An insider is an officer, director, or at least a 10% shareholder of a company’s stock, according to the SEC. These insiders often have greater insight into their businesses than the general public as they are involved in the daily operations. Therefore, tracking which stocks insiders have been buying can help identify which stocks the top brass are bullish on. According to GuruFocus' Insider Trades, a Premium feature, here are growth stocks insiders have been buying recently; let’s dive in.
Asana
Asana (ASAN, Financial) is a leading software company that specializes in team and project management. The business enables team members to coordinate what tasks they are working on in order to meet project goals. The whole idea is to reduce unnecessary “sync meetings” as everyone is already up to date on what people are doing.
Asana’s product is used by 80% of the Fortune 100. With Asana, customers have the ability to integrate with a variety of other common tools such as Salesforce (CRM, Financial) and even Jira for product management.
Asana is also integrating AI into its product. This gives teams the ability to query projects and ask “if a project is on track” and “what are the bottlenecks?” In addition, its AI tool has a writing assistant and improved automation features. These features help Asana to stay ahead of the many competitors in the team management space.
Insider buying
The founder and CEO of Asana is Dustin Moskovitz, who was also a co-founder of Facebook (now Meta Platforms (META, Financial)). In June 2023, Moskovitz spent $3.6 million to purchase another 160,000 shares of Asana, bringing his total holding to a staggering 43.4 million shares, or 23% of the company's outstanding shares. On the day of the trade, shares traded for an average price of $22.
Growing financials
Asana reported solid financial results for its first quarter of fiscal 2024. Its revenue was $152 million, which increased by 26% year over year and beat analyst forecasts by ~$2 million. This was driven by solid growth in its larger customer base (over $100,000 in annual recurring revenue), which increased by a rapid 31% year over year.
This included a variety of deals across multiple industries from health care to financial services. This is positive news as if one industry is facing headwinds, it will be unlikely to impact Asana’s core business.
Asana has also continued to grow its position inside organizations as it charges based on a per-seat model. For example, in one organization Asana has scaled to a staggering 200,000 paid seats, which it estimates to be the largest of any similar platform.
Asana’s platform is also immensely “sticky” as once a company has integrated the product into its daily tasks, it's unlikely to change platforms. Therefore I wasn’t surprised to discover Asana has a 110% dollar-based net retention rate, which means customers are not just staying with the platform, but spending more. This retention rate also increases for its larger customers. For example, its $100,000+ customers have a 130% net dollar retention rate. This is a positive sign for Asana’s business model as a whole, as it focuses on enterprises more so than competitors.
Moving on to the bottom line, Asana reported an operating loss of $65 million, which was an improvement over the $96.2 million loss reported in the prior-year quarter, although this loss is still fairly substantial. The loss per share of $0.28 did beat analyst forecasts by $0.12.
Asana has a strong balance sheet with cash and short-term investments equating to $523.5 million and long-term debt of $46.1 million.
Valuation
Asana trades at a price-sales ratio of 8.94, which is 54% cheaper than its five-year average.
The GF Value chart indicates a fair value of $53 per share and thus the stock is “significantly undervalued” at the time of writing.
Snowflake
Snowflake (SNOW, Financial) is a data warehouse provider which aims to help companies break down siloed data and derive insights.
Unlike its competitors such as Amazon (AMZN, Financial) Red Shift, Snowflake is industry agnostic. This enables the company to build greater trust with the majority of IT decision-makers who wish to operate a hybrid cloud model. In addition, Snowflake enables businesses to read and write their data across multiple platforms in a cost-effective manner.
Snowflake's platform is used across various industries from marketing to financial services and health care. This variety of industries means the company is immensely diversified.
Snowflake’s CEO is Frank Slootman, who wrote the book called “Amp It Up" in which he discussed his management style of setting big goals and then taking the “slack” out of the rope to achieve them.
Insider buying
Director Mark Mclaughlin purchased 1,830 shares of the company at the end of May 2023. On the day of the trade, shares traded at an average price of $160. Mclaughlin now has a total of 8,657 shares in the company.
Growing financials
Snowflake reported strong financial results for the first quarter of its fiscal year 2023. Its revenue was $623.6 million, which beat analyst forecasts by $15 million and rose by a blistering 48% year over year. This was slower than the 84% growth rate reported in the prior-year quarter, but given the macroeconomic environment, its growth rate is tremendous.
Snowflake is also poised to benefit from the growth in the AI industry, as large language models are built on large data sets. Already, over 1,500 customers used Snowflake for machine learning applications, up 91% year over year.
In the first quarter, Snowflake launched its Manufacturing Data Cloud. This focuses on helping businesses solve supply chain management issues, which became a hot topic in 2021.
Snowflake did report a heavy operating loss of $266.1 million in the first quarter of 2023, which was worse than the loss of $187 million in the prior year.
The only silver lining is this was driven by a $100 million increase in sales and marketing expenses, as the company continues to invest for aggressive growth. However, over time I would like to see its operating expenses fall as a portion of revenue.
For now, Snowflake has a solid balance sheet to continue to invest with $3.9 billion in cash and short term investments compared to just $254.9 million in total debt.
Valuation
Snowflake trades at a price-sales ratio of 26, which is 49% cheaper than its five-year average.
The GF Value chart indicates a fair value of $578 per share and thus the stock is “significantly undervalued” by this measure.
Final thoughts
Both Asana and Snowflake are two tremendous growth stocks in my opinion. Asana’s products aren’t unique and face lots of competition. However, its billionaire founder and high stickiness with customers do give the business a competitive advantage. Snowflake is more unique from a technology perspective, but the company is burning a lot of cash to continue its rapid growth trajectory. This could pay off long term, but traditional value investors may consider this more of a risk.
