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3 Dogs of the Dow for High-Yield Investors

The “Dogs of the Dow” strategy consists of investing in the 10 highest-yielding stocks in the Dow Jones Industrial Average. Purchasing the Dogs of the Dow creates higher dividend income by focusing on high-yielding stocks. This is a simple strategy for value investors looking to purchase high-yield dividend stocks with reasonable valuations.

The following three stocks are part of the 10 Dogs of the Dow. They have high dividend yields and strong business models and should maintain their dividends in a recession.

Dow Inc (DOW)

Source: Jonathan Weiss / Shutterstock.com

Dow Inc (NYSE:DOW) is a standalone company that was spun off from its former parent, DowDuPont. That company has broken into three publicly traded, standalone parts, with the former Materials Science business becoming the new Dow Inc. Dow should produce about $49 billion in revenue this year and trades with a market capitalization of about $38 billion.

Dow reported first-quarter earnings on April 25, and results were much better than expected in terms of both revenue and profits. Adjusted earnings per share (EPS) came to 58 cents, 21 cents ahead of estimates. Revenue of $11.9 billion was $560 million better than expectations. Volume was off 11% year-over-year, led by a decline of 15% in the Europe, Middle East, Africa and India region.

Operating cash was $531 million, down $1.1 billion year-over-year. Free cash flow conversion was 85% of net income on a trailing-12-month basis. The company noted it was focused on cost savings in the face of weak revenue and that this should help maintain margins throughout 2023.

Future growth is likely in the coming years from stabilized pricing, which has improved in recent years, margin gains from cost savings, and the company’s share repurchase program. These factors combined should afford Dow the ability to produce some measure of earnings-per-share growth under normalized conditions.

The company’s product portfolio is not only its competitive advantage but also should perform well enough during downturns to keep the company profitable. Its focused efforts on high-growth areas such as consumer care, packaging, and infrastructure, as well as its very long operating history as a component of the former company, and its brand, as competitive advantages.

Dow’s payout ratio is currently at 88% of estimated earnings. This is relatively high, which could limit future dividend raises. Given the strong yield, management is focusing on boosting the buyback allocation. The stock yields 5.4%.

Chevron (CVX)

Source: Denis Kuvaev / Shutterstock.com

Chevron (NYSE:CVX) is the fourth-largest oil major in the world based on its market cap of roughly $300 billion. Chevron is an integrated super-major, meaning it has large upstream and downstream businesses. Most of the company’s revenue is derived from its upstream exploration and production activities.

In late April, Chevron reported financial results for the first quarter of fiscal 2023. Its production dipped 1% sequentially due to the end of a concession in Asia, which more than offset high production growth in the Permian. Refining margins remained near record levels thanks to the sanctions of western countries on Russia, but oil and gas prices somewhat moderated. As a result, EPS declined 13%, from $4.09 to $3.55.

Chevron has announced a massive share repurchase program of $75 billion, enough to reduce the share count by 25%. Such a large buyback would provide a meaningful boost to EPS growth. Future earnings growth will also be driven organically by new oil and gas projects and production ramp-ups. Chevron is now in the positive phase of its investing cycle and is likely to return to growth mode this year thanks to its sustained growth in the Permian Basin and in Australia. The company has more than doubled the value of its assets in the Permian in the last four years thanks to new discoveries and technological advances.

Thanks to the high grading of its asset portfolio, Chevron can fund its dividend even at an oil price of $40. With WTI prices at $70 per barrel, the company can generate plenty of cash flow to fund its growth and continue to raise the dividend. Chevron has raised its dividend by 6% in each of the last two years and is likely to keep raising its dividend in the upcoming years. The company has increased its dividend for over 35 years. The stock currently yields 3.9%.

Amgen (AMGN)

Source: Michael Vi / Shutterstock.com

Amgen (NASDAQ:AMGN) is the largest independent biotech company in the world. Amgen discovers, develops, manufactures and sells medicines that treat serious illnesses. The company focuses on six therapeutic areas: cardiovascular disease, oncology, bone health, neuroscience, nephrology and inflammation. Amgen generates about $28 billion in annual revenues and operates in approximately 100 countries.

