Insiders Are Buying These Two Stocks. So Am I
Amid the wild market of yes-no tariffs, Iran tensions and more, I'm hunting for covered-call opportunities.
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Equities rebounded across the board last week. The Nasdaq broke a five-week losing streak and led the advance with a gain of 1.5% in the holiday shortened trading week. I continue to believe investors are being much too complacent within an overbought market. Last week, the Volatility Index, declined despite the SCOTUS ruling against a large chunk of the administration’s tariffs and the POTUS announcing new global tariffs following the decision. Not to mention, potential war with Iran seems closer by the week.
But when the music is playing you have to dance every now and again. And after Friday’s monthly expiration date for the month, I have more additional dry powder on selective opportunities in the market via covered-call holdings for the additional downside protection this simple strategy provides. In today’s column, I will highlight a couple of names I will be putting some new money into this week. Both names have also seen recent insider buying, with is a nice additional vote of confidence.
Let’s start with DraftKings (DKNG) , which operates a sports book, online casino, and daily fantasy sports platform. The company also has recently entered the fast-growing predictions market. The stock has dropped just over 20% in trading since posting its Q4 results on Feb. 12. It is down just over that since I first profiled a covered-call trade idea around the name in mid-November.
This pullback has triggered a just over $2 million purchase by one of the company’s directors. The company also has a robust stock buyback program in place and a rock-solid balance sheet. Draft Kings faces growing competition and growth is slowing. However, the company should see an impressive ramp up in earnings in coming years on approximate 15% revenue growth. I have recently added to my initial stake in this name via some additional covered call orders.
Equifax (EFX) is a new entrant into my portfolio as well. The company is a global provider of information services, including employment and background checks for businesses, creditworthiness information for loan originators, qualification verification for government programs, and credit monitoring for consumers, among many other services. The company competes with the likes of credit bureaus Experian and TransUnion (TRU) , business credit and information provider Dun & Bradstreet, and identity theft protection and credit monitoring service LifeLock in a $50 billion global total addressable market.
The stock is down just over 20% from its highs this summer. Part of this is because in July, the firm Fair, Isaac and Company, now called FICO (FICO) , announced that it was rechanneling its FICO licensing model by launching a program directly to lenders, eliminating reliance on the big three credit bureaus. But FICO is not a profit center for Equifax, and it has already responded in the marketplace.
The pullback in the shares was recently bought by a company officer who added over $450,000 to its stake in the company. The stock is not terribly cheap at just over 22-times forward earnings. However, it is reasonably valued given annual earnings growth projected in the high teens on 10 revenue growth over the next few years. The company also generates a considerable amount of free cash flow and is buying back stock as well.
I have made my entry point cheaper via executing covered-call trades on Equifax. Last week Bank of America resumed covered on the stock with a buy rating and $250 a share price target. Last week the shares closed just under $200.
At the time of publication, Jensen was long DKNG and EFX.
