Insiders Are Buying These Off-the-Radar Names. So Am I.
These two stocks appear promising plays amid this overbought market.
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Bad news just seems to roll off this market. Reciprocal tariff suspensions expiring in four weeks? Not a problem. The IMF cutting global growth projections and U.S. growth estimates again due to trade tensions? Same. Riots in Los Angeles? Just noise.
Frankly, I think if the Four Horseman of the Apocalypse were unleashed on Earth, it might trigger just a brief selloff in the markets before equities rebounded a few days later.
That said, I am being very selective about adding new money into this overbought market. But I did make two recent additions to my portfolio. Neither company is well known, but the stocks appear to be offering some rare value. Both equities have seen some recent insider buying as well.
First, I have taken a new position in Sonoco Products Company SON via covered-call orders. This is as about as a mundane business as one can find. The company produces various types of packaging products to the consumer and industrial end markets. These include paper, metal and consumer packaging. The company has scores of manufacturing facilities across some 40 countries.
Late last year Sonoco acquired European metal food can packaging company Eviosys for $3.8 billion. To help pay for this acquisition and to reduce debt, a few months later Sonoco divested itself of its thermoformed and flexible packaging and graphics businesses for just over $1.55 billion after tax. Management believes it can wring over $100 million in synergies from the integration of Eviosys over the next few years and is committed to continue to reduce the leverage on its balance sheet.
Given the current trade and tariff tensions it is not surprising to see the shares down 25% from their highs last summer. That said, the stock does seem to have formed a bottom. Shares are quite cheap at under eight-times projected fiscal 2025 profits and sports a dividend yield of 4.6%. Sonoco has paid a dividend continuously since 1925. The company’s CEO also added just over $1.7 million to his stake in the company in May, which is a nice vote of confidence in Sonoco’s longer-term prospects.
Up next is a small E&P company called Amplify Energy Corp. AMPY, based out of Houston. The shares took a better than 50% hit after an announced merger with Juniper Capital Advisors, L.P. They have behaved better since that transaction was called off altogether. The stock has also benefited from the rise in oil prices so far here in June. The company is reducing leverage at a solid clip. Earlier this month, an Amplify director purchased just $1 million worth of stock. The shares are also trading at a substantial discount to proved reserves. Amplify Energy is nicely profitable and trades at just under five-times trailing earnings and seems to merit at least a small trade here.
At the time of publication, Jensen was long AMPY and SON.
