Studies show that on average stocks bought by insiders tend to outperform the broader market (learn more about studies on insider trading). However, stocks seeing insider purchases don’t always outperform and investors don’t have enough capital to buy every single one of these stocks. As a result it’s best to treat insider purchases much like an investment screen: take a brief look at these stocks and decide if they are worth further research or not (unless an investor is already familiar with the company, in which case the purchase serves as just another piece of information that can be used to make a decision). Here are five stocks insiders have bought recently:
A Board member at Genuine Parts Company (NYSE:GPC) bought 1,000 shares of the stock at an average price of $63.03. Read more about this insider purchase. Genuine Parts gets about half of its revenue from the sale of replacement auto parts and the remainder of its business from office, industrial, and electrical products. Higher margins drove net income 14% higher in the third quarter of 2012 compared to the same period in 2011. The stock trades at 16 times trailing earnings, but we’re not sure how much more margin-driven growth the company could see. Renaissance Technologies, founded by billionaire Jim Simons, increased its stake during the third quarter (check out more stocks Renaissance was buying).
FutureFuel Corp. (NYSE:FF) executive vice president Samuel Dortch bought about 4,800 shares of the company’s stock at an average price of $11.60 per share. The company produces both chemicals and biofuels. The biofuels business has seen good sales growth, but operating income for the segment has been down; in contrast, higher margins in the chemicals business have been entirely responsible for that division’s recent improvements. The trailing P/E is 13, implying low growth expectations. Futurefuel also has a significant cash position relative to its market cap, even after a recent special dividend, and we’d estimate that its EV/EBITDA multiple is about 5x.
The spouse of a Board member at Piedmont Natural Gas Company, Inc. (NYSE:PNY) bought shares at an average price of $30.69. As a natural gas utility, changes in price are passed on to consumers and so there is little commodity exposure- for better or for worse. Piedmont doesn’t look particularly attractive as a value investment but as with many utilities it should have quite a bit of appeal to income or defensive investors: the stock’s beta is 0.5 and the dividend yield is close to 4%. Income investors may also want to look at electric utilities such as Duke or other cheap dividend stocks.
Here’s an income stock that multiple insiders are buying:
Another potentially attractive dividend stock is midstream natural gas company Access Midstream Partners LP (NYSE:ACMP), which operates gathering systems and other natural gas infrastructure. Our database shows three different insiders buying this stock recently; consensus insider purchases are particularly bullish signs. See a history of insider buying at Access Midstream. The current dividend yield is 5.3%, and the stock’s beta is 0.3. It has increased its dividend payment each quarter since November 2010, the date of its first dividend payment.
John Holder, who serves on the Board of Directors at Oxford Industries, Inc. (NYSE:OXM) bought 1,000 shares of the stock at $45.93 per share. Oxford is a $780 million market cap apparel company which owns Tommy Bahama and other brands; it operates retail stores under these names and also provides tailored clothing. Its most recent fiscal quarter ended in October, with the company seeing a large increase in earnings from a year earlier but more moderate revenue growth. As with many other apparel related companies such as Abercrombie & Fitch Co. (NYSE:ANF), the trailing P/E is higher than we’d normally like (at 24) though analyst expectations are for a good 2013 (the forward P/E is only 14). Of course, we would not take these projections at face value.
