Studies show that on average stocks bought by company insiders tend to beat the market (read more about studies on insider trading). In theory, this is because in order for an insider to forgo the benefits of diversification he or she must be confident that the stock will do well. While investing in stocks seeing insider purchases doesn’t always pay off, and it’s impossible to buy every single stock that insiders are buying, looking at this set of stocks can serve as a worthwhile screen for companies that are worth researching further. Here are five stocks which, according to our database of filings, have recently been bought by at least one company insider:
Fastenal Company (NASDAQ:FAST)’s CFO purchased 2,600 shares at an average price of $41.50. This was particularly interesting because another insider had bought shares in late November; while that buy had been small, consensus insider buying is particularly bullish. SAC Capital Advisors, which is managed by billionaire Steve Cohen, bought 1 million shares of Fastenal between July and September (find more stock picks from Steve Cohen). Fastenal reported double-digit growth rates in revenue and earnings in its most recent quarter compared to the same period in the previous year, but at a trailing P/E multiple of 30 we think that it’s too expensive for us.
A Board member at Occidental Petroleum Corporation (NYSE:OXY) bought 5,000 shares at an average price of $73.43 per share. The $61 billion market cap oil major had made our list of the most popular energy stocks among hedge funds for the third quarter of 2012 (see the full rankings) and carries trailing and forward P/E multiples of 10. Unfavorable price trends in natural gas have caused Occidental’s net income to decline over the last year, though the same is the case for many other large oil and gas companies which trade at low multiples as well. We’d consider Exxon Mobil Corporation (NYSE:XOM) or BP plc (NYSE:BP) to be better buys. Learn more about Occidental compared to its peers.
The CEO of Curis, Inc. (NASDAQ:CRIS), Daniel Passeri, bought 25,000 shares on December 6th at an average price of $3.03 per share. Curis is a $250 million market cap cancer drug discovery company (an average of 320,000 shares are traded daily, and the current stock price is about $3.15, creating about $1 million in daily dollar volume). The stock is down 22%, and analysts expect Curis to be unprofitable both this year and next year. There’s also considerable short interest, but apparently the company’s CEO thinks the stock has been too beaten down by the market and his buy is worth noting.
J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) had a family trust connected to one of its Board members buy 2,600 shares of the company’s stock at just under $59 per share. J.B. Hunt has an advantage over other companies in the trucking industry in that it has a very strong intermodal business, which has boosted its growth rate- earnings last quarter were up 14% from a year ago. Billionaire Stephen Mandel’s Lone Pine Capital had initiated a position of 3.8 million shares during the third quarter (check out Mandel’s stock picks). Still, the stock is valued at 23 times trailing earnings, considerably higher than many other trucking companies. When we had looked at J.B. Hunt (read our analysis of the company), we had found peers Swift Transportation Co (NYSE:SWFT) and Old Dominion Freight Line (NASDAQ:ODFL) to be more intriguing value prospects.
Gary Wescombe, who sits on the Board of Directors at Healthcare Trust of America Inc (NYSE:HTA), bought 20,000 shares at an average price of $10.10 per share. Healthcare Trust of America is a real estate investment trust which invests in healthcare-related real estate (such as office buildings), and like many other REITs pays a substantial dividend yield. The $2.1 billion market cap company went public in June and is about flat since that time.
