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A study (pdf) titled "Predictive and Statistical Properties of Insider Trading" by James H. Lorie and Victor Niederhoffer reached the following conclusion:

This study indicates that proper and prompt analysis of data on insider trading can be profitable, although almost all previously published studies have reached the contrary conclusion. When insiders accumulate a stock intensively, the stock can be expected to outperform the market during the next six months. Insiders tend to buy more often than usual before large price increases and to sell more than usual before price decreases.

Intensive insider buying was defined by the following three criteria:

  1. The stock was purchased by three or more insiders within one month.
  2. The stock was sold by no insiders in the month of intensive purchasing.
  3. At least two purchasers increased their holdings by more than 10 percent.

The stocks meeting these criteria outperformed the market by 9.51 percent in the six months following the period of "intensive" purchasing.

In this article I will feature five stocks that met these three criteria of intensive insider buying during the month of November.

1. FS Bancorp (NASDAQ:FSBW) is the holding company for 1st Security Bank of Washington. The Bank provides loan and deposit services to customers who are predominately small and middle-market businesses and individuals in western Washington through its six branches in suburban communities in the greater Puget Sound area.


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Insider buys

  • Ted Leech purchased 1,000 shares on November 29 and currently holds 8,187 shares of the company. Ted Leech is the Chairman of the Board.
  • Matthew Mullet purchased 2,000 shares on November 15 and currently holds 12,657 shares of the company. Matthew Mullet is Chief Financial Officer of the company.
  • Drew Ness purchased 1,640 shares on November 6 and currently holds 2,145 shares of the company. Drew Ness serves as a Chief Operating Officer of the company.

Financials

The company reported the third-quarter financial results on October 26 with the following highlights:

Net income $3.3 million
Book value $18.32 per share

Competition

FS Bancorp's competitors include Bank of America Corporation (NYSE:BAC) and Wells Fargo & Company (NYSE:WFC). Here is a table comparing these companies.

Company FSBW BAC WFC Industry
Market Cap: 42.31M 105.63B 172.40B 37.64M
Employees: 85 272,600 267,000 232.00
Qtrly Rev Growth (yoy): 0.54 -0.26 0.10 0.10
Revenue: 16.94M 80.66B 77.30B 21.93M
Gross Margin: N/A N/A N/A 0.00
EBITDA: N/A N/A N/A N/A
Operating Margin: 0.22 0.18 0.39 0.27
Net Income: 4.53M 3.98B 17.03B N/A
EPS: 1.40 0.37 3.18 0.53
P/E: 9.33 26.49 10.30 13.92
PEG (5 yr expected): N/A 2.98 1.33 1.41
P/S: 2.50 1.32 2.25 2.48

FS Bancorp is trading below the industry average P/E ratio.

My analysis

The stock is currently trading close to its 52 -week highs. There have been three insider buy transactions and there have not been any insider sell transactions during the last 30 days. The stock could be a good pick below the book value of $18.32 per share.

2. Pacer International (NASDAQ:PACR) is a leading asset-light transportation and global logistics services provider. As one of the premier intermodal transportation providers in North America, the company's intermodal segment represents approximately 75% of its total revenues.


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Insider buys

  • Paul Svindland purchased 15,000 shares on November 29 and currently holds 265,000 shares of the company. Paul Svindland is Chief Operating Officer of the company.
  • Daniel Avramovich purchased 30,000 shares on November 29 and currently holds 257,077 shares of the company. Daniel Avramovich was appointed Chairman and Chief Executive Officer of Pacer International in Dec 2009, with executive responsibility for all Pacer International business units.
  • John Hafferty purchased 5,000 shares on November 29 and currently holds 30,371 shares of the company. John Hafferty serves as Chief Financial Officer of the company.
  • Douglass Coates purchased 3,000 shares on November 29 and currently holds 27,489 shares of the company. Douglass Coates has served as a director of the company since September 2007.
  • Robert Grassi purchased 20,000 shares on November 29 and currently holds 51,489 shares of the company. Robert Grassi has served as a director of the company since March 2009.