In the most recent quarter, revenue declined 2.2% to $6.1 billion, which was $140 million less than expected. Adjusted EPS of $3.98 compared unfavorably to $4.25 in the prior year. However, this was in-line with estimates. Results were negatively impacted by lower revenues from Covid-19-related sales. Product revenue increased 2% while volumes were higher by 14%.

Prolia, which treats osteoporosis and is now the company’s the top grossing product, grew 9% to $927 million, driven by an 8% increase in volume. Repatha, which is used to control cholesterol, increased 18% to a record $388 million. Amgen reduced prices for Repatha in 2018 and this has allowed the product to capture market share. Volumes were higher by 33% during the quarter, helping to offset lower selling prices. More than 1.7 million patients have received a prescription for Repatha.

Amgen is in strong financial position. The company ended the quarter with $31.6 billion of cash and cash equivalents. Amgen provided updated guidance for 2023 as well. The company now expects adjusted earnings-per-share in a range of $17.60 to $18.70 for the year, up from $17.40 to $18.60. At the midpoint, this would be a 2.6% improvement from the prior year.

Amgen has been a strong dividend growth stock. The company has increased its dividend for 12 consecutive years. In 2022, the company hiked its dividend by 10%. The dividend is highly secure, as the company has a 2023 payout ratio expected at under 50%.

And, the dividend can be maintained even in a recession. Amgen’s profitability holds up very well during economic downturns. Companies in the health care sector are often recession-resistant as people will seek treatment for their health issues regardless of economic conditions. The company also has a very low payout ratio that will allow it to continue to raise its dividend going forward, even in a prolonged recession. AMGN stock yields 3.8%.

On the date of publication, Bob Ciura did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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Pfizer wins full FDA approval for oral COVID therapy Paxlovid for adults at high risk of developing severe illness

Pfizer Inc.
PFE,
-1.94%
said Thursday it has received full Food and Drug Administration approval for its Paxlovid oral treatment for COVID-19 for use in adult patients with high risk of developing severe disease. The treatment has been available in the U.S. since December of 2021 under an Emergency Use Authorization. To date, more than 11.6 million treatment courses have been prescribed. There are still about 14,500 reported cases of COVID in the U.S. every week, but many others are not reported. The U.S. ended the COVID public health emergency on May 11. Pfizer’s stock was down 2% Thursday, and has fallen 26% in the year to date, while the S&P 500 has gained 8%.

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NVDA, BBY, SNOW, CCL and more

The logo of NVIDIA as seen at its corporate headquarters in Santa Clara, California, in May of 2022.

Nvidia | via Reuters

Check out the companies making the biggest moves in premarket trading Thursday:

Nvidia — Shares soared 28% after the chipmaker reported blockbuster earnings. Nvidia said it expected a “giant record year” and guided for sales of $11 billion in the second quarter, more than 50% higher than analysts’ estimates.

related investing news

Nvidia's jaw-dropping beat and raise reinforces Cramer's 'own it, don't trade it' mantra

Best Buy — Shares of the electronics retailer gained nearly 5% in premarket trading after the company posted first-quarter earnings of $1.15 per share excluding items, topping the $1.11 expected by analysts, according to Refinitiv. Revenues of $9.47 billion came in below the $9.52 billion anticipated.

Snowflake — The cloud computing company slid about 13% following the company’s weaker-than-expected revenue guidance for the second quarter. However, Snowflake beat analysts’ estimates for first-quarter earnings and revenue when it reported after the bell Wednesday, according to Refinitiv.

American Eagle Outfitters — The stock shed nearly 20% in premarket trading after the retailer said it expects second-quarter revenue to fall. American Eagle Outfitters also posted first-quarter earnings per share in line with estimates and revenue slightly above expectations

Carnival — The cruise line added 2.3% following an upgrade to buy from neutral by Citi. The firm said Carnival is at a turning point on its balance sheet at a time when investors seem more interested in the cruise space.

