I have paid attention to insider buying for most of my career.
There can be a myriad of reason for inside sales of stocks but there is really only one for an executive to buy shares of the company they run. I pay special attention when the CEO cracks open his check book and makes a large, open-market purchase of stocks in his company.
The CEO sees all the future plans, new products and other factors that could lead to significant improvement in the business.
There is a significant chance that they already have stock appreciation rights, options and other stock-based compensation that will increase in value if the stock goes up, so additional buying shows a very high degree of confidence in the direction of price of the stock over the next few years.
Recent Insider Buying: Opko Health Inc. (OPK)
One of the largest buys in the past month was by the CEO of Opko Health Inc. (OPK). CEO Phillip Frost spent $864,000 on March 30 to buy more shares in the company he runs.
Opko is a biopharmaceutical and diagnostics company that is involved in the discovery, development and commercialization of drugs and medical technologies. The diagnostics division runs BioReference Labs, which offers detection, diagnosis, evaluation, monitoring and treatment of diseases. They also offer genetic testing services.
The bio-pharmaceutical division is involved in drugs for several conditions, including kidney disease and hemophilia.
It is worth paying attention when Frost is buying shares of his own company, as he has built two pharmaceutical companies in his lifetime and sold them at huge profits for himself and his shareholders.
Frost has been a regular buyer of Opko shares for some time and has been a heavy buyer even as the stock has fallen 28% in the past year.
Recent Insider Buying: Care Capital Properties Inc (CCP)
CEO Raymond Lewis spent $513,000 on March 28 to buy shares of nursing home operator Care Capital Properties Inc (CCP).
The company was spun out of Ventas, Inc. (VTR) in 2015 and owns 358 properties in 36 states that are leased on triple net basis to 42 private regional and local health care providers.
Since being spun off, the company has refinanced its seven-year dent at 3.25% and its five-year dent at just 2.73%. The annualized dividend rate is over 8% so Lewis will be well paid while he waits for the shares to appreciate.
Care Capital is one of just three pure-play skilled nursing care REITs and should be a beneficiary of the aging population in the United States. Baby boomers are now entering the stage where skilled nursing care becomes a greater need and that should provide solid growth opportunities for the REIT.
The stock has fallen by more than 20% in the past six months and Lewis has taken advantage of the opportunity to increase his holdings at what he considers a bargain price.
Recent Insider Buying: Holly Energy Partners, L.P. (HEP)
CEO Michael Jennings of Holly Energy Partners, L.P. (HEP) spent almost $500,000 in late March to buy more shares in his pipeline company.
Holly Energy owns petroleum product and crude pipelines, storage tanks, distribution terminals in many states, including Texas, New Mexico, Utah, Wyoming and Kansas. They also have interests in several other pipeline companies in the United States.
Shares of Holly Energy have held up much better than many other energy MLPs and have returned more than 5% over the last year. Jennings clearly believes that more good times are ahead for the pipeline operator and has backed up his convictions with his cash.
The shares currently yield 6.8%, so he will be earning well while he waits for the shares to appreciate further.
As of this writing, Tim Melvin did not hold a position in any of the aforementioned securities.