I have a simple yet effective way to screen for potential stocks to buy. If a stock price has dropped significantly, I check the insider buying.
Insiders are people who have access to confidential information about the company. 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.
Over the years, many insiders have used this information to gain an unfair advantage over uninformed investors. One of the regulations that the SEC has established to prevent this kind of activity is the requirement that an insider must publicly disclose when they have made a transaction in their stock.
Because of this, we outsiders can profit. We can find out if the insiders are buying or selling.
There are many reasons why an insider of a company may be motivated to sell their stock. They could need to raise money for things such as buying a house, installing a pool, or paying a college tuition. But an insider will only buy the stock for one reason — they believe that the stock is undervalued and that it will trade at a higher price, where they can make money.
These companies are on my radar screen as potential stocks to buy due to the significant insider buying that has occurred recently.
Stocks to Buy: Carnival (CCL)
Carnival (NYSE:CCL) is the popular cruise ship company. It has worldwide operations but the headquarters are in Miami, Florida.
CCL has lost over 10% of its value since its June 20 earnings release was a disappointment to investors. Since then, there has been some significant insider buying.
Last week, the president and chief executive officer of Carnival, Arnold Donald, made some large purchases of the stock. He invested $1 million when he bought 22,050 shares around $45.31.
Mr. Donald also made a similar size investment in December, when the markets made the significant move lower and CCL was trading around current levels. He must believe that the stock is a good value at these levels.
Randall Weisenburger is a director of Carnival. He must also believe that the recent selloff is over because he just made a considerable personal investment as well. He just paid $46.50 for 20,000 shares. This is $930,000.
Hooker Furniture (HOFT)
Hooker Furniture (NASDAQ:HOFT) is a home furnishings and logistics company. That’s a fancy way of saying that they make and sell furniture.
The stock of HOFT has dropped over 50% in the past year. At this time last year it was trading around $48 per share. The most recent close was $21.32. In June the shares dropped from $27 to current levels due to disappointing earnings results. The company blamed it on tariffs and higher lumber costs.
Douglas Townsend is the co-president of the Home Meridian Segment of the company. He must believe that this selloff has come to an end. Mr. Townsend just invested over $100,000 when he bought 4,900 shares at $21.64.
Nymox Pharmaceutical Corporation (NYMX)
Nymox Pharmaceutical Corporation (NASDAQ:NYMX) is a biopharmaceutical company that engages in research and development of products for the ageing population. This sounds like a great business to be in, but NYMX must being doing something wrong. Over the past year the share price has dropped by 60%.
James Robinson is a director of Nymox. Mr. Robinson must be tired of watching the stock fall and thinks that this selloff is overdone. He invested $150,000 when he recently paid around $1.50 for 100,000 shares.
No firms on Wall Street follow this company. Some investors may consider this to be a good thing because they believe that if they can get into it before it is “discovered” by the big players, they will be able to make significant profits.
Kroger (NYSE:KR) operates various types of stores, including food and drug stores, multi-department stores, jewelry stores and convenience stores.
Like many retailers, KR stock has had a rough time over the past year. Shares have lost about 30% of their value since their highs last September. Some blame this on a combination of tariff concerns and the Amazon (NASDAQ:AMZN) effect.
Ronald Sargent is Kroger’s lead director. He must believe that the recent selloff has created a great buying opportunity. He just invested $107,000 of his personal funds when he bought 5,000 shares at $21.49.
This is the first time an insider has purchased shares of KR in two years. Maybe this is because the Board of Directors just increased the dividend by 14%.
Dave & Busters Entertainment (PLAY)
Dave & Busters Entertainment (NASDAQ:PLAY) owns and operates entertainment and dinning venues. Its concept is to offer customers the opportunity to eat, drink and play in one location.
Unfortunately for the shareholders of PLAY, they have not been as entertained as the short-sellers have. Since early May, the price of the stock has fallen by 30%. This includes the drop of 20% that occurred when the company missed earnings estimates in early June.
Michael Griffith is a director of Dave & Busters. He apparently thinks that this recent weakness in the stock has created a buying opportunity. He just invested almost $200,000 of his own money when he purchased 5,000 shares at an average price of $39.31.
Currently, 10 firms on Wall Street follow PLAY stock. They like it as well. The average rating is overweight and the average price target is $50.
Greif (NYSE:GEF) produces industrial packaging products and services.
In the past four months, the price of GEF stock has dropped from $42 to $34. This has been attributed by analysts to lower volumes of sales in some sectors and higher debt burdens. It could also be under pressure due to worries about tariffs.
Peter Watson is the president and chief executive officer of Greif. He must believe that the selloff is over and that the stock will appreciate from here. Mr. Watson just paid $32.71 for 15,000 shares of GEF. That is a $500,000 investment.
Seven firms follow Greif. Opinion seems to be widely varied. There are three buy ratings, three sell ratings, and one hold rating.
As of this writing, Mark Putrino did not hold a position in any of the aforementioned securities.