by Tim Melvin | April 1, 2014 12:02 pm
There has been a lot of talk — including a fair amount from me — about the increase in insider selling as markets have moved higher. Officers and directors of U.S. corporations have been selling a lot more stock that they have been buying in the companies they oversee.
Given this backdrop, when I see clusters of insider buying, I take notice.
Buying in the current elevated market indicates a high degree of confidence in the direction of your company — and your stock’s ability to do well regardless of market conditions. I ran a screen to see which companies had seen some heavy insider buying recently, and there are some interesting names on the list.
Tile Shops Holdings (TTS) came public back in 2012 and was initially a hot deal, doubling in the months after the deal was priced. It has been pretty much downhill from there, and the shares have lost half their peak value and are back near the offering price.
The company has 91 stores selling manufactured and natural stone tiles, setting and maintenance materials. There were questions about the company involvement with a Chinese exporter that was owned by the CEO’s brother-in-law. The investigation dragged on longer than expected but finally concluded with a finding of no serious wrongdoing by the company or its officials.
Insiders believe the business will continue to prosper and the stock is now positioned to recover. Four different officers and directors have purchased more than 145,000 shares in the past month.
One of the really interesting stocks on the list is Clean Energy Fuels Corporation (CLNE). The company operates fueling stations that allow vehicle fleets to use natural gas to run their vehicles. CLNE also sells compressed natural gas for light-, medium- and heavy-duty vehicles; and liquefied natural gas for medium- and heavy-duty vehicles. CLNE has a pretty good customer base, with 779 fleet customers operating approximately 35,240 natural gas vehicles.
While the use of nat-gas-fueled cars has not taken off as fast as many had hoped, you can file it under “has to happen” as we continue to reach for true energy independence. T. Boone Pickens has been a pretty shrewd energy investor over the year and he is the largest shareholder of the company. The stock is down more than 30% in the past year, and at least three directors think it is nearing a bottom — they opened their checkbooks and bought a total of 47,000 shares in the past month, worth $438,000.
These are two most interesting companies that have shown insider cluster buying in the past two months. I have always wondered why so few investors pay any attention to the buying and selling activities of the people actually running the companies. While not foolproof, this information has proved to be a strong sign of much higher prices over the next few years.
At the time of publication, Melvin had no positions in the stocks mentioned.
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