It can be a good idea for traders and long-term investors to keep tabs on what insiders (think directors, the CEO, CFO, and a whole bunch of other executives) are up to when it comes to their own shares. Undoubtedly, there may be a ton of reasons as to why an executive would sell shares of their own company’s stock. However, there’s only one reason if they’re buying more on the public markets, especially if they’re already being compensated with shares in the company.
In any case, this piece will check out two firms that have encountered notable insider buying activity of late. And while they may be indicative of undervaluation, I still think it’s important to do one’s own research and analysis before buying based on what someone else is doing.
As always, insider buying is just one data point in many that self-guided investors should investigate before loading up on shares of a company. Either way, here are two names that I also view as reasonably priced (even a tad on the cheap side) and potentially timely as we head into the year’s end.
ConAgra Brands (NYSE:CAG) has cratered close to 58% from its early-2023 peak, so it’s not a mystery as to why an insider would want to buy more shares at historically depressed multiples. Reportedly, some insiders, including directors, have been buying up this month.
Of course, there are serious challenges that the consumer packaged goods firm is facing, but with a robust portfolio of brands and, perhaps more importantly, a strategy that could power a recovery in shares, I wouldn’t be hesitant to add to a position, even though they’ve been a dangerous falling knife since the year began.
The stock now boasts a huge 7.74% dividend yield and a depressed 9.8 times trailing price-to-earnings (P/E). For fans of buying dips, CAG stock really does stand out as a potential play to consider, even as consumers continue to reduce their spending on snacking. Of course, the GLP-1 drug trend could act as a long-lived headwind facing sales, but with valuations and expectations floored, I think it’s time to reconsider the contrarian trade while shares are going at multi-year lows.
Though time will tell if the tides will turn in the new year, I do view recent insider buying as a bullish sign that shares have fallen too hard, too fast, and maybe offer incredible value. As for the dividend, I think it’s mostly secure, but I do acknowledge that the payout ratio is starting to get stretched.
CarMax (NYSE:KMX) is another fallen name that’s looking too cheap going into November. With insiders reportedly scooping up shares after the latest implosion, I’d argue that the dirt-cheap multiple is a massive reason why. At the time of this writing, KMX shares go for 12.4 times trailing P/E after shedding more than 71% of its value from peak levels.
