In Thursday’s note to investors, JPMorgan strategists identified suppressed short selling and short covering as one of the main drivers of a “steady flow of support” for stock performance.
Short interest is now at its lowest level in six years across SPDR® S&P 500® ETF Trust (ASX:SPY) and Invesco QQQ Trust (NASDAQ:QQQ), the biggest equity ETFs that track the S&P 500 and Nasdaq 100, respectively.
JPMorgan strategists identified greater retail activity, greater regulatory scrutiny and the rising difficulty in maintaining short position against the buoyed market as the main suppressors of short sellers.
In turn, insider buying becomes more indicative of the stocks’ potential rally. Case in point, Metrick and Zeckhauser found in a 2003 study that insider purchases act as market outliers, outperforming the market by 11.2% annually. After all, fund managers, executives, and high stakeholders signal higher confidence in companies’ futures as they buy the shares under the belief they are undervalued.
These three stocks have shown such insider activity in recent weeks.
Priority Technology Holdings
Priority Technology Holdings Inc (NASDAQ:PRTH) is a fintech company that facilitates payment processing and point-of-sale systems for mainly small and medium-sized enterprises (SMEs). Additionally, Priority Technology offers data analytics, e-commerce payment solutions, and inventory management tools to brick-and-mortar retailers of all sizes.
On June 14th, John Priore, as a Director at the company, bought 598,187 common stock PRTH shares, worth around $2.13 million, at an average price of $3.56 per share. In Q1 earnings, the company reported $5.2 million net income vs $0.5 million net loss in the year-ago quarter. This performance, minus dividends paid to redeemable senior preferred stockholders, beat the estimated earnings per share (EPS) of -$0.12 vs reported -$0.1.
At the present price of $4.55, PRTH stock is nearly double its 52-week low of $2.62 and close to its 52-week ceiling of $5.07 per share. According to Nasdaq forecasting, PRTH average price target is $5.75 with the upper ceiling of $7. Interestingly, the bottom forecast is not too far from the current price, at $4.5 per share.
Disc Medicine, Inc.
Previously known as Gemini Therapeutics following a merger, Disc Medicine Inc (NASDAQ:IRON) is a clinical-stage biotech firm primarily focused on treating hematological (blood) disorders. This makes it a high-risk, high-reward stock typical of the biotech sector.
Disc Medicine has three main projects in its pipeline. Bitopertin to treat Diamond-Blackfan anemia (DBA) as a congenital disorder with a 40-year life expectancy of 75% afflicted. After the positive AURORA study and European Hematology Association (EHA) updates, Bitopertin is looking as a prospective drug heading into Phase 3 trials.
The biotech firm’s other two candidates are DISC-00974 for anemia of Myelofibrosis (MF) and DISC-3405 for polycythemia vera and iron overload disorders. Both drug hopefuls are still in early Phase 1 trials.
Co-founder and board member of Disc Medicine, Kevin Bitterman, while also serving on the boards of Akero Therapeutics (NASDAQ:AKRO) and Kinaset Therapeutics, purchased ~$8 million worth of IRON shares on June 17th. Likewise, Orbimed Advisors LLC and Ashiya Mona (Orbimed Advisors board member) purchased $3 million worth of IRON shares each.
All three instances of insider buys were at $36 per share. At the present price of $44.41, IRON stock is still far from its 52-week high of $77.60. The current Nasdaq forecasting consensus is $62.11 as the average price target, with an upper ceiling of $85 per share. This makes Disc Medicine one of top potential gainers.
Citi Trends, Inc.
Largely serving urban black and Latino communities, as 84% of the customer base, Citi Trends Inc (NASDAQ:CTRN) offers value-priced fashion apparel. Typically located in local communities adjacent to grocery and other value stores, Citi Trends buys upfront from manufacturers according to its designs.
In May and early June, Pleasant Lake Partners and Fund 1 Investments insiders bought CTRN shares worth $2.67 million, with purchase prices ranging from $22.4271 to $25.55 per share.
The company reported 3.7% year-over-year sales growth in Q1 earnings to $186.3 million. However, given the value-oriented pricing, Citi Trends came out with an operating $5.6 million loss (adjusted), although lower than the $7.9 million in the year-ago quarter. On the upside, the company holds zero debt and ended the quarter with $58.2 million in cash.
At the present price of $21.31, CTRN stock is significantly under its 52-week ceiling of $32.90 per share. Nasdaq’s forecasting puts the average CTRN stock price at $31, while even the low ballpark of $25 is above the current price level.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.