Financials

The company reported the third-quarter financial results on October 25 with the following highlights:

Revenue $348.9 million
Net income $1.1 million
Cash $12.3 million

Outlook

  • Full year 2012 earnings guidance is between $0.10 and $0.14 per share. The company expects revenues in 2012 to range between $1.40 billion and $1.45 billion.
  • The company expects earnings per share in 2013 to range between $0.25 and $0.35.

Competition

Pacer International's competitors include Hub Group (NASDAQ:HUBG), JB Hunt Transport Services (NASDAQ:JBHT) and Union Pacific Corporation (NYSE:UNP). Here is a table comparing these companies.

Company PACR HUBG JBHT UNP Industry
Market Cap: 116.62M 1.20B 6.94B 57.12B 2.58B
Employees: 1,010 1,339 15,631 45,882 13.39K
Qtrly Rev Growth (yoy): -0.07 0.07 0.11 0.05 0.08
Revenue: 1.42B 3.09B 4.92B 20.78B 2.20B
Gross Margin: 0.11 0.11 0.17 0.44 0.31
EBITDA: 13.70M 130.88M 734.90M 8.36B 326.80M
Operating Margin: 0.00 0.04 0.10 0.32 0.15
Net Income: 3.20M 66.12M 298.94M 3.87B N/A
EPS: 0.09 1.78 2.50 8.06 1.91
P/E: 37.00 17.91 23.45 15.06 14.85
PEG (5 yr expected): 1.93 1.15 1.10 1.02 1.13
P/S: 0.08 0.39 1.41 2.75 1.72

Pacer International is currently trading below the industry average P/S ratio.

My analysis

The stock is currently trading close to its 52 -week lows. There have been five insider buy transactions and there have not been any insider sell transactions during the last 30 days. There are two analyst buy ratings, one neutral rating and one sell rating with a average target price of $3.50. The stock is trading at a P/E ratio of 37.00 and a forward P/E ratio of 12.81. The stock is currently trading at its book value of $3.36 per share which could be a good entry point for the stock.

3. Acorn Energy (NASDAQ:ACFN), the digital energy company, is a holding company focused on making energy better by providing digital solutions for energy infrastructure asset management. The four businesses in which the company has controlling interests improve the world's energy infrastructure by making it: more secure ‐ providing security solutions for underwater energy infrastructure [DSIT]; more reliable ‐ providing condition‐based monitoring to critical assets on the electric grid (GridSense, OmniMetrix) and more productive and efficient ‐ increasing oil and gas production while lowering costs through use of permanent ultra‐high sensitive seismic tools that allow for a more precise picture of reservoirs (U.S. Seismic).


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Insider buys

  • Richard Rimer purchased 5,000 shares on November 30 and currently holds 49,400 shares of the company. Richard Rimer serves as a director of the company.
  • Mannie Jackson purchased 4,100 shares on November 16 and currently holds 4,100 shares of the company. Mannie Jackson serves as a director of the company.
  • James Andersen purchased 1,000 shares on November 9 and currently holds 1,000 shares of the company. James Andersen is President and CEO of U.S. Seismic Systems.
  • Michael Barth purchased 500 shares on November 15 and currently holds 34,328 shares of the company. Michael Barth has been the company's Chief Financial Officer since December 2005.
  • Christopher Clouser purchased 3,300 shares on November 13 and currently holds 31,300 shares of the company. Christopher Clouser serves as a director of the company.
  • John Moore purchased 5,000 shares on November 12 and currently holds 880,912 shares of the company. John Moore has been a director and Chief Executive Officer of the company since March 2006.
  • Richard Giacco purchased 1,000 shares on November 12 and currently holds 32,000 shares of the company. Richard Giacco serves as a director of the company.

Financials

The company reported the third-quarter financial results on November 7 with the following highlights:

Revenue $5.1 million
Net loss $3.8 million
Cash $32 million
Debt $0.5 million
Quarterly dividend $0.035 per share

Competition

Acorn Energy's competitors include Schlumberger (NYSE:SLB). Here is a table comparing these two companies.

