The U.S. stock market has had a tumultuous start to 2022 as high inflation and looming interest rate hikes curbed general market bullishness.
Not all stocks are down so far this year, but a few notable high-profile cases have pushed the S&P 500 down more than 5% year to date. The biggest among these is Meta Platforms Inc. (FB, Financial), the company formerly known as Facebook, which notched the largest market cap loss in U.S. history following a disappointing fourth-quarter earnings report. On Feb. 3, the stock dropped more than 26%, losing $230 billion in value.
With Meta’s uncertain future in the metaverse and its huge market cap loss, investors may feel like their faith in the company is shaken, and with good reason. On the other hand, value-focused investors may see it as an opportunity to buy the dip, but this strategy only works if the company can make good on its promises to play catch-up and eventually become the top metaverse platform.
In times like this, investors need to be cautious when doing their research. A huge price drop can be a value opportunity, but it could just as easily be a value trap.
One signal to look for is whether or not insiders have been buying shares recently; if the top executives of a company are buying a dip, it can mean that they see the issues as temporary. It’s notable that insiders have not been buying the dip on Meta.
Thus, using the GuruFocus All-in-One Screener, a Premium feature, I screened the market for stocks trading below their GF Values whose CEOs have bought shares in the past month. While not a surefire way to identify value opportunities, this strategy can be a great starting point for further research.
According to the screener results, five companies that are undervalued based on GF Value and have recent CEO buys are Verizon Communications Inc. (VZ, Financial), Netflix Inc. (NFLX, Financial), PayPal Holdings Inc. (PYPL, Financial), Monro Inc. (MNRO, Financial) and AngioDynamics Inc. (ANGO, Financial).
Verizon Communications
U.S. telecommunications giant Verizon Communications (VZ, Financial) traded around $52.98 per share on Feb. 10 compared to its GF Value of 58.42, giving the stock a price-to-GF Value ratio of 0.91. The price-earnings ratio of 9.95 is lower than both the industry median and the company’s own historical median.
Chairman and CEO Hans Erik Vestberg bought 19,000 shares of Verizon stock on Jan. 26, bringing his total number of shares owned up to 149,764. Before this, the most recent insider buy for the stock was in February of 2020.
The stock is up 2% year to date and down 3% year over year. It has been in a slow but steady decline since the end of 2020. The 5G rollout has been slower than expected, delaying much-needed profits after heavy investments in the next-gen mobile network.
Netflix
Video streaming pioneer Netflix (NFLX, Financial) changed hands for around $399.66 per share on Feb. 10 compared to the GF Value of $621.31, resulting in a price-to-GF Value ratio of 0.64. The price-earnings ratio is 36.12, which is higher than the industry median but below the company’s own historical median.
Netflix’s co-CEO Reed Hastings added 51,440 shares on Jan. 28, bringing his total number of shares owned to 5,158,941. Prior to this, the earliest insider buy for Netflix’s stock was in August of 2019.
The stock is down 32% year to date and 27% year over year. After riding the wave of new subscribers that joined due to the Covid-19 pandemic, Netflix’s growth inevitably began to slow and drop below projections, driving a massive re-rating of the stock back to pre-pandemic levels.
PayPal Holdings
Electronic payments processor PayPal Holdings (PYPL, Financial) traded around $120.89 per share on Feb. 10 compared to its GF Value of $211.06 for a price-to-GF Value ratio of 0.57. The price-earnings ratio is 34.35, which is double the industry median but below its own historical median.
PayPal has seen three insiders buying shares over the past month. President and CEO Daniel Schulman bought 7,994 shares on Feb. 3 for a total holding of 196,544 shares, Director Frank D. Yeary bought 4,000 shares on Feb. 4 for a total holding of 30,727 shares and Director David W. Dorman bought 8,400 shares on Feb. 8 for a total holding of 55,427 shares.
The stock is down 36% year to date and 57% year over year. PayPal’s stock has been floundering due to the increasing competition in the digital payments space, which prompted it to shift strategies from growing its user base more toward monetizing existing users.
Monro
Shares of Automotive repair and maintenance company Monro (MNRO, Financial) were $44.98 apiece on Feb. 10 compared to their GF Value of $69.03, resulting in a price-to-GF Value ratio of 0.65. The price-earnings ratio is 23.25, which is above the industry median but below the company’s historical median.
Company President and CEO Michael T. Broderick bought 2,500 shares of Monro stock on Jan. 28 for a total holding of 63,448 shares. Broderick also added to his holdings in his company’s stock on Nov. 24, July 30 and May 28 of 2021.
The stock is down 23% year to date and 27% year over year. Monro has experienced a slowdown in growth in both revenue per share and earnings per share, which has led it to make worrying cost-reduction measures that could negatively affect productivity.
AngioDynamics
AngioDynamics (ANGO, Financial), a cancer and peripheral vascular disease medical device company, changed hands for around $22.13 per share on Feb. 10 versus its GF Value of $22.61, resulting in a price-to-GF Value ratio of 0.98. The company is not currently profitable, so its price-earnings ratio cannot be calculated.
President and CEO James C. Clemmer added 10,000 shares to his stake in his company on Jan. 11 for a total holding of 390,764 shares. Executive Vice President and Chief Financial Officer Stephen A. Trowbridge also bought 1,000 shares on Jan. 12 for a total position of 76,081 shares.
The stock is down 20% year to date and up 4% year over year. Both the top and bottom lines have been falling in recent years, but things are beginning to take a turn for the better as the company’s innovative medical devices gain traction.
