The markets are stretched. Investors are fretting about Friday’s quadruple witching. And China is blowing up entire buildings because one of their largest property lenders is about to go full Lehman Brothers. Oh, boy, what a week to be alive.
When the world is crazy, I always turn to one special group of people for clues on what stocks to purchase. If you’ve followed my writing for long enough, you know that I’m paying special attention to the purchases of Chief Executive Officers and Chief Financial Officers. That’s right, CEOs and CFOs. What are they doing with their own money? I always ask this question.
I’m not interested in the options that they are executing. I’m not focused on anything related to charity. Nope. I want to know on the SEC Form 4 that they have pulled money out of their own accounts and put their cash to work. That they purchased their own stock. That they stand behind the company. It’s most likely that they believe the stock to be undervalued. And, who knows the balance sheet better than the CEO or the CFO? No one… that’s who.
He’s Buying OPKO Again
I do like to focus on biotech stocks the most when the insiders put their money to work. But there’s no biotech company that gets my attention more these days than OPKO Health (NASDAQ:OPK). Why? Because Phillip Frost – Chairman and CEO of the company – has been buying the stock in droves over the last few months. Yesterday, he bought $346,334 in stock. Last month, another $368,912 in stock. He had a $723,648 purchase three months ago, and $1.45 million four months ago.
After yesterday’s purchase, shares popped 6.1% today. And he’s happy to keep gobbling it up as the stock continues to stay range bound between $3.00 and $4.00 over the last few months. Considering that Wall Street has an average price target of $6.00 – that price represents an upside of 61%.
The diagnostic and pharmaceutical firm looks cheap still. It trades at a price to book ratio of just 1.45x, while trading at a price to revenue of just 1.25x. On two occasions the stock has spiked to the $5.60 level or higher since the COVID crisis started. A move back is justified at this valuation and the positive buying pattern of the top insider.