On Friday, I talked a bit about the insider buying patterns. I also included a chart that showed you the Top 10 Insider purchases of the last ten days. Today, I want to update this chart because of one new entry… and what you might learn.
As I’ve noted, we’re looking for CEOs and CFOs who have purchased at least $100,000 of their shares. In these cases, they are putting THEIR money on the line. Sometimes they’re buying more stock because they think it will go higher off recent gains.
Other times, they’re buying because they believe the stock is undervalued after a recent selloff. The only thing that matters – as famous investor Peter Lynch once said — “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.”
We’re looking at Insider Buys based on SEC Form 4. These are the documents they must purchase when they buy or sell their stock. A quick scan of the data provides this list.
Now, one stock sticks out. It wasn’t on the list Friday. Oric Pharmaceuticals (ORIC). The CEO bought 350,000 shares at an average of $4.92 on March 23. On Monday, shares rallied more than 16% on the news.
It’s quite interesting because this stock has experienced dramatic insider selling over the last year. I’d argue that CEO Jacob Chacko was calling a bottom on the stock. The chart below shows that since March 2021, insiders have sold more than $32 million in stock.
As I dig through those trades, I find that many shares sold at more than $25.00 per share. So, the stock has effectively fallen by 80% since many insiders sold shares. This is significant because of the value of the buy: More than $1.7 million. I’m interested because anything over $100,000 is significant in my research. So, that checks a box.
That big downturn of more than 80% is also significant because it signals that the executive – based on the size of the stock – is willing to wager A LOT of his money on what he considers to be a bottom for ORIC shares.
There’s one more thing that I want to see. Most people aren’t spending a lot of time looking at the options chains of these small stocks. This is a microcap stock with about $200 million market capitalization. So, large institutions aren’t going to be actively trading this stock.
I looked out to the April, May, and later options chains. And I saw some small – barely noticeable – buying on the $5 call today. There was also some buying at the $7.50 level.
April 14 is significant because it falls within a 30-day window of when I want to buy and trade biotech stocks with insider buying. But why is the speculation there with short-term options? There had to be a catalyst.
What’s To Come For ORIC Pharmaceuticals
I dug even deeper into potential events ahead of April 14, a period that suggests on the options chain that the stock might move up or down 22.3% based on volatility and the options straddle price.
What I found is that ORIC Pharmaceuticals will be hosting multiple presentations at the 2022 American Association for Cancer Research (AACR). Three presentations over three days during the April 8 to 13 event. They are:
- ORIC-533 oral presentation and poster presentation to highlight potential of small molecule inhibitor of CD73 as a treatment for multiple myeloma
- ORIC-114 poster presentation to highlight compelling brain penetrant properties of an irreversible inhibitor designed to selectively target EGFR and HER2 with high potency against exon 20 insertion mutations
- PLK4 program poster presentation to introduce novel, highly selective inhibitors targeting a synthetic lethality approach as a potential treatment for breast cancer
Now, I don’t know what most of this means, but I do like the idea of buying and holding the stock through the event. If one of these presentations or multiple presentations is very positive for the stock and a possible rebound, we could see stock upgrades.
The worst case scenario, I buy the stock and set a 7% trailing stop. It’s possible that the stock trades higher ahead of the event and sells off on the day of presentation. Regardless, I’m content to manage my risk and take a chance on a CEO calling a bottom on this stock. We’ll continue to talk insiders this week.