The stock market is teetering on a knife’s edge. The recent Fed rate cut has brought some much-needed optimism, but lingering fears of a “hard landing” and a looming recession have kept investors on edge. Wall Street analysts are quick to downgrade companies at the first sign of trouble leaving many average investors wondering, “Who do I trust?”.
Look no further than the corporate insiders. These are the CEOs, CFOs, board members, and other executives who have a deep understanding of their companies' operations and future prospects. And when these insiders start buying up their own company's stock, it's a powerful signal that something big is brewing.
This week, we’re focusing on two companies that have been left for dead by Wall Street, but the insiders are piling in, betting on a major rebound. This is a contrarian strategy, but one with the potential for massive gains if you know what to look for.
Rocket Companies Inc. (RKT)
Rocket Companies has been a battleground stock this year. Crushing interest rates have hammered the mortgage industry, sending RKT down more than 50% from its highs in 2022.
Wall Street analysts have been quick to downgrade the stock, with a slew of “Hold” ratings and price targets well below RKT's current price. But the insiders are telling a different story.
Chris Johnson of Money Morning highlights the recent surge in insider buying: “Wall Street is sitting on their hands with Rocket Companies with all 15 covering the stock ranking it a Hold. That will change.”, Johnson continues, “Currently, the market is still projecting a high possibility for two interest rate cuts by the end of 2024 with more to follow in 2025. Analysts will begin to change their posture by upgrading Rocket Companies as soon as we get close to those rate cuts becoming a reality.” Read Johnson's full article here.
Johnson is right – RKT is a classic contrarian play. The company's fundamentals are actually quite strong, with growing revenue and a dominant market share in the mortgage lending industry. But the negative sentiment surrounding the housing market has created an opportunity for savvy investors to buy in at a deep discount.
Lululemon athletica (LULU)
Lululemon has also been taken to the woodshed, with its stock falling more than 50% from its highs in 2023. The athleisure craze that drove the company's meteoric rise has slowed, leaving analysts questioning Lululemon's long-term growth prospects. But CEO Calvin McDonald is putting his money where his mouth is.
Bryan Bottarelli of Trade of the Day pointed out this recent insider buy last week: “CEO Calvin McDonald just bought 4,000 shares of LULU for $1 million, paying an average price per share around $260. This was the first open market stock purchase he’s made since being named CEO in 2018.” Read Bottarelli's full analysis here.
Insiders like McDonald typically buy stock for one reason – they believe the company is undervalued. And with Lululemon’s strong brand, loyal customer base, and potential for growth in new markets, this could be a sign that the worst is over.
Take Action!
These two stocks are not for the faint of heart. They're contrarian bets that require a strong stomach for short-term volatility. But if the insiders are right, these companies could be poised for a major rebound.
Don't let Wall Street’s negativity scare you away from potential profits. Get access to my watchlist of 10 stocks with a recent surge in insider buying before the Fed's rate cut announcement by clicking here. And come back tomorrow, where we’ll be revealing three “under-the-radar” AI stocks trading below $50!