Dish Network — Shares slipped 2.7% in the premarket after being downgraded by Citi to neutral from buy on Wednesday. The Wall Street firm cited Dish’s substantial capital needs combined with the drop in market value of its securities.

Dollar Tree — Shares of the discount retailer fell 11% in premarket trading after Dollar Tree reported shrinking margins for the first quarter. Gross profit fell 4.7% even as net sales rose 6.1%. The company’s first quarter adjusted earnings per share of $1.47 was below analyst estimates of $1.52, according to StreetAccount.

C3.ai, Palantir Technologies — The AI stocks rallied on the back of Nvidia’s earnings, with C3.ai popping 14% and Palantir Technologies gaining nearly 10%.

Advanced Micro Devices, Taiwan Semiconductor — The semiconductor stocks followed Nvidia higher in premarket trading, with AMD adding about 9% and Taiwan Semiconductor up nearly 7%.

— CNBC’s Alex Harring, Tanaya Macheel and Jesse Pound contributed reporting.

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3 Oil Stocks to Buy for a Sector Reversal

Source: Pavel Ignatov / Shutterstock.com

The soft inflation report was a sigh of relief for many sectors, especially the energy industry. With high-interest rates, economic slowdown, and weakness across multiple sectors, oil prices have taken a hit. They have seen massive volatility over the past few months. With the onset of summer, I believe oil prices could be ready for steady growth and this means top oil stocks could see a sector reversal. Furthermore, as we inch closer to the end of rate hikes, we could see a slowdown in the economic growth and this means a rise in oil prices. Smart investors know now is a good time to start looking for oil stocks to buy.

The Saudi energy minister has already warned of further OPEC+ output cuts and this means there could be a supply squeeze, further pushing oil prices higher. The peak travel season is upon us and oil prices could start to rise. Therefore, now is a good time to cash in on the “black gold” and start investing in oil stocks that are well-positioned in the industry today. With that in mind, let’s take a look at the three oil stocks to buy for a sector reversal.

Chevron Corporation (CVX)

Chevron Corporation (NYSE:CVX) is a solid, well-established powerhouse in the oil and gas sector. The company is engaged in the production, exploration, refining as well as distribution of oil and gas. Having built a solid foundation over the years, the company holds an enviable position in the market today. If you are looking for a dividend stock in this industry, CVX is one of those oil stocks to buy. The company has been raising dividends for 35 consecutive years.

One solid reason to bet on this business is its solid profile. The company has low operating costs and is generating a whopping amount in cash. It ended 2022, with $18 billion in cash and needs only $5 billion to operate. The company generated a cash flow from operations of $7.2 billion in the first quarter. CVX stock offers passive income thru dividends, a balanced profile, and strong financials. It produced a net income of $6.57 billion in the recent quarter, which is up from $6.26 billion in the same quarter a year ago.

The stock has been suffering after Warren Buffet trimmed his investment in the company. However, I think a lot is working in favor of CVX stock. Recently, the company announced the acquisition of PDC Energy (NASDAQ:PDCE) in an all-stock deal valued at $6.3 billion. Chevron believes that this transaction will add $1 billion to its annual free cash flow.

Morgan Stanley has raised the price target of the stock to $198, which is a massive upside potential from the current level.

Exxon Mobil (XOM)

Exxon Mobil (NYSE:XOM) is another one of the oil stocks for sector reversal that has impressed investors with a strong first quarter. The company reported a record-breaking first-quarter net income of $11.4 billion and I believe its business will hold steady in the coming quarters. It posted an EPS of $2.79 which is up from $1.28 in the same period last year. This is more than a 100% jump and it is nothing but impressive. Clearly, Exxon Mobil has had a better first quarter in 2023 than it did in 2022 and I think the momentum will continue. XOM is one of the top oil sector reversal stocks to own today.

