Thursday, 17 May 2018

Special Report: Insiders Buy Over $1 Million Of Stock

Usually we don't play stocks that have over a billion in market cap with Canopy Growth Corporation (TWMJF) (WEED.TO) being the notable exception. However one stock we found trading in Canada is particularly intriguing thanks to heavy insider buying and as a gap fill candidate on the charts. Note that we were recently very successful with our call on Prothena Corporation plc (PRTA) in our report titled "Breakout Alert: PRTA To Fill That Gap". That one moved quite quickly despite being over half a billion in market cap so we think this larger cap play can move fast too. We are up to 614 followers despite not giving out a lot of alerts, a fact that we think is indicative of a diligent and prudent stock picking history. If you like our picks you can follow our blog by clicking the follow button on the top of the left hand panel. You can also follow us on Twitter @StockTradePicks. We are closing in on 3,000 followers on Twitter as well.

Element Fleet Management Corp. (ELEEF) (EFN.TO) trades at over a $2 billion market cap in Canada at around $6.00. It looks to be in the middle of a turnaround, having named James Forbes as new CEO along with the intention to shake up the Board. The company released Q1 financial results on May 15th which has been well received. EFN was trading at less than $5.00 as recently as May 11th. For the next two days it ran in excess of 10% (pretty good for a company of its size) and consolidated a bit before continuing its run today.  But the real key here is the insider buys:











The new CEO Forbes bought 200,000 shares yesterday at $5.77 along with another insider buying 50,000 shares. They likely bought yesterday at the first opportunity to buy shares after the blackout period for Q1 results was lifted. Forbes himself put over $1.15 million into the company and he did it AFTER the stock has already run quite a bit. This is a sign that he is very bullish on the company and expects it to run a lot more in the near term. This shake-up might be a sign that interested parties are trying to take over the company, but at a minimum it looks like Forbes' appointment will bring in funds interested in buying the stock, either as his direct contact or institutions that don't know him personally but like him running the company.

While Forbes bought high in comparison to recent prices, EFN was over $10.00 six months ago and over $8.00 three months ago. It has the potential to move back to those levels quickly, just look at the chart:































Recall what we said about gaps getting filled on the PRTA reports. Gap downs usually do get filled but you want to wait until the stock price rebounds to challenge the prior day high of the day of the gap down. For instance, a stock that gapped down on the threat of bankruptcy is likely not something you should play based purely on the expectation of a gap fill. But PRTA and now EFN are good rebound candidates because of the chart setup. There is a big gap to fill in EFN's chart from $8 to $6 from back in February. Now that it is challenging the $6 mark, this is an ideal time to expect a gap fill in short order. The Board change and the fact that the CEO bought over a million dollars worth of stock just reiterated this point.

Disclosure: We are long stocks listed in this report.

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