There are many reasons for a stock price to fall, perhaps more for an insider to want to sell, but there are only two reasons for them to buy: when they think the shares are deeply undervalued or about to head higher. Because there is substantial institutional and analyst interest in names like Darling Ingredients Inc. (NYSE: DAR), Alpha Teknova, Inc. (NASDAQ: TKNO), and Read Good Food (NASDAQ: RFG), there is a good chance that both conditions are true for these stocks.
Alpha Teknova, Inc. finally hits the bottom
Alpha Teknova suffered a substantial post-IPO letdown but has finally hit bottom. The market first touched bottom earlier this year and has since confirmed and begun to move higher. The latest action has the market up about 50% from the recent low, a low supported by insider activity. Insiders have been buying this stock off-and-on since the IPO, but their activity spiked in Q3.
Four insiders made four purchases that were followed by a fifth in Q4. Together, they own about 17.2% of the holdings, and an activist investor is involved. Telegraph Hill Partners is the company's controlling shareholder, with more than 60% of the shares outstanding. Telegraph Hill Partners is a VC firm focused on helping life sciences and biotech companies meet their goals. Alpha Teknova is a life sciences research supply company struggling to gain traction.
Institutions own a small 15% of the stock, but their holdings have grown in 2023, and the analysts have begun to issue targets. Insidertrades.com tracks a single analyst rating initiated by KeyCorp at Sector Weight this year. Shares of the stock moved above the 150-day moving average this week and may have reached a significant turning point.
Darling Ingredients has a 45% upside at minimum
If the analysts are correct, Darling Ingredients has a minimum 45% upside ahead of it. The grouping includes ten ratings issued in 2023 and a downward trending price target, but even the lowest price target is still 45% above the current action. The lowest price target of $65 was set in early November following the recent earnings release and is tagged to an Outperform rating. The consensus sentiment is Moderate Buy, with a target of about 84% above the recent action. Notably, the high target is the most recently adjusted and is still more than 100% above the current price action.
That may be why the insiders are buying. Five insiders made five purchases in November to counter a selling trend in the year's first half. The buying coincides with a market bottom a few weeks before the release. Institutions are also major holders of this stock, with 90% of the shares in their portfolios. The institutional holding includes some fund activity but is broad and aligns with the thesis that this stock is undervalued and primed to rebound in 2024. Darling Ingredients produces a line of bio-formulated ingredients for food, pet food, healthcare and industrial end markets.
Real Good Foods to double over the next 12 months
Real Good Foods is another stock suffering from post-IPO blahs, and the selling is overdone. While analysts have trimmed their targets over the past year, they continue to rate it a Buy, and the recently set lowest price target is more than 100% above the stock market action. That target was set by Truist, which rates the stock at Buy. Real Good Foods is a health-and-wellness-focused company providing high-protein, low-fat and gluten-free frozen foods at major retailers nationwide.
Real Good Foods has four insiders buying in Q3, including the CEO and CFO, to bring their holdings to about 25%, including non-controlling shareholders. Institutions own another 16%, and they have also been buying. Institutional activity is light but spiked in Q4 following a string of better-than-expected quarters. Shares of this stock may be at their lowest, but the market has yet to signal the rebound.