It has increased dividends for 20 consecutive years and has a dividend yield of 3.42% with a recent dividend payout of $0.91. Conservative investors love XOM stock. It is trading at $106 today and is inching closer to the 52-week high of $119. The stock is up 12% in the past year and hasn’t dropped below $60 since November 2021. The company has a solid business and a long way to go. If you are trying to add an oil stock to your portfolio, this is the one to buy.

The business is globally diversified which makes it an attractive investment in uncertain times. However, it is still affected by the industry’s cyclical movements but not as much as other businesses. The company has also joined the electric vehicle bandwagon and bought drilling rights on 120,000 acres in Arkansas for lithium production. This means it is also preparing for a future that is less reliant on gasoline.

Devon Energy (DVN)

One of the best oil stocks to buy is Devon Energy (NYSE:DVN). Based in Oklahoma City, the company has a hydrocarbon exploration business which has a strong dividend yield. It remains one of the top dividend stocks to buy now. The company is a leader in its niche and has steadily paid dividends for the past 17 years. It has a dividend yield of 9.18%, better than the majority of dividend-paying companies in the industry. It recently paid a quarterly dividend of $1.13. Devon has a fixed and variable dividend program wherein one portion remains fixed and the variable portion varies according to the profits generated by the company.

If you look at the earnings potential of this stock, it looks undervalued at $49. DVN stock is down 30% in the year and 15% year to date. This is due to the drop in oil prices. However, it is also an opportunity for investors to grab the stock at discounted rates.

When it comes to financials, Devon Energy has a robust balance sheet and it has had a record year for the business. The company saw the top and bottom lines racing ahead this quarter. It also reached an all-time high in oil production at 320,000 barrels per day. With a rise in profits, the company continues to increase dividend payouts. With the rise in oil prices, Devon Energy is set to soar higher. Buy the stock while it is trading at a discount.

On the date of publication, Vandita Jadeja did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.

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Toronto-Dominion Bank stock dips on earnings growth warning

Toronto-Dominion Bank stock
TD,
-2.50%

TD,
-1.85%
is down 1.5% in premarket trading on Thursday after the Canadian bank with a sizeable U.S. presence said it does not expect to meet its medium-term adjusted earnings per share growth target of 7% to 10%. The bank blamed the mutual termination of its deal to buy First Horizon Corp.
FHN,
-1.33%
as announced on May 4, as well as “deterioration in the macroeconomic environment.” TD’s second-quarter profit fell to C$3.35 billion, or C$1.72 a share, from C$3.81 billion, or C$2.07 a share, in the year-ago quarter. Adjusted profit of C$1.94 a share missed the analyst estimate of C$2.08 a share. Second-quarter revenue rose to C$12.37 billion from C$11.26 billion, and slightly beat the analyst view of C$12.35 billion. The bank’s Wealth Management and Insurance net income fell 16% to C$563 million, reflecting lower earnings in the wealth management business.

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META Stock: A Bullish Bet on AI or a Ticking Time Bomb?

Source: Blue Planet Studio / Shutterstock.com

In less than eight months, Meta Platforms (NASDAQ:META) stock has gone from the most undervalued stock in America to the most overvalued.

On the surface it’s a study in failure. Its new name represents technology that is already a dead end. The company has been laying off people all year, and it’s still laying them off. It’s not growing, with revenue for the March quarter down 11% from December.

Despite this the stock’s value has nearly tripled. Meta’s November low was below $89. It now sells for almost $250.

META

Meta Platforms

$247.66

Why, Meta, Why?

Investors buy stocks for a reason. We’re not stupid. People were dumping Meta last year and they’re buying it this year based on hope for the future. It’s why CEO Mark Zuckerberg changed the name.

The metaverse was supposed to be this mash-up of gaming, commerce and social networking that would transform how we live. It turned out to be Microsoft (NASDAQ:MSFT) BOB.

But Artificial Intelligence? AI is something else. Since the launch of ChatGPT, a generative AI program that can take vague input and deliver written output, a gold rush has begun the likes of which we haven’t seen since the Web was first being spun.

