Insider purchases tend to be bullish signals (read more about insider trading) and consensus insider purchases- when multiple insiders buy the stock within a fairly short time frame- are particularly interesting events. Learn more about consensus insider buying. We believe that these stocks tend to perform well following insider purchases because the transactions themselves signify confidence in the company- otherwise, the insiders would prefer to diversify their wealth away from being concentrated in one single business as per economic theory. In any case, we track consensus insider purchases and take a brief look at the companies involved so that investors can review them quickly and decide whether or not to research them further. Here are five finance and insurance stocks that multiple insiders have bought in the last three months:
We have recorded multiple insiders buying shares in Citigroup Inc. (NYSE:C) within the last three months. Even though its stock price has risen 33% in the last year, the megabank still trades at a significant discount to the book value of its equity with a P/B ratio of 0.7. Citigroup was one of the most popular stocks among hedge funds in the third quarter of 2012, joining other large banks on our top ten list (see more stocks hedge funds loved). Billionaire David Tepper’s Appaloosa Management was one of the funds reporting a large position in the company (check out Tepper’s stock picks). In the fourth quarter of 2012, Citi reported a 25% increase in earnings compared to the same period in 2011.
Another bank- though a considerably smaller one- which insiders have been buying is TCF Financial Corporation (NYSE:TCB). TCF, as the holding company for TCF National Bank, is based in the Midwestern U.S. (almost half of its retail branches are in Illinois). Unlike Citigroup, TCF is valued at a premium to the book value of its equity- the P/B ratio is 1.3. The company is unprofitable on a trailing basis due to a bad quarter in the first three months of 2012, but Wall Street analysts believe that TCF is performing more strongly now. Their expectations for 2013 imply a current-year P/E multiple of 14.
THL Credit, Inc. (NASDAQ:TCRD), a private equity and debt firm, had three different company officers purchase shares in December. THL stands out for its dividend yield of almost 9%, based on quarterly payments of about 30 cents per share over the last year. The fact that the company has only been paying dividends for a short time, and has been raising them to that level, could be taken as a good sign- increased dividend payments could be on the way- or a bad one as it would be more likely to cut or suspend its dividend. THL trades at a slight premium to book value and at 11 times consensus earnings for 2013.
An officer and multiple Board members have bought shares of Hilltop Holdings Inc. (NYSE:HTH), a property and casualty insurance company with a market capitalization of about $730 million (an average of 320,000 shares are traded per day and the current price is about $13, so there is plenty of dollar volume). Hilltop reported a slight increase in revenue in the third quarter of 2012 versus a year earlier. The P/B ratio is 1.2, so the market is pricing this company slightly above book value as well.
Mortgage data, analytics, and services company Corelogic Inc (NYSE:CLGX) is another stock seeing consensus insider purchases. CoreLogic’s stock price is up 82% from a year ago, which has carried it to a high trailing P/E multiple of 18. The sell-side expects earnings growth in 2013, and so the current-year P/E is only 16, but we would still be wary of investing in the stock. Highfields Capital Management, which is managed by Jonathon Jacobson, cut its stake in the company during the third quarter of 2012 but still reported a position of 6.1 million shares at the end of September (find Jacobson’s favorite stocks).
Disclosure: I own no shares of any stocks mentioned in this article.
