We recently published a list of 10 Small–Cap Stocks Insiders Are Selling Recently. In this article, we are going to take a look at where Jack in the Box Inc. (NASDAQ:JACK) stands against other small–cap stocks insiders are selling recently.
Why are some investors focusing on stocks with smaller market capitalizations? Among some of the reasons are diversification of their portfolios, because small-cap stocks usually operate in different industries than large-cap companies. Another reason is the share price, which is often lower than that of companies with larger market capitalization (above $10 billion), making them more affordable.
Some investors’ strategy is finding nascent companies with strong growth potential, which can bring high returns once the companies have grown. Even though small-cap stocks often carry higher risks and are more prone to market volatility, they also offer investors more room for growth.
What are some ways to assess small-cap stocks that are worth investing in? While there’s no single simple or complicated rule that investors can follow to achieve secure results, some strategies can help. One strategy is to keep track of insider trading activity. Insiders or, in other words, people in high positions within companies, such as CEOs, CFOs, directors and other executives have valuable insights into the company’s strategic moves, plans, and initiatives. A CEO’s investment in a company’s stock can sometimes signal strong confidence in the company’s future.
Does this mean that it is a bad sign for the company when insiders sell their shares? Not necessarily; just like insider buying activity doesn’t always mean stock is heading for growth. When insiders are selling their shares, it can sometimes mean that the management is losing confidence. On the other hand, it also happens that large shareholders just want to trim their holdings to more appropriate position sizes based on the risk/reward. Insiders can also decide to sell their shares due to personal financial reasons that have nothing to do with the company.
While both insider selling and buying can be driven by various motives, it’s important to consider these moves within the broader context of the company’s fundamentals, industry trends, and overall market conditions.
To identify the 10 large-cap stocks insiders are selling recently, we considered only stocks with a market capitalization of between $250 million to $2 billion. We first used Insider Monkey’s insider trading stock screener and looked for stocks with at least two insiders selling over the last two months.
With each stock we note the number of recent insider sales and the company’s current market capitalization. But why is it important to follow insider activity? Our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds, focusing on insider trading and stock picks from hedge fund investor newsletters and conferences. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
The front counter of the restaurant, with the menu illuminated in the background.
Jack in the Box Inc. (NASDAQ:JACK)
Number of insiders selling: 7
Market capitalization: $802.871M
Jack in the Box Inc. (NASDAQ:JACK) is a popular quick-service restaurant chain in the US, known for its diverse menu and strong national presence. The San Diego, California-headquartered company operates franchises Jack in the Box and Del Taco quick-service restaurants. It was founded back in 1951.
In December, seven insiders sold a total of approximately $932,125 worth of Jack in the Box shares, at an average price of $40.73 per share. Out of the total amount, the company’s CEO, S Darin Harris, sold 14,671 shares worth around $594,468 reducing his ownership to 138,803 shares.
As per 17 analysts’ average rating, Jack in the Box is “Buy.” The data from StockAnalysis also revealed that analysts have an average 12-month price target of $54.5, representing an increase of 36.59% from the latest price.
Since the beginning of the year, Jack in the Box shares declined 4.18%, with the stock currently trading at $39.90 per share. Over the past five years, the shares also declined 54.82%.
A bull-case theory for Jack in the Box (NASDAQ:JACK) suggests that despite a challenging 2024, analysts believe the company will have steady earnings per share growth of around 9% annually through 2029, even when taking near-term challenges into account. The company’s stock has historically traded at an average price-to-earnings (P/E) multiple of around 17x, and applying this multiple to revised earnings estimates suggests a target price of $123 by 2029, a significant upside from the current stock price of $39.90.
Overall, JACK ranks 6th on our list of small–cap stocks insiders are selling recently. While we acknowledge the potential of JACK, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than JACK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
