Bulls, take note. We had a rough period, but now the S&P 500 has bumped up to another record high, and the NASDAQ is hovering just below its all-time record. Markets are trending back up after a ‘September swoon,’ giving investors an opportunity to buy in at the start of an upward cycle.
But the trick is, how to recognize the stocks that are set to gain? That’s no mean trick, really, as we have a number of headwinds threatening to push stocks back down. For investors looking to find solid returns, some bullish signal is in order.
Fortunately, the markets never lack for signals that investors can learn to recognize. And one of the more interesting of those signals comes from the insiders. These are the corporate officers, from ‘inside’ the companies they run, with access to a wide range of otherwise privileged information, from corporate business plans to the latest sales figures, info that the average retail trader just won’t have – but info that can inform anyone’s trading decisions.
Insiders are human, like the rest of us, and it’s natural for them to trade their own company stock on the inside info they possess. To keep the trading fair, Federal regulators require that insiders regularly publish their trades, and the rest of use can use that trading activity as a signal in judging stocks.
It’s a popular signal to follow, and the TipRanks Insiders’ Hot Stocks filter is a popular tool for following insider trades. We’ve used it to pull up two 'Strong Buy' stocks that have seen recent and informative stock buys from insiders. Here are the details.
Sight Sciences, Inc. (SGHT)
We’ll start with a medical device company in the ophthalmology/optometry segment. Sight Sciences has two products on the market, the OMNI surgical system, an implant-free device used in both cataract surgery and the treatment of glaucoma, and the TearCare system used in the treatment of dry eye disease. These are the world’s most prevalent eye conditions, and present a substantial patient base.
This company got its start back in 2011 but is new to the public markets, having held its IPO just this past summer. The initial offering saw 11.5 million shares of common stock go on the market, and the underwriters exercised their own option to buy 1.5 million shares. The initial price was $24 per share, higher than the $20 to $23 price range in the original filing, and the company raised $276 million in gross proceeds from the event. SGHT shares closed above $33 on its first day of trading, and while it has slipped 22% since then, the company still boasts a market cap of $1.23 billion.
Sight Sciences has seen some recent news headlines of interest to investors. Earlier this month, the company published data from the OLYMPIA study of the TearCare system, intended to assess the clinical impact of using eyelid-worn medical device technologies on key MGD (meibomian gland dysfunction)-related signs and symptoms of DED. The 135 patient study met its primary and secondary endpoints without adverse events.
On the legal front, Sight Sciences in September filed a patent infringement lawsuit against competitor Ivantis. The suit claims patent infringements on several devices for reducing intraocular pressure in the eyeball, the chief feature of glaucoma.
And back in August, Sight Sciences reported its first quarterly results as a publicly traded entity. The company showed $12.5 million in top line revenue for 2Q21, for a year-over-year gain of 258%. Of that total, $12 million came from Surgical Glaucoma sales, a yoy gain of 263%. The company reported its gross margins expanded to 82% in the quarter.
Turning to the insiders, Encrantz Staffan, a Board member of Sight Sciences, bought 527,048 shares, paying out $12.65 million for the block. He now controls $95.76 million in SGHT stock.
Staffan is not the only one showing confidence here. Piper Sandler’s Matt O’Brien has high expectations too.
“The company’s unique Omni technology for treating glaucoma addresses a $9B market opportunity globally,” writes the 5-star analyst. “With only one of two labels to treat the largest segment of this market (stand-alone patients), we see a long runway for revenue growth over the next several years. Augmenting that top-line outlook, in a few years, should be a bigger contribution from the company’s TearCare product. Collectively, we anticipate SGHT will deliver some of the most robust revenue growth in the coming years, elevating the scarcity value of the name.”
In line with these comments, O’Brien gives the stock a rating of Overweight (Buy) and his $44 price target implies a one-year upside potential of 69%. (To watch O’Brien’s track record, click here.)
The Strong Buy consensus rating here is based on 4 recent analyst reviews, breaking down 3 to 1 in favor of Buy over Hold. The shares are priced at $25.96 and their $43.50 average price target suggests the stock has room for 68% appreciation in the year ahead. (See Sight Sciences’ stock analysis at TipRanks.)
Apollo Endosurgery, Inc. (APEN)
The second stock we’re looking at, Apollo, is another device-based medical tech company – in this case, the focus is on the gastrointestinal system. Apollo works to develop and market less invasive therapies and visualization devices for gastrointestinal scoping and treatments. The company’s devices manage issues from defect repairs to obesity intervention, using methods short of invasive surgical procedures. Apollo aims to reduce complication rates and healthcare costs while improving patients’ outcomes.
The company has a line of products on the market, in 75 countries. Products include the Overstitch endoscopic suturing system and the Overstitch Sx, as well as the ORBERA intragastric balloon and the X-Tack Endoscopic HeliX Tacking System.
Several of these products, the Overstitch and Overstitch Sx as well as the X-Tack, allow physicians to suture injuries or repair gastrointestinal defects through a flexible endoscope, avoiding the need for abdominal surgical incisions. The Orbera gastric balloon fills the niche between obese patients whose condition can be managed without surgery and those who require surgery.
These products brought in $16.6 million in revenue during 2Q21, a new company record in quarterly sales. The company reported that Endoscopic Suturing System (ESS) and Intragastric Balloon (IGB) revenue saw significant growth from Q1; ESS grew 23% sequentially, and IGB grew 16%. Looking forward, Apollo’s preliminary Q3 numbers predict revenue between $16 million and $16.4 million – above the consensus estimate of $14.4 million. The official Q3 numbers will be released on November 1.
Beforehand - today (October 22), in fact – as part of the “Top 10 Papers at IFSO” virtual session, the company will present the primary efficacy and safety endpoints data from the MERIT study of the Overstitch ESS used to perform a minimally invasive endoscopic weight loss procedure, compared to a medically monitored regimen of diet and healthy lifestyle. In June, the company announced that based on a preliminary analysis, the study had achieved its primary endpoints.
On the insider front, two of Apollo’s major shareholders made informative buys in recent days. Kent McGaughy, a 10% owner and a member of the Board, purchased over 683,000 shares for $5.3 million, pushing his total stake in the company to just under $34 million. At the same time, an institutional investor, CPMG Inc., also made a $5.3 million purchase of APEN shares. CPMG also holds nearly $34 million worth of APEN.
Noting that Apollo’s Q3 preliminary data beat his firm’s expectation, Piper Sandler analyst Adam Maeder wrote, “APEN elected to raise its FY ‘21 sales guidance to $63-64M (+50-52% y/y) given the underlying momentum in the business. Separately, APEN announced that: (1) it made its De Novo 510(k) submission for ESG and bariatric surgery revisions—putting likely FDA approval timing in 2022; and (2) we will now get the much anticipated initial data readout from the MERIT study on October 22 at a virtual meeting session hosted by IFSO. In short, we are encouraged by APEN’s Q3 performance and we view the company’s operational updates to be positive.”
The 5-star analyst rates the stock as Overweight (Buy) and has a $14 price target to imply a 57% one-year upside potential. (To watch Maeder’s track record, click here.)
Turning now to the rest of the Street, where Apollo has a unanimous Strong Buy consensus rating, based on 3 positive reviews on record. Shares are priced at $8.92 and the $14.33 average price target indicates room for a 61% upside from that level. (See Apollo’s stock analysis at TipRanks.)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.