That you can use the whole Internet as input, to create stories, art, music, or software, is a sea change in productivity. Professionals of all kinds will see huge improvements in their work, or they’re going to be working at Starbucks (NASDAQ:SBUX).

This gives tech companies a huge stick with which to beat people, something Wall Street loves unless they’re the ones being whipped.

Meta has been using this stick to force people out or back into the office. Zuckerberg calls it his “year of efficiency.” He’s using the stick, building a sandbox for AI innovation, and Wall Street is cheering.

Can Meta Lose?

But why should Meta, which pioneered global social networking, win the AI revolution? Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) didn’t win social networking. IBM (NYSE:IBM) didn’t win the Internet. The PC revolution was won by start-ups, Apple (NASDAQ:AAPL) and Microsoft.

At the start of every technology revolution, investors buy the incumbents. Meta is the AT&T (NYSE:T) of AI. It has a network of scaled cloud data centers. In the developing world Meta IS the free Internet.

But while you’re piling into Meta stock, the company’s past is catching up with it. Meta just got hit with a $1.3 billion fine for violating Europe’s data privacy regime. The threat of the Internet splintering into regional networks is real.

Open source is building its own social networks, so Meta’s effort to copy Twitter would be like 68-year old me saying I’m going to date Taylor Swift.

Meta is having to dump formerly-big acquisitions like Giphy for a song. The company isn’t paying its content moderators in Africa. About 5% of its total revenue in the last year has gone to lawyers .

That first quarter jump in profits? Mostly Chinese retailers buying ads for their export markets.

The Bottom Line

Our Larry Ramer is right.

You don’t pay 30 times earnings or 5.5 times revenue for a maybe, just because you’re scared. You pay for certainty, for market dominance, for continuing growth on the top and bottom line.

Meta may find a place in AI. We’re still in the tool-making stage of AI, and Meta has money to build tools with. Meta’s network can bring the results to market.

But you don’t need big money or a big network to build a compelling tech product and scale it into something competitors can’t buy. Look at Tik-Tok.

On the date of publication, Dana Blankenhorn held long positions in AAPL, MSFT and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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Understanding Gaps: Common, Breakaway, Runaway, and Exhaustion Gap

Stocks making biggest moves premarket: Moderna, Kohl’s, Intuit

People walk near a Kohl’s department store entranceway in Doral, Florida, June 7, 2022.

Joe Raedle | Getty Images

Check out the companies making headlines in premarket trading Wednesday.

Moderna — The biotech company added 2.4% amid renewed Covid-19 concerns in China after an uptick in infections.

VF Corporation — Shares in the clothing and shoemaker added 3.3% on the back of better-than-expected fiscal fourth-quarter results. The company earned an adjusted 17 cents per share, topping a Refinitiv forecast of 14 cents per share. Revenue of $2.74 billion was also slightly above expectations.

XPeng — The electric vehicle maker slipped 4.7% after an earnings miss. XPeng also issued weaker-than-expected revenue guidance for the second quarter. Still, CEO He Xiaopeng said he is “confident in taking our Company into a virtuous cycle driving product sales growth, team morale, customer satisfaction and brand reputation over the next few quarters.”

Palantir Technologies — Shares were 2.2% lower in premarket trading, on pace for its first decline in three sessions. Cathie Wood’s Ark Invest recently bought more than $4 million worth of Palantir shares, the firm’s website showed.

Analog Devices — Analog Devices dropped 5.3% in premarket trading on the back of weaker-than-expected third-quarter guidance for the fiscal third quarter. Analog Devices expects adjusted earnings of about $2.52 per share in the third quarter, compared to forecasts for $2.65 per share, according to consensus estimates on FactSet. It expects revenue of around $3.10 billion, less than the $3.16 billion estimate. In a statement, CEO Vincent Roche said, “Looking to the second half, we expect revenue to moderate given the continued economic uncertainty and normalizing supply chains.”

