Nabors Industries Ltd. (NBR) and Two Other Companies Highlight Slow-Escalating Insider Buying

The aggregate dollar value of insider buying in April was lower than the value recorded in any other month in the past year or so, mainly owing to the first-quarter earnings season. The February of 2016 registered the greatest dollar volume of insider buying in the past 12 months, which successfully signaled the sharp turnaround of U.S. equities that followed shortly. It is widely known that corporate insiders tend to act as contrarian investors, which serves as one of the primary explanations as for why their purchases outperform broader market benchmarks. Apparently, directors and executives buy securities in their own companies for one simple reason, which is that they believe those securities are trading at a huge discount to their “intrinsic” value. Insider Monkey processed all Form 4 filings reporting insider buying that were submitted with the SEC on Monday and pinpointed several noteworthy insider purchases.

Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that imitating the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012 (read more details here).

This Alternative Auto Parts Maker Had CFO Buy Shares on Friday

To start with, LKQ Corporation (NASDAQ:LKQ) saw one of its most informed executives buy shares last week. Dominick P. Zarcone, Chief Financial Officer and Executive Vice President, purchased 5,000 units of common stock on Friday at prices that fell between $31.74 and $31.77 per unit, lifting his overall ownership to 233,491 units. The insider purchase comes after the provider of alternative vehicle collision and mechanical replacement parts released a satisfactory first-quarter earnings report, which revealed a top-line figure that beat estimates and a bottom-line figure that met analysts’ expectations.

The shares of the alternative auto parts maker have gained 9% since the beginning of 2016 and are chasing their 52-week high of $34.26 reached at the end of April. LKQ Corporation (NASDAQ:LKQ)’s primary source of revenue comes from the sale of vehicle replacement products and related services to collision and mechanical repair shops, but the company also generates revenue from scrap sales and sales of ingots and sows. LKQ’s first-quarter parts and services revenue, which accounted for approximately 95% of total revenue, increased to $1.82 billion from $1.64 billion recorded in the first quarter of 2015. As strange as it may sound, low levels of fuel prices are anticipated to encourage more driving across the United States and other countries, which may eventually lead to more car accidents and more business for auto-parts specialists such as LKQ.

In late April, LKQ Corporation announced the completion of its acquisition of distributor and manufacturer of automotive glass products Pittsburgh Glass Works LLC, which operates roughly 120 distribution branches that serve more than 7,000 automotive glass retailer shops on the North American continent. Moreover, PGW also operates 12 manufacturing, fabrication and assembly facilities. Meanwhile, LKQ’s shares are changing hands at around 15.5-times expected earnings, notably above the forward PE multiple of 10.8 for the auto parts and equipment sector. Alan Fournier’s Pennant Capital Management owned 4.70 million shares of LKQ Corporation (NASDAQ:LKQ) at the end of December.

Let’s head to the next pages of this article, which discuss the insider buying registered at Meridian Bioscience Inc. (NASDAQ:VIVO) and Nabors Industries Ltd. (NYSE:NBR).

Meridian Bioscience’s Board Member Buys New Stake

Meridian Bioscience Inc. (NASDAQ:VIVO) registered the first insider purchase in 2016 last week, when a Board member purchased a new stake. Catherine Sazdanoff, who was appointed to the company’s Board in August 2015, bought 7,700 shares on Friday at prices that ranged from $19.02 to $19.39 per share. Although the size of the stake is not overly large, the timing of this insider purchase may be particularly interesting. Why buy shares now and not two months ago? – A possible question at the top of investors’ minds at this point in time.

Meridian Bioscience, a life science company that develops and distributes clinical diagnostic test kits for different infectious diseases, has seen its market value decline by 5% year-to-date, partly owning to a seemingly disappointing earnings report recently released. At the end of March, Meridian Bioscience completed the $66 million-acquisition of Magellan Biosciences, which engineers, develops and manufactures products for blood testing that diagnose lead poisoning in children and adults. The deal was funded with $6 million cash on hand and a $60 million five-year term loan. In the meantime, Meridian Bioscience anticipates net revenues in the range of $195 million to $200 million for the fiscal year that ends September 30, after recording net revenues of $98.42 million for the six months ended March 31.

The life science company pays out a quarterly cash dividend of $0.20 per share, which equates to a dividend yield of 4.12%. The stock is priced at a forward P/E of 20.9, which is above the 15.5 ratio for the healthcare sector and the 18.00 for the Nasdaq 100 Index. Jim Simons’ Renaissance Technologies had 1.57 million shares of Meridian Bioscience Inc. (NASDAQ:VIVO) in its equity portfolio at the end of December.

Nabors Industries Witnesses Insider Trading for First Time in Years

Nabors Industries Ltd. (NYSE:NBR) had not witnessed any insiders buy or sell shares for a few years until last week. Director Howard Wolf purchased 15,000 shares on Thursday at a weighted average cost of $9.78 per unit, boosting his overall holding to 90,000 shares.

Nabors Industries is the operator of the world’s largest land-based drilling rig fleet. The company’s stock has gained 9% since the beginning of this year, but it is still down by 43% in the past 12 months. Nabors Industries operates as a provider of services for land-based and offshore oil and natural gas wells with a fleet consisting of 430 actively marketed rigs for land-based drilling operations and 42 actively marketed rigs for offshore drilling operations. The company’s largest customer in 2015 was state-owned company Saudi Arabian Oil Company; the world’s biggest oil producer accounted for 12% of Nabors Industries’ operating revenues last year. The demand of Nabors’ services represents a function of the capital spent by oil and gas companies on exploration, development and production activities. As a result, the company experienced a huge decline in dayrates and average number of rigs operating due to the decline in oil prices and reduced drilling activity.

Nabors Industries had long-term debt of $3.66 billion at the end of 2015, while cash and cash equivalents stood at $254.53 million. However, the company had $2.24 billion remaining under its $2.25 billion revolving facility and commercial paper program at the end of the year. It should be noted that Nabors repaid $975.1 million under its commercial paper program and revolving credit facility during 2015. All in all, the company’s balance sheet does not show signs of weakness at this point in time. Anand Parekh’s Alyeska Investment Group acquired a new stake of 6.10 million shares during the final quarter of 2015.

Disclosure: None