Studies show that stocks bought by insiders narrowly outperform the market (read our analysis of studies on insider trading). We think that this is because insiders should tend to buy the stock when they are confident in the company’s prospects- after all, it is their own money they are risking rather than diversifying their wealth among other options. Investors cannot imitate every insider purchase, so we recommend treating these events similarly to a stock screen: as triggers to take a brief look at a company to see if it is worthy of further research. Here are five stocks insiders have reported buying recently:
A Board member at Time Warner Inc (NYSE:TWX) directly purchased 3,000 shares of stock on August 9th. The large media and entertainment company’s revenue was up 10% in the second quarter of 2013 versus a year earlier, with net margins expanding as well. The company also plans to spin out its publishing business, which could provide further upside for shareholders. At 17 times trailing earnings, Time Warner Inc (NYSE:TWX) trades about in line with its peers.
A senior vice president at Avon Products, Inc. (NYSE:AVP) bought 12,000 shares of the beauty and personal products company earlier this month. Recent results have been troubling for the company, as North American operations have held back earnings, but Avon Products, Inc. (NYSE:AVP) is seeking to improve by selling its underperforming jewelry business. The forward P/E here is 16 as markets look for earnings growth following the completion of this sale. D.E. Shaw, a large hedge fund managed by billionaire David Shaw, had been buying Avon Products, Inc. (NYSE:AVP) in Q1 2013 (check out more stocks D.E. Shaw was buying).
We’ve also tracked an insider purchase at Valeant Pharmaceuticals Intl Inc (NYSE:VRX), a $32 billion market cap drug developer. Valeant has roughly doubled in the last year as investors have become more optimistic about the marketability of the company’s products, and in fact last quarter its revenues grew by over 30% compared to the second quarter of 2012 though profitability remains poor. Billionaire Stephen Mandel’s Lone Pine Capital had initiated a position of 4.9 million shares in Valeant Pharmaceuticals Intl Inc (NYSE:VRX) between January and March of this year (find Mandel’s favorite stocks).
Oneok Partners LP (NYSE:OKS) saw its CEO buy more than 12,000 shares of the stock at an average price of $49.55 per share. The natural gas gathering, processing, and transportation company pays an annual yield of nearly 6% following the most recent increase in its quarterly dividend. The buildout of natural gas infrastructure is a huge opportunity as production in the onshore U.S. continues to rise, though Oneok Partners LP (NYSE:OKS) has not yet proven able to capitalize on this by converting its significant revenue growth into improvements on the bottom line.
Rounding out our list of stocks seeing recent insider purchases is $11 billion market cap retail and corporate bank KeyCorp (NYSE:KEY). The bank is valued at a small premium to some of the megabanks, with trailing and forward P/Es of 14 and 12 respectively as well as being priced slightly above the book value of its equity. We’d note that its profits have been down, in contrast to the good financial performance of many industry peers. Cliff Asness’s AQR Capital Managemnt disclosed ownership of about 11 million shares of KeyCorp (NYSE:KEY) in its most recent 13F filing (research more stocks Asness likes).
Disclosure: I own no shares of any stocks mentioned in this article.
