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Heavy Insider Buying Says These 3 Stocks Are Ultra Cheap

After the biggest insider buying day of 2018 so far on Friday, May 18 (114 purchases), insider buying activity slowed considerably last week, being outpaced nearly 3-1 by insider sales. Likewise, the dollar volume of the top insider purchases was quite low during the week.

Insider buying, particularly clusters of buying activity, are a powerful signal that a stock looks undervalued in the eyes of those who know the company and its prospects in the greatest detail. It’s unsurprising then that emulating such activity has been shown to deliver outsized returns. Below we’ll check out the insider buying activity at three companies last week, two of which have had noticeable clusters of buying.

Alongside our tracking of insider trading activity, we also track the top consensus picks of the best performing hedge funds each quarter. This “Best Performing Hedge Funds Strategy” gained 4% last quarter vs. a loss of 1% for the S&P 500 ETF (SPY), and a further 7.6% so far in the second-quarter compared to a 0.9% loss for the SPY. Since its inception in May 2014 this strategy’s picks have returned 87.8% vs. 53.3% for the SPY. You can see our latest picks by trying our newsletters free of charge for 14 days.

Extreme Networks, Inc (NASDAQ:EXTR)

Who Bought Shares: Director Raj Khanna

How Many Shares Were Bought: 10,000 @ $8.96 per share

Date of the Transaction(s): May 24

The Extreme Networks, Inc (NASDAQ:EXTR) board member was just the latest insider of the company to have purchased shares over the past two weeks. A filing revealed that Director John Shoemaker purchased 20,000 shares on May 11, while Directors Edward Kennedy and Kathleen Holmgren, as well as President and CEO Edward Meyercord, have all purchased shares since then.

The insider buying flurry followed Extreme Networks, Inc (NASDAQ:EXTR) shares cratering on May 9 following the release of disappointing fiscal third-quarter results. While revenue jumped by 76% year-over-year, it was due to several acquisitions in 2017 that were being banked on for even more growth. Extreme Networks, Inc (NASDAQ:EXTR) cited the difficulty of integrating those acquisitions into a single back-end platform as contributing to the underwhelming results, as it hindered business activity in the quarter. With that work now down, the company expects better results going forward.

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On the next page we’ll look at two other stocks with heavy insider buying activity in recent days.

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