Insiders Have Bought Accenture Plc (ACN), Walgreen Company (WAG) and More

According to our analysis of studies on insider trading, there is a small outperformance effect for stocks bought by company insiders (read our analysis of studies on insider trading). This finding is generally attributed to the fact that unless insiders are particularly confident in the company, they will choose to diversify their wealth rather than buy stock and therefore increase their company-specific risk. Investors can’t imitate every insider purchase, but it’s possible to think of insider buying similarly to a stock screen: understand that these picks are on average an advantageous “hunting ground” for good picks, look for stocks which might be potential values, and perform more research on these names. Read on for Insider Monkey’s quick take on five stocks which at least one insider has bought recently:

Stefano Pessina’s healthcare and beauty company Alliance Boots has added more shares of Walgreen Company (NYSE:WAG); Pessina serves as a member of Walgreen Company (NYSE:WAG)’s Board of Directors. The drug store chain managed 16% earnings growth in its most recent quarter (which ended in May, and was the third of its fiscal year) compared to a year ago, though revenue only grew 3% over the same time frame. The stock is up 60% in the last year, though with Wall Street analysts being fairly optimistic about future performance this has resulted in a valuation of 14 times forward earnings estimates.

Insider Monkey’s database has shown multiple members of the Brown family buying shares- directly or indirectly- in Brown-Forman (NYSE:BF.B). The alcoholic beverage company’s fiscal year ended in April, with the 10-K showing growth on both top and bottom lines. However, markets have been quite optimistic about the company’s future and as a result Brown-Forman currently trades at 26 times trailing earnings. In addition to following insider trading activity, we also track quarterly 13F filings from hundreds of hedge funds and other notable investors, using the included information to help develop investment strategies (for example, the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year). This database can also be used to track interest in individual stocks; billionaire Richard Chilton’s Chilton Investment Company owned about 930,000 shares of Brown-Forman at the end of March (find Chilton’s favorite stocks).

An Accenture Plc (NYSE:ACN) officer’s family limited partnership bought 20,000 shares in early July at about $72 per share. The IT, consulting, and outsourcing services provider is valued at 17 times earnings, whether we compare the current stock price to trailing earnings or forward consensus from the sell-side. Business has been more or less stagnant- the company has been reporting higher earnings per share, but this has primarily been caused by a lower effective tax rate and net benefits from corporate reorganization. We wouldn’t count on either of those factors supporting EPS growth in the future.