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 Skyward Specialty Insurance Group, Inc. (NASDAQ:SKWD) 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).
An executive in a suit flanked by workers, all smiling and looking confident.
Skyward Specialty Insurance Group, Inc. (NASDAQ:SKWD)
Number of insiders selling: 9
Market capitalization: $1.969B
Skyward Specialty Insurance Group, Inc. (NASDAQ:SKWD) is an insurance company providing commercial property and casualty insurance products in the US. The offering includes general liability, excess liability, professional liability, commercial auto, group accident and health, property, surety, and workers’ compensation insurance products.
Insider Monkey recently shared a Bull Case Theory for Skyward Specialty Insurance Group (NASDAQ:SKWD). In summary, the thesis argues that while natural disasters bring short-term risks, the company’s disciplined pricing and risk management should protect its capital in the long term. In 2023, many property and casualty insurers posted underwriting losses with a combined ratio of 101.5%, Skyward delivered a 90.7% ratio, showcasing its capability to drive consistent profits.
The company’s ability to navigate these challenges reinforces its long-term investment appeal. Valuation-wise, insurance companies are often assessed based on price-to-book ratios, with the industry averaging around 1x book value. Given Skyward’s profitability and book value per share growth of 23% annually over the past three years, a 2.5x price-to-book multiple is justified. Assuming book value continues to grow at a conservative 16% per year, Skyward’s stock could reach $107.23 by 2029, representing a 19% CAGR from current levels. With a strong management team, industry tailwinds, and disciplined execution, Skyward Specialty Insurance presents a compelling investment case with significant upside potential.
In January, nine insiders, among which is the company’s CEO sold around $2.34 million worth of Skyward Specialty shares at an average price of $47.57. The stock is now trading at $50.82 per share, having gone up 0.55% since the beginning of the year. Over the last 12 months, Skyward Specialty shares gained 56.32%.
The average rating on the stock from 10 analysts is “Buy,” while the 12-month stock price target is $53.0.
Overall, SKWD ranks 2nd on our list of small–cap stocks insiders are selling recently. While we acknowledge the potential of SKWD, 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 SKWD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.