3 Undervalued Stocks With Heavy Insider Buying

Strong votes of confidence from upper management in the form of insider buying have revealed three stocks trading at compelling values that have lots of potential upside. After stock’s impressive rally, investors should look to these companies for finding value in this market.

The market has staged an impressive rally over the past few months after deep early losses incurred in the beginning weeks of 2016. The fears around the high-yield credit markets and other myriad “worst case” concerns about a hard landing in China or even a global recession have not materialized. Oil that was nearing $25 a barrel at the nadir of the descent has rebounded back into the mid-$40s. While not even near the over $100 a barrel price that existed for years, this rise has improved sentiment and stock prices in the energy sector as well as many emerging markets. It has also lowered the volatility in our markets as well.

One big tell that the market was overcorrecting early in the year was insider buying activity, which hit a multi-year high a few months ago when stocks were selling off. The fact that so many corporate directors and high-level management thought their equities were undervalued was a tip-off that things were not as bad as the market was portraying. It also looks like the correct view given the recent broad-based rally in the stock market.

However, after this big rise the market does feel more than fairly valued given we are in the fourth quarter in a row of declining profits within the S&P 500 year-over-year and the second quarter looks poised to run that streak to five. So, which stocks still look good to insiders despite the recent rally in the market? Well, after the deep bear market in biotech, which looks like it has recently ended, there is some significant insider buying still going on in the small and mid-cap names in that sector. Here are a few that look attractive to me at current levels.

Let’s start with Opko Health (NYSE: OPK), a biopharmaceutical and diagnostic concern down here in Miami that I have mentioned before and that continues to show strength after a recent and temporary setback. Insiders have bought over two million shares of this stock over the past six months in over five dozen different transactions. That buying continues and is mainly led by noted biotech billionaire and entrepreneur Dr. Phillip Frost.

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Positions: Long ARDX, LIFE, OPK

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