Examining Telos Corporation (TLS) Amidst Insider Buying Trends
Insider buying activity often provides valuable clues about a company’s prospects. Executives and other key personnel typically possess a deeper understanding of their companies than the average investor. Their insights extend beyond surface-level financial data, allowing them to assess long-term growth, operational trends, and industry shifts well before they become widely known.
When these insiders purchase shares of their own company, it can signal confidence in the firm’s future. This is because insiders usually have a vested interest in sustained growth and have access to information that is not typically available to analysts and other investors. Unlike institutional investors who may react to short-term market fluctuations, insiders take a longer-term approach, making their purchases a compelling indicator of potential upside. Furthermore, their ability to leverage confidential information extracted from their relationships with customers and suppliers can provide precise outlooks on demand evolution and industry trends.
Empirical studies support the idea that insider buying can be a reliable indicator of stock price returns. However, it is important to note some caveats. Stocks with significant levels of insider purchases tend to outperform the broader market in the subsequent periods. These insiders have access to non-public information that empowers them to make informed investment decisions that public investors do not. Studies have indicated that insider purchases, particularly by top executives and directors, can often correlate with future price appreciation. This correlation is especially true during periods of market uncertainty or when purchases are conducted in clusters.
It is important to note that investors should not overreact to every single transaction made by an insider, because those can be motivated by purposes unrelated to the general direction of the business. What is more important to look for is clusters of insiders buying considerable amounts of stock during specific periods, such as material developments in the business or industry. Insiders often actively purchase their own company’s stock during periods of rapid decline in the stock price. This can be due to overreaction to some negative short-term developments in the business, like missing quarterly earnings. With greater visibility into the future, insiders have a better understanding of the magnitude of risk, and can thus find opportunities stemming from the fears of less informed investors. Studies also find that peak buying and selling from insiders usually happens at market extremes. For example, record valuations and market capitalizations tend to coincide with accelerated selling by insiders, while market troughs and strong investor fears tend to coincide with insiders beginning to buy.
With the US stock market currently near peak valuations, insider buying has been subdued overall, particularly within expensive sectors like technology. Research indicates that the top 50 largest US technology companies show negative overall insider transactions, meaning that selling has dominated over buying. In this context, discovering technology stocks where insiders are actively purchasing shares could offer unique insights.
Methodology
Our analysis used Insider Monkey’s insider trading stock screener to find technology stocks showing at least two insiders buying shares worth at least $100,000 in 2024. We believe that multiple insiders buying a notable amount of stock suggests a higher level of confidence in the company
For all the companies we also include the number of hedge funds that own it and include in the article the top 10 names with the largest hedge fund ownership, according to Insider Monkey’s database of Q4 2024.
Why Hedge Fund Activity Matters
We are also interested in the stocks that hedge funds are investing in. Our research has shown that imitating the top stock picks of the best hedge funds can enable us to outperform the market. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, outperforming its benchmark by 218 percentage points (see more details here).
Telos Corporation (NASDAQ:TLS)
- Number of Hedge Fund Holders: 8
Telos Corporation (NASDAQ:TLS) is a cybersecurity and IT solutions provider. They specialize in secure communications, cloud security, and risk management services for government agencies, defense, and commercial enterprises. The company’s solutions help organizations protect critical infrastructure. They also ensure regulatory compliance, and enhance operational resilience in an evolving cyber threat landscape. With expertise in identity management, zero-trust security, and cloud-based risk assessments, TLS supports mission-critical operations for US federal agencies and Fortune 500 companies. TLS is one of the tech stocks with insider buying.
During 2024, the share price for Telos Corporation (NASDAQ:TLS) has been rangebound, while the company posted strong results in the latest 3Q 2024 – TLS delivered revenue near the high end of guidance and exceeded adjusted EBITDA guidance for the quarter. The company made significant progress on two major programs: the Defense Manpower Data Center contract worth up to $485 million was resolved in their favor and is now generating revenue, while the TSA PreCheck program expanded from 83 to 173 enrollment locations. In 2025, management expects revenues to return to growth, with additional uplift from the programs.
Telos Corporation (NASDAQ:TLS) has also taken strategic actions to reduce costs and reallocate resources by discontinuing selected solutions that were not generating acceptable returns. With that in mind, it is not surprising that insiders are seeing opportunities with their own company and bought significant amounts of shares in 2024.
Overall, TLS ranks among the technology stocks where insiders have been actively buying shares in 2024. While the potential of TLS is acknowledged as an investment, this analysis suggests that AI stocks could deliver even higher returns.
