its market share in the K-12 population. Nerdy posted disappointing second-quarter results and provided reduced forward guidance in early August. Three things are keeping me in this stock, at least for another quarter or two. One, the company has promised to return to durable and profitable growth by year-end. Two, Nerdy has a good slug of net cash on its balance sheet to get it through this transition. And three, the CEO has stepped up and purchased over $9.5 million worth of stock in August so far.
Next up is GEO Group, Inc. GEO, which has been kinder to my portfolio with a gain of nearly 25% in 2024. But the shares have pulled back some 20% since mid-July. The company manages and operates secure facilities, processing centers, and community-based reentry facilities in the U.S.
The company recently did an overdue restructuring of its balance sheet and the stock is more than reasonably valued based on fiscal 2025 expected earnings per share. The GEO Group would also be a significant beneficiary of a change of administration come November. The executive chairman of the company might have the same opinion based on the fact he has added more than $3 million to his stake in the company so far in August. I added a bit of exposure to GEO this week via new covered call orders.
Debt and Taxes
“There is no such thing as an unbalanced budget. You pay for it either in the form of taxes, or indirectly in the form of inflation or debt.” – Milton Friedman
Speaking of November ...
Gold hit another all-time high yesterday. The Biden Administration and Congress continue to spend like drunken sailors, so it's no surprise. And my apologies to any frequently inebriated former Navy men (and I thank you for your service).
Snark aside, let's end this with a recap of what just happened on the market and economy:
Equities broke an eight-session win-streak on Tuesday, but only barely as all the major indexes fell between 0.15% and a third of 1% on the day. Oil dropped just less than 1% and the yield on the 10-Year Treasury was off nearly seven basis points on Tuesday. I am still somewhat shocked how the majority of investors continue to ignore most market risks, especially around the deteriorating economy.
After posting better than 4% gross domestic product growth in the back half of 2023, growth clocked in at half that rate in the first half of 2024. The Conference Board now sees just 0.6% GDP growth in the third quarter on an annualized basis. The Atlanta Fed’s GDPNow projects a faster pace of 2% in the current quarter. But that expectation is down from 2.9% just one week ago thanks to tepid Industrial Production and July existing home sales readings.
Finally, keep watch for the revised jobs numbers later this morning.
At the time of publication, Jensen was long GEO and NRDY.
