While we keep track of insider purchases in general, we are particularly interested in stocks that multiple insiders have been buying in a recent period. This is because stocks bought by a consensus of insiders are particularly likely- though not certain, of course- to outperform the S&P 500 (read our analysis of studies on consensus insider purchases). Since investors cannot buy every stock that insiders have bought, we think that it is a good idea to review these stocks, take a brief look at the company, and then decide whether or not each particular stocks is worthy of further research. According to our database of insider trading filings, here are five consumer and retail stocks that multiple insiders have bought in the last three months:
Several company officers bought shares of drug store GNC Holdings Inc (NYSE:GNC) in November at prices close to $33 per share. GNC reported high growth in the third quarter of 2012, with sales rising 16% and earnings up 28%. With a trailing earnings multiple of 16, double-digit growth rates would generally be very strong results for a value investor. We would, however, note that the most recent data shows 16% of the outstanding shares of the company held short. Billionaire Ken Griffin’s Citadel Investment Group increased the size of its position in GNC during the third quarter and closed September with 3.5 million shares in its portfolio (see Griffin’s stock picks).
Regis Corporation (NYSE:RGS), an owner and operator of hair salons such as Supercuts with a market capitalization of just under $1 billion, has also had multiple insiders buy share in the past three months. Regis is one of activist fund Starboard Value’s five largest single-stock positions according to its most recent 13F, at 2,8 million shares; Starboard is managed by Jeffrey Smith (find more of Smith’s favorite stocks). Regis is another popular short target, with 21% of the outstanding shares held by short sellers. The forward P/E multiple, based on expected results for the fiscal year ending June 2014, is 21.
Three more consumer stocks insiders love:
Several insiders have been purchasing shares of recent IPO Tilly’s Inc (NYSE:TLYS), a specialty apparel retailer whose product line is aimed at teens and young adults. While the market capitalization is only about $420 million, an average of 160,000 shares are traded per day and the current market price is over $15 (making for over $2 million in daily dollar volume). As with many other apparel retailers, the valuation at Tilly’s is dependent on future growth: the stock trades at 29 times trailing earnings but only 16 times forward earnings estimates. However, earnings have been not good recently.
$1.3 billion market cap women’s apparel and accessories retailer Francesca’s Holdings Corp (NASDAQ:FRAN) had a number of company officers and Board members buying the stock in mid December. It’s another growth prospect like Tilly’s- the stock carries trailing and forward P/E multiples of 32 and 23, respectively- and another company with a strong bearish community with 39% of the float held short. However, the company has been performing well: it its most recent fiscal quarter, net income was more than double its levels from a year earlier and revenue was 44% higher. Read our analysis of Francesca’s.
Pilgrim’s Pride Corporation (NYSE:PPC), a producer and distributor of chicken products, has had an insider and major shareholder JBS USA both buy the stock recently. Pilgrim’s is up 60% in the last year, and its current market capitalization of $2.2 billion places it at 30 times trailing earnings. Wall Street analysts expect strong earnings growth this year, and so this value is only 10 times consensus for 2013. That is an appealing earnings multiple, but since so much of the apparent value is due to expected growth this year we would have to investigate why the sell-side is so bullish before deciding whether or not Pilgrim’s is actually a value stock.
Disclosure: I own no shares of any stocks mentioned in this article.