First Horizon — The regional bank added 2.3% in premarket trading following an upgrade to buy from hold by Jefferies. The firm said the bank has top-tier capital strength and is at a discount to peers.

Palo Alto Networks — Shares of the cybersecurity company rose nearly 5% in premarket trading after it reported a fiscal third quarter that topped analyst estimates. The company reported $1.10 in adjusted earnings per share on $1.72 billion of revenue. Analysts surveyed by Refinitiv had penciled in 93 cents of earnings per share on $1.71 billion of revenue. Palo Alto’s fourth-quarter earnings guidance was also higher than expected.

Kohl’s — The retailer popped more than 13% after reporting better-than-expected results and a surprise profit for the recent quarter. Kohl’s also reiterated previous guidance.

Intuit — The tax and accounting technology maker suffered a 5% drop after the company missed revenue expectations, according to Refinitiv, for its fiscal third quarter. That result was due in part to a decline in tax returns, Intuit reported.

— CNBC’s Jesse Pound, Samantha Subin, Alex Harring, Sarah Min and Tanaya Macheel contributed reporting.

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3 Biotech Stocks With Blockbuster Potential

When it comes to possibilities of outsized rewards, few sectors can beat out biotech stocks with blockbuster potential. Fundamentally, the underlying sector enjoys a massive footprint. According to Grand View Research, the global biotech market size reached a valuation of $1.37 trillion last year. However, the segment might expand at a compound annual growth rate (CAGR) of 13.96% from 2023 to 2030, per analysts. By the end of the forecast period, the segment might post revenue of $3.88 trillion. Therefore, top biotech stocks to buy will always attract speculative interest.

However, investing in biotech stocks presents significant risks. Primarily, anything can happen during the course of clinical trials for new therapeutics. And investors don’t waste time punishing shares, especially those tied to financially unstable enterprises. Nevertheless, high-potential biotech stocks command attention because of their possible capacity to deliver scientific breakthroughs. If you can handle the heat, below are three enticing ideas to consider.

NVO	Novo Nordisk	$161.78
BMRN	Biomarin Pharmaceuticals	$90.54
TVTX	Travere Therapeutics	$16.78

Novo Nordisk (NVO)

A Danish multinational pharmaceutical company, Novo Nordisk (NYSE:NVO) is one of the top players in the field. It’s also one of the top biotech stocks with blockbuster potential, particularly because of its long track record. Specifically, Novo might be enticing because of its drug Wegovy. Per Fierce Pharma, Wegovy helps certain obese patients lower their weight. Last year, the drug nabbed its first approval by the U.S. Food and Drug Administration.

In full disclosure, the publication points out significant challenges for Wegovy, particularly regarding manufacturing setbacks delaying supplies. In addition, social media and celebrity craze for Wegovy and another Novo treatment Ozempic (which can help with weight loss) imposed more inventory woes.

Nevertheless, having massive demand is a far better problem than the opposite situation. Financially, Novo benefits from a stable balance sheet, solid long-term revenue growth, and consistent profitability. Of note, its trailing-year net margin stands at 32.47%, ranked better than 93.44% of biotech competitors. Thus, it’s a stellar idea for those interested in investing in biotech stocks.

BioMarin Pharmaceutical (BMRN)

A lesser-known entity but still ranking among the high-potential biotech stocks to buy, BioMarin Pharmaceutical (NASDAQ:BMRN) focuses on research in enzyme replacement therapies. At the moment, BioMarin features a market capitalization of $17.27 billion. Since the start of the year, BMRN lost roughly 9% of its equity value. However, in the past 365 days, shares gained nearly 17%.

For those just learning about BioMarin, the regulatory narrative centers sharply on its hemophilia A gene therapy Roctavian. Previously, BMRN garnered much interest as one of the biotech stocks with blockbuster potential because if approved by the FDA, it would be the first gene therapy for the previously mentioned condition. Following many struggles, BioMarin won conditional marketing authorization from the European Commission.

