Insider buying could be a powerful bullish indicator. When analyzing a company as a potential long-term investment, I always like to know the insiders are doing. It goes without saying that they probably have a much better idea of what is happening in the company than most analysts. They certainly know more about it than I do. I especially like to see what they are doing after their company stock has fallen dramatically.
I am not implying that there is anything illicit or illegal going on. When an insider wants to buy or sell their company’s stock they can as long as they follow very strict procedures. They have to file their intent to buy or sell with the SEC, and they are subject to blackout periods. These are times in which they cannot trade the stock. For example, an insider may be prohibited from buying or selling the stock in the thirty days before or after the earnings release is due to be reported.
There are many reasons why an officer or a director of a company may decide to sell their stock. They could need to raise money for things such as tuitions, divorce settlements, or bailing their delinquent kid out of jail.
But they only buy it for one reason! They believe that the stock is undervalued and eventually it will trade at a higher price where they can make a profit.
These stocks came up on my radar screen as potential buys due to the significant insider buying that has recently occurred.
U.S. Auto Parts Network (PRTS)
Click to Enlarge U.S. Auto Parts Network Inc. (NASDAQ:PRTS) is a company that is, not surprisingly, engaged in the auto parts business. They sell their products through different websites including www.usautoparts.net and www.autopartswarehouse.com.
In 2016 the company earned $.69 a share but last year they lost 14 cents per share. This is probably why the price of the stock has fallen from $3.50 to $1 in the past two years.
Lev Peker is the CEO. He must believe that the selloff is overdone because he just invested $90,000 of his own money when he purchased 90,000 shares at $1. David Meniane just joined the company in March as CFO. He must also believe that the stock is a bargain at these prices because he just bought 100,000 shares.
Only two firms on Wall Street follow this company and they must also believe the stock is a value at these prices. They each have a buy rating on it and the average target price is $3.50.
Affliated Managers Group (AMG)
Click to Enlarge Affiliated Managers Group, Inc. (NYSE:AMG) is an asset management company. They do not invest directly in the markets like a typical investment manager. AMG typically invests in these types of companies. They target small and growing investment management firms.
The stock of AMG has fallen dramatically over the past 18 months. A year ago it was trading around $160. It is currently trading around $90.
One would assume that the insiders of an investment firm would be able the recognize a bargain when the see it.
Hugh Culter is an Executive Vice-President. He just bought 1,133 shares at a price of $91.66. This is more than a $100,000 investment. He must be confident that the selling is overdone.
Eleven firms on Wall Street follow AMG and they seem to like it as well. The average rating is an overweight and the average price target is $115.
Click to Enlarge SunOpta, Inc (NASDAQ:STKL) engages in the production and sale of organic and non-genetically modified food and beverage products. Healthy and plant based foods is a rapidly growing business. It seems like you cant go anywhere without seeing vegan or vegetarian restaurants.
STKL used to be profitable, but since 2015 they have lost money every year. Last year it lost $1.74 a share and the four firms that follow it all think that there will be additional losses next year.
Mr. Joseph Ennen is the CEO of the company. He must believe that the prospects for the future of the company are bright. He just acquired 125,000 shares around an average price of $4.25.
Spark Energy (SPKE)
Click to Enlarge Spark Energy Inc. (NASDAQ:SPKE) provides electricity and natural gas. The business serves both retail and commercial customers. It operates through two segments, Retail Electricity and Retail Natural Gas.
From 2015 through 2017 the company was profitable. Earnings per share during those years were 53 cents, 56 cents and $1.21. Then last year the company lost 69 cents. Maybe this is why the stock has fallen by 50% over the past two years.
Only one company follows SPKE and they believe its fairly valued. They have a hold rating on it with a $10 target price.
Keith Maxwell is a director of SPKE. He obviously likes the stock at these prices. He just invested $220,000 of his own money in it.
Click to Enlarge Cutera Inc. (NASAQ:CUTR) provides laser and energy based aesthetic systems. I really have no idea what that means but that it what they say they do. They have been around for about 20 years and are based in California.
In January CEO James Reinstein resigned after just two years. It could be because the stock lost about 60% of its value between June and December.
Maybe Daniel Plants thinks that it is a good thing that Mr. Reinstein is gone. He is a Director of the company and he just purchased 7,200 shares. At current prices that is about a $120,000 investment.
Wall Street likes this company as well. Four firms follow it. The average rating is overweight and the average price target is $21. That is about a 10% premium to where it is currently trading.
Vaalco Energy (EGY)
Click to Enlarge Vaalco Energy Inc. (NYSE:EGY) engages in the acquisition, exploration, development and production of crude oil and natural gas. Like many companies in this field it is headquartered in Houston, Texas.
The price of EGY has fallen about 40% in just one month. At these prices the PE Ratio is only 1.10.
Two insiders have decided to take advantage of this weakness. Cary Bounds is the CEO. He just bought 6,000 shares. Alfred Knapp is a Director. He just invested $168,000 of his own money when he paid $1.68 for 100,000 shares.
This company isn’t followed by Wall Street but it seems to be headed in the right direction. In 2015 it lost ($2.72) per share. In 2016 that improved to a loss of 45 cents a share.
In 2017 the company reported a profit of $.16 per share, and last years profit was $1.62 a share.
Intrepid Potash (IPI)
Click to Enlarge Intrepid Potash, Inc. (NYSE:IPI) produces and markets potash and langbeinite products. They sell their products in three different markets. They can be used in fertilizers for agriculture, as a component for fracking, and also as an ingredient in animal feed (yikes … all of a sudden vegetarianism seems a bit more appealing to me).
The company recently lost about 30% of its value when investors were disappointed with first quarter earnings.
Robert Jornayvaz is the Chairman, President, and Chief Executive Officer of IPI. He apparently is trying to take advantage of this selloff. He just spent $85,000 when he paid $3.27 for 85.000 shares.
The Street is mixed on this one. Five firms cover it. There is one buy rating, two holds, and three sells ratings on the stock.
As of this writing, Mark Putrino did not hold a position in any of the aforementioned securities.