I spent part of my weekend doing my usual routine of looking at the latest list of top insider purchases in this week's Barron's while having the Red Zone going to keep tabs on my fantasy football team. Two companies with top insider buys caught my eye this week:
International Game Technology (IGT) is one of the leading manufacturers and marketers of electronic gaming equipment and systems worldwide. Its core focus is on the casino space.
Four reasons IGT is undervalued at under $14 a share:
- A director purchased $500K of new shares in the second week of November. It was the first insider purchase in 2012.
- Consensus earnings estimates for both FY2012 and FY2013 have risen nicely on IGT in the last month.
- The stock sells at under 11x forward earnings, a discount to its five-year average (17.6).
- IGT has a five-year projected PEG of exactly 1, and sells at just 8 times operating cash flow.
AGCO Corporation (AGCO) manufactures and distributes agricultural equipment and related replacement parts worldwide.
Four reasons AGCO is undervalued at $46 a share:
- Mallika Srinivasan, the current chairman and CEO of Tractors and Farm Equipment Limited and director of AGCO, has bought over $100mm in shares over the past two months. AGCO was on the top of Barron's insider buy list this weekend.
- AGCO sells at just 6.5x forward earnings, a huge discount to its five-year average (14.3).
- The company is selling near the bottom of its five-year valuation range based on P/E, P/CF, P/S and P/B.
- AGCO has beat earnings estimates in 11 of the last 12 quarters. The company does get around 50% of its revenue from Europe. However, I believe the pessimism is overdone on the stock. Europe is challenging, but crop subsidies to help farmers across the continent do not seem to be on the "austerity" chopping block in any of the articles I have seen on what countries are doing to get their budgets under control.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AGCO over the next 72 hours.