The past month has seen some hefty swings in the markets. The main indexes are down since 2022 began, although they ended January and started February with a couple of strongly positive trading sessions.
High volatility makes it difficult for investors to predict what’s likely to happen, and investors always crave predictability. Without it, the stock market is just a guessing game. But when markets are stable and predictable, investors can make more rational choices.
So what’s needed here is a clear signal to cut through the increased noise of recent volatility. One source of such a signal is the insider trades – the trades made by corporate officers, who have both access to the inner workings and data of their companies and a responsibility to bring home sound returns for Boards and shareholders. These investors don’t trade lightly, making their large-scale buys a clear signal that a stock may be bound for better times.
We can use the Insiders’ Hot Stocks tool from TipRanks to track the latest insider trades, sorting them by a variety of strategies. The tool makes it easy to find stocks that insiders are picking up, and makes it easy for investors to monitor the frequency and magnitude of those trades. Here are the details on two such stocks, that are showing both strong insider buys and support from the Street’s analysts.
Western Alliance (WAL)
First up is Western Alliance, one of the country’s best performing public bank holding companies. Western had over $39 billion in outstanding loans last year, along with more than $47.5 billion in total customer deposits. The company currently has some $56 billion in total assets. Western serves its customers online, and through 58 banking offices.
This company released its 4Q21 and full year results at the end January. At the top line, revenue was down sequentially in Q4 – but the full-year total of $2 billion was up more than 57% year-over-year. In earnings, the company reported $2.32 per share for the quarter and $8.67 for the full year; the quarterly result was relatively flat sequentially while the full-year result was up 77% yoy.
Turning to the insiders, we find that Western’s President and CEO, Kenneth Vecchione, purchased 5,600 shares in the days after the earnings were released. Vecchione spent over $548,000 for the stock.
On the analyst front, Wedbush 5-star analyst David Chiaverini sees this stock as undervalued, and priced at an attractive point of entry.
“WAL has demonstrated that it is well-positioned to grow rapidly in good times and bad, and we expect the company to continue to generate above-average growth in earnings, loans, and deposits, and accretes capital at a very high pace which results in strong TBV growth. WAL trades at 11.5x our 2022 EPS estimate, which is below peers trading at 12.1x despite WAL’s above-average growth outlook,” Chiaverini commented.
Chiaverini rates the stock an Outperform (i.e. Buy), and his $130 price target implies an upside of 32% for 2022. (To watch Chiaverini’s track record, click here)
Turning now to the rest of the Street, it appears that other analysts are on the same page. With 6 Buys and no Holds and Sells, the consensus rating comes in as a Strong Buy. In addition, the $134.67 average price target puts the upside at ~36%. (See WAL stock forecast on TipRanks)
NextEra Energy (NEE)
The second stock we’re looking at, NextEra, is the world’s largest electric utility holding company, measured by market cap; even after steep share price losses in January, the company has an impressive market cap of $151 billion. NextEra, through its subsidiaries, is a major producer of electric power, with a total of 58 gigawatts of generating capacity, including 34 gigawatts from renewable sources. The company boasts over 5.6 million customer accounts, and provides power for over 11 million Florida residents.
Being a mainly Florida-based power provider, NextEra sees highly seasonal demand patterns. Q4, comprising late-autumn and early-winter periods, shows lower demand due to Florida’s mild weather, compared to peak demand, due to high A/C use, in Q3. The upshot is, the company’s recent 4Q21 results showed a sharp sequential decline at both the top and bottom lines. Revenue came in at $5.05 billion, down from Q3’s $6.8 billion – but up some 20% year-over-year. EPS was mainly flat yoy, at 41 cents per share. While down from the 75-cent EPS in Q3, the result fit the company’s normal seasonal pattern.
NextEra’s biggest recent news was not the earnings. Rather, it was the announcement that long-time chairman and CEO Jim Robo is stepping down and will be succeeded by John Ketchum. Ketchum has a 19-year history in company management, and his appointment to the top spot is effective as of March 1.
Changes in upper management frequently correlate with insider buying, and this example is no exception. Outgoing CEO Jim Robo acquired 64,691 shares, paying $4.99 million for them. Company EVP and SFO Rebecca Kuwaja also spent $502,810 on 7,000 shares.
BMO analyst James Thalacker notes NextEra’s sharp decline in January, and points out that it compares unfavorably to the company’s previous three years of outperformance. It is only one month, however, and Thalacker believes the company retains a sound overall position. He described the company’s CEO transition as ‘part of the normal succession planning process,’ and says of the firm’s path forward: “While it is difficult to call an inflection in this market dynamic, we believe NEE’s fundamentals remain unchanged given the company’s ability to deploy capital at both the utility and NEER into an accelerating renewables environment.”
It should be unsurprising, then, that Thalacker rates NEE an Outperform (i.e. Buy). His $101 price target indicates the potential for ~30% upside growth in the year ahead. (To watch Thalacker’s track record, click here)
It’s clear from the consensus rating, a Strong Buy based on 10 Buys and 3 Holds, that Wall Street generally agrees with the bullish views on this one. With a share price of $77.73 and an average price target of $93.54, NextEra boasts ~20% upside for 2022. (See NEE stock forecast on TipRanks)
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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.