Strong Insider Buying Supports the Bullish Thesis for These 2 Stocks

Apr 4th, 2022 10:59 EST

A quick look at the charts shows just how volatile this year has been for markets. It looks something like a carpenter’s saw, with a jagged-toothed pattern, trending down and then back up. The key to the pattern is, volatility has increased this year. Uncertainty is rising, and it’s getting more and more difficult to predict where the stock market will go.

What the retail investor needs is a clear signal, some sign writ large and easy-to-read, to point the way forward. We can start with the insiders. These are corporate officers, whose positions put them in place to know what’s going on behind the scenes with their companies . This is vital knowledge, that investors can use to inform their own trading.

The Insiders’ Hot Stocks tool, from TipRanks, makes the patterns of insider buying easily accessible. Combine that with some of the other frequently used signals – the consensus view of Wall Street’s analysts, the average upside potential, and you can quickly locate the stocks that have a clear bullish story.

So let’s get started. We’ve pulled up the details on two stocks that show a combination of strong insider buying and plenty of love from Wall Street.

DoubleVerify Holdings (DV)

If there’s one thing that the corona pandemic crisis proved, it’s the ongoing need for digital security. DoubleVerify has known that for a decade or more – the company specializes in creating trust in digital advertising through a combination of fraud identification and brand reputation building. The company was a pioneer in digital ad verification, and today provides a wide range of media authentication services for customers in a variety of businesses, including financial services, telecom, retail, automotive, travel, and pharmaceuticals.

While DoubleVerify has been in business since 2008, it only went public last year. The company held an IPO in April of 2021, a successful launch of more than 13.33 million share into the public domain. The initial price rage was expected at $24 to $27; the stock opened at $35, and closed its first day at $36. DV raised approximately $360 million in new capital through the IPO.

In the past few years, DoubleVerify has taken frequent steps to boost its footprint through smart acquisition and partnership moves. In October of 2018, DoubleVerify announced a partnership with Twitter, for the authentication of video ads. That partnership was expanded in August of last year, when DV teamed up with the Twitter company MoPub to provide fraud detection, protection, and reporting. MoPub handles ad requests between advertisers and more than 1.5 billion addressable users worldwide.

Following that, in September of last year, DoubleVerify partnered with TikTok to measure viewability and invalid traffic. DV will offer advertisers on TikTok a range of services, including data validation and campaign optimization. And on the heels of the coup, DV in November 2021 completed an agreement to acquire the contextual targeting platform OpenSlate in a cash and stock transaction valued at nearly $150 million.

All of this has had a predictable impact on DV’s financial results. In 4Q21, the most recent reported, the company showed $105.5 million at the top line, a company record and up 35% year-over-year. DV has reported 4 quarterly results since its IPO, and showed sequential revenue gains in the last three of them. For the full year, DV reported a 36% y/y gain in revenue, to reach $332.7 million.

On the insider front, DV’s CEO Mark Zagorski made the most recent ‘informative buy.’ He picked up over 19,800 shares, paying over $508K for them.

Covering DV for JMP Securities, analyst Andrew Boone is also bullish. He writes: “With difficult comps across digital advertising and macro risks growing, we believe DoubleVerify has a highly defensible business as it charges based on impressions (not on ad spend or pricing) and has multiple near-term catalysts ahead as TikTok continues to ramp, Twitter comes online in 1H22, and it cross-sells OpenSlate across its 1K+ advertiser partners.”

“This as we believe its opportunity is underestimated (without including its ability to offer performance-enhancing products like Authentic Attention and Custom Contextual) as 61% of its 176 client wins in 2021 were greenfield while 58% of the top 700 advertisers do not work with DoubleVerify at year-end,” the analyst added.

To this end, Boone puts an Outperform (i.e. Buy) rating on DoubleVerify’s shares. His price target of $41 implies an upside of ~54% for the year ahead. (To watch Boone’s track record, click here)

Overall, the 8 recent analyst reviews on this stock break down to 6 Buys and 2 Holds, for a Strong Buy analyst consensus rating. DV shares are priced at $26.55 and the $33.75 average price target suggests ~27% one-year upside potential from that level. (See DV stock forecast on TipRanks)

LCI Industries (LCII)

Next up, LCI Industries, is a major name in the RV niche. This is another niche that greatly benefited from the COVID crisis, as people went looking for recreational activities that would work in tandem with smaller groups and social distancing. RVing, getting to the outdoors in a self-contained unit, fit the bill, and LCI Industries has seen its revenues grow steadily since bottoming out in the second quarter of 2020.

The company earned those revenues through the manufacture of RV’s and accessories. On its own, and through its subsidiaries, LCI Industries offers RV steel chassis and components, as well as the interior fittings for beds, kitchens, seating, lighting – if it goes in an RV, this company can produce it. LCII also has its hands in the light truck accessory, utility, and trailer line; the recreational marine niche; and even in the passenger railway industry.

By the numbers, LCII sees approximately $4.47 billion in annual sales, and has generated a 22% 5-year revenue CAGR. Earnings have also grown fast, at 16% annual CAGR over the past 5 years. The $1.2 billion that LCII reported in 4Q21 was a company record, and up a robust 55% year-over-year. Diluted EPS came in at $3.22, for 69% y/y growth.

This solid performance backs up the company’s common share dividend, which was declared in February at 90 cents and paid on March 25. With an annualized rate of $3.60, the dividend yields 3.3%.

This company’s insiders have not been shy recently about picking up shares. In the last few days, there have been two million-dollar buys from corporate officers. First, Jason Lippert, President and CEO, spend just over $1 million to buy 9,265 shares. And second, James Gero of the Board of Directors, spend $1.055 million to buy 10,000 shares.

Company officers are not the only bulls here. 5-star analyst Michael Swartz, from Truist, sees this firm in a solid position going forward, writing: “We believe that LCII offers limited earnings downside risk from here given the favorable pricing/cost dynamic that should hold for the better part of 2022, more diversified business mix (~50% of sales from motorized RV, marine, aftermarket and other industries), potential content/mix benefit from the unfolding trade-up dynamic discussed above, organic share gains stemming from supply chain disruption, improving aftermarket profitability and the annualized contribution from acquisitions completed during 2021 (+$320mm in consolidated sales).”

“Based on our updated RV industry shipment estimates for 2022/2023 (+1%/-10%), we believe LCII can AT LEAST maintain 2022 sales levels into 2023,” Swartz summed up.

These comments support Swartz’s Buy rating on the stock, and his $165 price target indicates potential for 52% upside going forward. (To watch Swartz’s track record, click here)

While this industrial company has slipped under the radar somewhat, and only picked up 3 analyst reviews recently, they all agree that the stock is a Buy, for a unanimous Strong Buy consensus rating. The shares are priced at $108.54 and their $160.67 average price target implies a 48% one-year upside potential. (See LCII stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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