Investing

Insiders and Wall Street Heavyweights Jumping on 4 Battered Large Caps

Lee Jackson

Published: November 28, 2017 8:35 am

Last Updated: January 12, 2020 5:59 am

Wall Street and investors can certainly be fickle friends when it comes to companies and where their money goes. Huge blue chip leaders can often turn into disasters when the fundamentals change, and often those fundamentals change because upper management doesn’t have the vision to change with the times. When bad times come, it sometimes takes a ton of money and, most importantly, courage to step up to the plate and buy.

At 24/7 Wall St. we constantly monitor where the big money is going, and while most of the time, they go after pretty much what all investors are following, sometimes they use their deep pockets and financial clout to go in big after stocks that have taken a beating. We found four battered companies that some big name investors and insiders are buying shares of now.

General Electric

This iconic blue chip industrial has been a huge laggard in 2017, and after cutting its dividend the most since the Great Depression it may be offering long-term investors a very promising entry point. General Electric Co. (NYSE: GE) is a highly diversified, global industrial company. Its businesses are organized broadly under these segments: Power, Renewable Energy, Energy Connections, Oil & Gas, Aviation, Healthcare, Transportation and GE Capital.

The company’s products and services include power generation equipment, aircraft engines, locomotives, medical equipment and compressors. Over half of the business is tied to service and aftermarket support.

According to the most recent filing from the SEC, Director James Tisch purchased 3 million shares of GE on November 21 at prices from $17.83 to 17.99 on behalf of Loews. Also, Chairman and CEO John Flannery and other high ranking officials at the company have bought shares at multiyear lows. Notably a director bought 55,000 shares totaling $1 million, and Flannery bought 60,000 shares for $1.1 million.

The road back for GE can be a long one, but the chances of the company ever going out of business are very remote. Merrill Lynch has a rating of Buy on the shares and recently said this after the company’s analysts day earlier this month:

We lower our price objective to $23 (based on updated sum of the parts) but we maintain our Buy for the following reasons: 1) The dividend cut is now behind us; 2) While the companys lower 2018 outlook versus our and consensus’ forecast was not expected, we view the current outlook as the “true reset”; 3) GE is pre funding $6 billion of its pension obligations in 2018 by issuing debt, ameliorating some of the concerns about off-balance-sheet liabilities; 4) GE did not provide a lot of detail on potential spins/divestitures beyond highlighting part of Healthcare IT, Current & Lighting, Transportation, and its stake in Baker Hughes (BHGE); however, we continue to think that the portfolio optionality goes well beyond that. 5) Our sum of the parts of $23, while lower, still points to 20%+ upside relative to the current stock price.

GE investors now receive a 2.64% dividend. The Merrill Lynch price objective of $23 a share is the same as the Wall Street consensus price target. The stock closed Monday at $18.12 per share.

SandRidge Energy

This company emerged from bankruptcy in October of 2016 and has been accumulated in a big way by Wall Street legend Carl Icahn, who now holds a reported 13.51% stake. SandRidge Energy Inc. (NYSE: SD) is an oil and natural gas company that focuses on exploration and production activities in the Mid-Continent and Rockies regions of the United States.

As of December 31, 2016, it had 3,122 gross producing wells and approximately 1,364,000 gross total acres under lease. The company’s primary areas of operation are the Mid-Continent area of Oklahoma and Kansas and the Niobrara Shale in the Colorado Rockies.

Recent articles have suggested that Icahn had accumulated the large stake and is reportedly against the proposed acquisition of Bonanza Creek Energy. The stake is reportedly Icahn’s first activist position this year and makes him the largest shareholder. He started buying shares in October, thinking the company was cheap, and bought more when the deal was announced.

The posted consensus price target is $20.33, and shares closed Monday at $18.37.

AT&T

This company has bounced off the lows, but is still down from highs printed in January. AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV, with TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE. The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions.

With its shares trading at a very cheap 12.8 times estimated 2018 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic but increased device financing plans.

AT&T has several major catalysts that will likely drive strong network traffic demand: DirecTV Now and Mobile, “Data-Free TV” for DirecTV/U-verse subscribers, and increasing penetration of unlimited data plans. Many on Wall Street believe that the company is well-positioned to address ongoing traffic requirements, with additional LTE capacity available and the ability to leverage small cell deployments.

The company posted solid numbers for the third quarter, but between concerns over the Time Warner deal risk and the overhang from the arbitrage accounts, the stock has been in a funk. However, several large investors have recently made changes to their positions and institutional investors now own 55.21% of the company’s stock. An AT&T director recently bought 92,243 shares of the stock for a whopping $3.5 million.

AT&T investors receive a 5.65% dividend. Jefferies has a Buy rating on the shares and a big $48 price target. The consensus target is $39.68, and shares closed on Monday at $34.68.

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Sprint

The on-again, off-again merger with T-Mobile appears to be off-again, and the shares have been crushed once more. Sprint Corp. (NYSE: S) provides various wireless and wireline communications products and services to consumers, businesses, government subscribers and resellers in the United States, Puerto Rico and the U.S. Virgin Islands.

The company operates in two segments. The Wireless segment offers wireless data communication services, including mobile productivity applications, such as internet access, messaging and email services; wireless photo and video offerings; location-based capabilities comprising asset and fleet management, dispatch services and navigation tools; and mobile entertainment applications.

The Wireline segment provides wireline voice and data communications, including domestic and international data communications using various protocols, such as multiprotocol label switching technologies, internet protocol (IP), managed network services, voice over IP, session initiated protocol and traditional voice services to other communications companies and targeted business subscribers.

Softbank, which remains the largest shareholder of the company, continues to add shares, picking up the buying momentum once again as the reported merger deal fell through. The company recently bought an additional 3.2 million shares at prices that ranged from $5.99 to $6.18 for a total of $19.6 million.

The consensus price target of $7.28 compares with Monday’s closing price of $6.15 a share.

Whether any of these beaten down stocks are right for a portfolio depends entirely on one’s risk tolerance. One thing is for sure though: the low prices make them tempting for any investors with a long enough timeline to see if they don’t bounce off these extremely low levels.