Still, the FDA approval is the big dog. According to Fierce Pharma, the publication noted in early March this year that the regulatory agency moved back its decision date by three months. Ultimately, analysts remain bullish on BMRN, pegging it a moderate buy. Their average price target clocks in at $118.16, implying over 28% upside potential.

Travere Therapeutics (TVTX)

Based in California, Travere Therapeutics (NASDAQ:TVTX) states that its directive focuses on identifying, developing, and delivering life-changing therapies to people living with rare diseases. Although an exciting example of biotech stocks with blockbuster potential, prospective investors should be clear: it’s also one of the riskiest. Since the Jan. opener, TVTX dropped nearly 18% in equity value.

In the trailing year, TVTX gave up more than 24%. Still, those interested in investing in biotech stocks have put Travere on their radar because of Sparsentan, a novel, oral small-molecule therapy that holds promise for primary immunoglobulin A (IgA) nephropathy and focal segmental glomerulosclerosis (two types of kidney disease).

However, those thinking about participating in TVTX must understand that they’re dealing with an aspirational enterprise. For example, Gurufocus points out that it suffers from a rather weak balance sheet. Also, its three-year revenue growth rate (along with its trailing-year net margin) sits in negative territory. Nevertheless, analysts peg TVTX as a consensus strong buy. Their average price target stands at $28.17, implying nearly 66% upside potential.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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7 Stocks That Insiders are Selling

Insider buying, or the legal, reported purchase of shares in a company by its C-suite/board members/large shareholders, is considered a bullish signal. However, does that mean it is best to sell/avoid stocks insiders are selling? Put simply, it depends. Heavy insider selling, or even a lack of insider buying, can sometimes be a sign that those most “in the know” at a company are not very confident in its future prospects.

Then again, much like with “outsider” investors, lack of confidence isn’t the only reason insiders decide to sell. Diversification is a big driver of insider selling decisions. There’s even a Securities and Exchange Commission (or SEC)-approved mechanism for insiders to sell shares without raising red flags with investors and regulators. Through 10b5-1 plans, insiders can plan in advance to sell a particular number of shares each month over a period of months, or even years.

Having said all of this, instead of making broad generations as to whether insider selling is bullish or bearish, let’s take a look at seven stocks insiders are selling, and see whether it’s a sign to buy or a sign to sell.

Airbnb (ABNB)

Going public in late 2020, Airbnb (NASDAQ:ABNB) quickly zoomed higher, thanks to the post-pandemic “revenge travel” trend. However, shares in the lodging marketplace platform have fallen since then. And there are now signs that the boom times for travel are coming to an end.

If that is not concerning enough, there has also been far more insider selling with ABNB stock than insider buying. In particular, by co-founder and board member Joseph Gebbia Jr. Gebbia was a big seller in 2022, and has continued to systematically reduce his Airbnb position. Granted, given these sales appear to be conducted in a pre-planned manner, this may not necessarily be a sign that you too should head for the exits. Yet as a recession looms, all while ABNB trades at a pricey 35.3 times earnings, now perhaps may not be the time to enter/add to a position.

AutoZone (AZO)

The past few years have been highly favorable for AutoZone (NYSE:AZO). The U.S. vehicle shortage, which has resulted in inflated prices for new and used automobiles, has resulted in motorists holding onto their existing vehicles for longer, providing the auto parts retailer with solid demand growth.

Thanks to this trend, AZO stock has kept hitting new all-time highs. That said, the boom times for AutoZone and its peers may be coming to an end, as the used car bubble deflates. At least, that’s the takeaway from the company’s latest quarterly results.

AutoZone beat earnings estimates for the quarter, but investors reacted negatively to weaker-than-expected sales. It remains to be seen whether (and to what degree) AZO’s fiscal performance deteriorates from here. However, it’s not exactly encouraging that company insiders, most notably CEO William Rhodes III, have sold hundreds of millions worth of AZO shares since last fall.

