Insiders Are Buying These Stocks: Should You? Apache Corporation (APA), Kaman Corporation (KAMN), The Valspar Corporation (VAL)

Analysts are slightly bullish on the stock: the average recomendation is 2.10 (overweight), and the stock has an average price target $101.87, which implies that the stock has a potential price upside of almost 40% from current price levels. The most recent analyst report (UBS on Feb. 15) rated the stock a “buy,” and gave it a $94 price target.

Apache Corporation (NYSE:APA) pays a dividend of $0.80/share, which works out to a yield of 1.08%, slightly below the industry’s average. A hiatus in the early 2000s notwithstanding, the company has paid a dividend to its shareholders since 1987.

The stock is 32.72% below its 52-week high of $109.62, and only 1.5% above the 52-week low of $72.62. The stock price has fallen over 6% YTD, and has been experiencing negative momentum since March 2012. The fact that insiders are buying could suggest that the stock might be undervalued, and that better performance is in the offing.

My take: The stock has been severely beaten since mid last year, so this could be a good contrarian play. Investors should expect a bumpy ride, but the stock is trading at an attractive P/B ratio (0.92), and is in a solid business sector. Sure, there are probably other oil companies out there that will outperform Apache Corporation (NYSE:APA), and the negative momentum can scare prospective investors off, but the recent insider buying could signal that the company has been oversold, and that it can now be the time to buy some shares at a discount.

The bottom line

The stocks all engage in different business and have their challenges: Kaman Corporation (NYSE:KAMN) might suffer from decreased defense spending, The Valspar Corporation (NYSE:VAL) disappointed analysts and could stagnate if industrial demand doesn’t pick up, and Apache Corporation (NYSE:APA) stock has performed terribly since mid-2012. However, all three companies have had insiders, who hold unique insights into a company’s business, buying shares. I would recommend that investors conduct their own analysis and decide whether it is worth copying the insiders and investing in any of these relatively out-of-favor stocks.

The article Insiders Are Buying These Stocks: Should You? originally appeared on Fool.com and is written by Alex Bastardas.

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