The share price weakness is the result of a liquidity crunch as the company isn’t generating enough cash flow to support the current dividend. Though investors are worried that the divided may be cut, management recently told analysts that other options will instead be pursued, such as asset sales or overhead cuts. NuStar “stressed that a distribution cut is not actively being explored currently,” reported analysts at Goldman Sachs in Sept. 10 note to clients.
If that dividend is indeed safe, then investors are likely to refocus on it, as it currently yields 10.7%. The insider-buying angle is intriguing, as these insiders also share in the dividend, and if they had a view that the dividend would soon be slashed, they’d be selling, not buying. On top of that yield, shares have 15% potential upside to Goldman’s $26 price target.
3. Lionbridge Technologies, Inc. (NASDAQ:LIOX)
I recently profiled this low-priced stock, noting that a key shareholders had been acquiring stocks in the open market in previous months. Well, that shareholder, Glenhill Capital, is at it again, making its biggest purchase yet.
In late September, Glenhill bought 175,000 more shares, at prices far higher than previous purchases. Glenhill now owns more than 650,000 shares of Lionbridge and clearly sees further upside in the months ahead.
4. Swift Energy Company (NYSE:SFY)
Insiders have been stepping up their buying at this oil and gas driller as shares have fallen far from the 52-week high of $19.69. A pair of insiders bought nearly $300,000 in stock (at an average price of $11.75) in the past two months.
Swift has a solid geographic position in South Texas’ Eagle Ford Shale, but many of its key wells initially proved to have disappointing levels of output. Those wells are now producing better oil and gas flows, though investors are waiting to see how that will impact cash flow — a key consideration for a company that has seen long-term debt rise from under $500 million in 2010 to more than $1 billion today.
Swift is expected to discuss asset sales (outside of the Eagle Ford region) when third-quarter results are discussed Oct. 31. If cash flows are indeed starting to strengthen, and the debt load starts to fall (thanks to asset sales), then this beaten-down energy driller may be poised for a rebound.
Risks to Consider: Insiders shouldn’t be confused with stock pickers. They don’t always have a keen sense of whether their shares are overvalued or undervalued. They instead should just be seen as a barometer of business conditions at their firms.
Action To Take –> Insiders tend to be especially active when the market gets choppy, so if this month’s troubles in Washington pressure stocks more deeply, you should devote more time to analyzing the moves at insiders, many of whom have a clear sense of their own company’s health, regardless of broader economic distractions.
This article was originally written by David Sterman and posted on StreetAuthority.
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