Moderna (MRNA)

During 2021, biotech firm Moderna (NASDAQ:MRNA) went from early-stage to cash cow, thanks to the widespread Covid-19 vaccination wave. This pushed the stock to prices nearing $500 per share. For reference, MRNA traded for around $25 per share pre-Covid.

Yet with Covid vaccines dropping off, and the company expected to re-enter the red this year, MRNA stock has given back most of these gains. Some investors may be bullish that Moderna, sitting on nearly $9 billion in cash, will put this war chest to work developing new mRNA vaccines, resulting in a profitable “second act.”

However, management perhaps holds a different view. MRNA has been a stock that insiders are selling. According to MarketBeat, CEO Stephane Bancel and other insiders have sold a total of $322.71 million worth of MRNA shares in the past year. MRNA has also been one of the stocks insiders won’t buy during this time.

NVR (NVR)

As the housing market has cooled but not yet entered “meltdown mode,” shares in homebuilder NVR (NYSE:NVR) continue to perform well. However, just because the proverbial other shoe hasn’t not dropped thus far, doesn’t mean it will not drop.

In other words, the threat of a housing crash is still present. If the chances of an increase keep climbing, NVR stock could plunge, in anticipation of revenue/earnings declines. Much like with other insider selling stocks mentioned above, it doesn’t help that the sale of shares by Executive Chairman Paul Saville and other insiders has picked up in the past month.

A high valuation is another reason why it may be best to skip NVR now. At 11.8 times earnings, the stock trades at a big premium to other major homebuilders. Couple these risks together, and NVR may be one of the top stocks to avoid.

Constellation Brands (STZ)

Constellation Brands (NYSE:STZ) isn’t the best-known alcoholic beverage stock, but many of its brands are household names. These brands include Corona and Modelo beers, along with Robert Mondavi wines. Nevertheless, the fact it has been one of the stocks insiders are selling may seem concerning on the surface. Over the past year, insiders, namely members of the founding Sands family, have made sales of STZ stock totaling $2.5 billion. Still, in contrast to the aforementioned insider trading stocks, Constellation may be worthy of consideration.

Shares sell for a reasonable 20.1 times forward earnings. Sell-side forecasts call for steady earnings growth over the next few fiscal years. STZ’s move into cannabis, via a big investment in Canopy Growth (NASDAQ:CGC) has so far been a bust, full U.S. legalization (which could spark a comeback for the industry) could always emerge out of left field.

TransDigm Group (TDG)

Based in Cleveland, Ohio, TransDigm Group (NYSE:TDG) is a manufacturer of aircraft components. Regarded as a “serial acquirer,” TransDigm has been for years successful at making “bolt-on” acquisitions of companies in its industry. This strategy has made TDG stock a compounder, with shares up more than ten-fold over the past decade. Still, after this stunning decade-long run, it may be reasonable to assume that TransDigm is starting to top out. Shares trade at a pricey 32.7 times forward earnings.

That’s not all. Keep in mind too that investing in TDG now is an example of investing in stocks insiders sell. Insider selling from CEO Kevin Stein and Directors Robert Small and Nicholas Howley has increased recently. This may signal more underwhelming returns ahead for TransDigm. Possible headwinds for the aviation industry post-travel boom is another reason why you may be another to stay away from TDG.

Walmart (WMT)

It may be an understatement to say Walmart (NYSE:WMT) is one of the stocks insiders are selling. Over the past year, there has been zero buying of the retailer’s shares amongst C-suite executives, board members, and large shareholders.

At the same time, insiders, primarily the children of company founder Sam Walton, have sold a total of $4.66 billion worth of WMT stock. So, if you currently own this widely-held blue chip, should you follow the lead of the Waltons? Per Louis Navellier, that may be a wise move.

As Navellier argued back in March, Walmart trades at a valuation premium compared to other retailers, and compared to that of the overall market. As of this writing, this premium still stands. If Walmart’s growth slows down due to the current economic headwinds, this valuation gap could narrow. The downside risk with WMT may be far larger than one would assume.

On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.

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