As concerns over the true health of the economy weigh on investors’ minds, many investors are looking to move into safe stocks. However, if you’re playing the long game, you might have some speculative cash to park in stocks with high upside. If that’s the case, you can consider stocks with heavy insider buying.
Insider buying refers to shares that company executives or major shareholders buy. There are times when this activity is part of a compensation agreement, but when you see outsized buying activity over a period of time, it’s something to watch closely. While insiders may sell a stock for any number of reasons, they typically only buy it if they believe the stock is undervalued. This is common in small-cap stocks that may not get much attention from analysts.
That’s the case with the three stocks listed here. Each of these small-cap stocks may have catalysts as interest rates begin to move lower.
1. RE/MAX: Addition by Subtraction
RE/MAX Holdings Inc. (NYSE: RMAX) is one of the most well-known real estate brokerage services franchisors. The company’s July sector overview highlighted several metrics pointing to a tepid housing market recovery. July home sales were up 3.8% from the prior month, and the median price of $425,000 was 1.2% lower. More importantly, it appears that inventory is starting to come back online in the 51 markets the company surveys.
However, that may not be the only reason a major shareholder has made five different purchases of RMAX stock in the last 90 days. As the housing market has gotten tight, many realtors are leaving the industry. And that has analysts liking what they see from a leaner organization.
RMAX stock is up 39% in the last three months but is still down 18% in 2024. The RE/MAX analyst forecasts on MarketBeat have a consensus Reduce rating. However, the consensus price target of 11.9% shows a 9% upside.
2. Tile Shop Holdings: Topped the List of Insider Buying in the Last 90 Days
Tile Shop Holdings Inc. (NASDAQ: TTSH) has had 30 separate incidents of insider buying in the last 90 days. While that buying has come from one major shareholder, it still indicates conviction in the company’s future.
Tile Shop is a specialty retailer of natural stone and man-made tiles, maintenance materials, and related accessories. As you would expect, the company’s fortunes are heavily linked to real estate stocks. TTSH stock is down 31% from its all-time high in 2022. Not only is the housing market slow, but many people who were going to remodel have already done so.
But that could change quickly if the housing market picks up. The Tile Shop isn’t covered by any analysts so investors are largely on their own. That’s not unusual for a micro-cap company with a market cap of only $260 million. However, the company’s revenue is above 2019 levels and it’s now profitable with a profit margin of 66%.
3. Lindblad: A Bet That Those That Can Travel Will Travel
You might be surprised to see Lindblad Expeditions Holdings Inc. (NASDAQ: LIND) on a list of stocks with high insider buying, but three separate insiders made five purchases of the stock in the last 90 days, making it worth a closer look.
The company hosts marine expedition adventures and travel experiences. It’s one of the leaders in the adventure tourism industry and has a strategic partnership with National Geographic through 2040. That tells you a little about Lindblad’s target audience. And if you’re going to invest in the company, it’s because you believe that those consumers will still be willing to invest in adventure travel.
The good news is that, even with facing difficult comparisons, Lindblad’s revenue is up year-over-year. And with interest rates moving lower, it could continue to keep discretionary dollars flowing. The bad news is that the company isn’t profitable yet and is not likely to be in the near future. Nevertheless, analysts are bullish on LIND stock with a price target of $13.25, which forecasts a 42% upside.