An interesting method of assessing the direction a stock can take is by monitoring insider purchases. This is because company insiders hold information about catalysts and industry trends, which is not available to other investors. Institutional investors also have vast resources at their disposal to assess the potential of stocks.
This makes following insider and institutional buying trends an effective investment strategy. The following few companies have seen significant insider and institutional interest in the last few months.
Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR)
Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) is a biopharmaceutical company involved in the development and commercialization of drugs for the treatment of rare diseases. The primary product candidate of the company is Juxtapid capsules for patients with homozygous familial hypercholesterolemia. Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) distributes its products to customers through a specialty pharmacy.
The company has a market capitalization of approximately $1 billion. In the last 6 months, insiders have acquired an additional 624,767 shares of the company, bringing total insiders holdings to 5.8 million shares. This net increase is an 11% increase in total shares being held by Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) insiders. During the same time frame, institutions have also increased their holdings by approximately 2.1 million shares, increasing total institutional holding by approximately 10%.
The stock is trading near its mean sell side target price of $40.2. The company’s forward P/E is very high at 225 times, but a low PEG ratio of 0.25 indicates that there’s growth ahead.
Dole Food Company, Inc. (NYSE:DOLE)
Dole Food Company, Inc. (NYSE:DOLE) is one of the world’s largest distributors of fresh fruits and vegetables to a global clientele. The U.S.-based company has two different segments for Fresh Fruits and Fresh Vegetables. The total market capitalization of Dole Food Company, Inc. (NYSE:DOLE) is around $1 billion.
Insiders have purchased 4.2 million shares of the company during the last 6 months, increasing insiders’ holdings of Dole Food Company, Inc. (NYSE:DOLE) by 7.6%. Insiders hold a total of 59.6 million shares of the company. During the same period, institutions have also shown an interest in the stock and added 11.7 million shares.
The stock is trading near its mean sell side target price of $10.7. The forward P/E of Dole Food Company, Inc. (NYSE:DOLE) is 13.6 and PEG ratio is pretty high at 2.4. Using consensus EPS estimate of $0.8 for 2014 and P/E of 15x, we can establish a target price of $12. This shows that there is an attractive upside, and insider interest shows long potential in the company.
Janus Capital Group Inc (NYSE:JNS)
Janus Capital Group is an asset management company with a portfolio of approximately $167 billion. The group provides a number of services including tax planning, investment for college, retirement planning etc. Janus Capital has a pretty diverse clientele ranging from individual investors to institutions.
The company has a market capitalization of approximately $1.7 billion, and in the last 52 weeks the stock price has fluctuated between $6 and $10. Insiders have purchased a mammoth 30 million shares of the company during the last 6 months, increasing insider holdings to 39 million shares, a massive increase of 340%. In the last six months institutions have reduced their holdings in Janus Capital Group by 22%.
The stock is currently trading at a 6% premium to mean sell side target price of $8.7 and forward P/e of 12.6. Despite trading at its target price, I believe insider trades show strong prospects for the company and make it an attractive investment option.
The bottom line
The companies above have solid fundamentals and bullish insider sentiment. Insider interest is just one of the many ways which can be used to asses the potential of an investment. Therefore, I would recommend that investors do their own due diligence before making a long term investment in any of the above options.
The article 3 Companies Insiders Love originally appeared on Fool.com and is written by Mohsin Saeed.
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