A number of events have occurred since the Q4 earnings release that translate from a bearish to a bullish bias. On April 1, the company announced the promotion of two divisional merchandising managers for the Wet Seal brand, both of whom will report directly to the CEO. Subsequently in a separate release, Wet Seal announced the resignation of the president of the Arden B. brand and a permanent replacement who is coming from competitor
bebe stores, inc. (NASDAQ:BEBE).
Wall Street is also becoming more bullish as management transitions the Wet Seal brand to a new fashion model, and the improved financial impact could be evident as soon as fiscal Q2 2013. Analysts at New York-based Brean Capital reiterated a “buy” rating and $3.75 price target on March 22. Following the management shake-up on April 8, analysts at Ascendiant Capital issued a “strong buy” rating and $4 price target on the stock.
Insiders have also been buying in recent weeks. Board member Lynda Davey purchased 62,500 shares of The Wet Seal, Inc. (NASDAQ:WTSL) on the open market for approximately $3.19 per share. The total transaction value amounted to $199,375 when the stock was bought on April 15.
On the recent earnings call, management announced plans to open 19 new Wet Seal stores during fiscal 2013. Value investor Karen Finerman also owned the stock during fall 2012, although she disclosed no position on her most recent 13F filing.
Foolish Bottom Line
While there are numerous reasons for corporate executives to sell, insider buying takes place for only one reason. Each of the companies above fits the definition of a special situation, and now may be the right time to invest based on recent conviction from insiders.
AeroVironment’s quarterly report cards can undoubtedly be affected by postponement in Washington. However, Wall Street is betting that demand for unmanned aircraft systems and autonomous electric vehicles will continue. If you believe timing is the only concern, then I suggest buying AVAV as a long-term speculative holding.
While AGCO Corporation (NYSE:AGCO) is experiencing a business slowdown in its end markets, there’s no question that the company has a long growth trajectory ahead in emerging markets such as India. I recommend accumulating the stock on any weakness and view AGCO as the safest pick among the group.
Finally, Wet Seal’s initial turnaround steps appear optimistic, although only time will tell if the new management team can make inroads on competitors such as L Brands. An outside buyer such as private equity may be likely if Wet Seal isn’t able to improve sales in the next 12 months.
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The article More Gains Ahead? Insiders Provide Clues on a Business Turnaround originally appeared on Fool.com.
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