Company ACFN SLB Industry
Market Cap: 139.45M 94.28B 67.36M
Employees: 124 113,000 150.00
Qtrly Rev Growth (yoy): 0.00 0.11 0.05
Revenue: 21.86M 43.86B 62.42M
Gross Margin: 0.32 0.21 0.44
EBITDA: -15.10M 11.09B 2.90M
Operating Margin: -0.75 0.17 -0.10
Net Income: -12.52M 5.53B N/A
EPS: -0.69 4.13 N/A
P/E: N/A 17.20 19.60
PEG (5 yr expected): -0.34 0.90 0.89
P/S: 6.38 2.15 1.08

Acorn Energy is trading above the industry average P/S ratio.

My analysis

The stock has a $4 price target from the Point and Figure chart. There have been seven insider buy transactions and there have not been any insider sell transactions during the last 30 days. There are two analyst buy ratings, 0 neutral ratings and 0 sell ratings with a average target price of $12.65. The company has a book value of $3.20 per share and the stock has a 1.81% dividend yield. The stock could be a good pick after the $4 price target is hit.

4. Inphi Corporation (NYSE:IPHI) is a leading provider of high-speed, mixed signal semiconductor solutions for the communications and computing markets. Inphi's end-to-end data transport platform delivers high signal integrity at leading-edge data speeds, addressing performance and bandwidth bottlenecks in networks, from fiber to memory. Inphi's solutions minimize latency in computing environments and enable the roll-out of next-generation communications infrastructure. Inphi's solutions provide a vital interface between analog signals and digital information in high-performance systems, such as telecommunications transport systems, enterprise networking equipment, enterprise and data center servers, and storage platforms.


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Insider buys

  • John Edmunds purchased 10,000 shares on November 30 and currently holds 62,572 shares of the company. John Edmunds has served as the company's Vice President and Chief Financial Officer since January 2008.
  • Ford Tamer purchased 20,000 shares on November 30 and currently holds 353,822 shares of the company. Ford Tamer serves as the President and Chief Executive Officer of the company.
  • Sam Srinivasan purchased 20,000 shares on November 16 and currently holds 59,141 shares of the company. Sam Srinivasan has served on the board of directors since June 2007, and as lead director since February 2011.

Financials

The company reported the third-quarter financial results on November 1 with the following highlights:

Revenue $24.8 million
Net loss $1.1 million
Cash $122.8 million

Outlook

The company's guidance for the fourth quarter of 2012 is as follows:

  • Based on a slowing macroeconomic environment for Server markets, the company expects its revenues to be down 3% -12% for Q4 2012, resulting in $22.9 million at the midpoint - plus or minus $1 million.
  • GAAP net loss, which includes non-cash stock based compensation expense, is expected to be a loss of $1.3 million to $2.3 million, or ($0.04) to ($0.08) per diluted common share on an estimated 30 million fully diluted common shares.
  • Non-GAAP net income, excluding stock-based compensation expense, is expected to be between $0.1 million and $1.1 million, or $0.00 - $0.04 per diluted common share.

Competition

Inphi Corporation's competitors include Broadcom (NASDAQ:BRCM), Hittite Microwave Corporation (NASDAQ:HITT) and Texas Instruments (NASDAQ:TXN). Here is a table comparing these companies.

Company IPHI BRCM HITT TXN Industry
Market Cap: 238.24M 18.14B 1.87B 33.19B 1.45B
Employees: 165 9,590 469 34,759 3.40K
Qtrly Rev Growth (yoy): 0.50 0.09 -0.01 -0.02 0.35
Revenue: 85.58M 7.55B 256.10M 13.27B 831.78M
Gross Margin: 0.65 0.49 0.74 0.50 0.39
EBITDA: -2.76M 1.16B 116.19M 4.30B 87.25M
Operating Margin: -0.08 0.10 0.41 0.23 0.08
Net Income: -4.42M 722.00M 72.10M 1.76B N/A
EPS: -0.16 1.28 2.35 1.52 0.02
P/E: N/A 25.19 26.25 19.43 21.82
PEG (5 yr expected): 1.95 0.92 2.30 1.83 0.78
P/S: 2.78 2.40 7.31 2.50 1.60

Inphi Corporation's gross margin is above the industry average.

My analysis

The stock has a $2.5 price target from the Point and Figure chart. There have been three insider buy transactions and there have not been any insider sell transactions during the last 30 days. There are three analyst buy ratings, three neutral ratings and 0 sell ratings with a average target price of $13.00. The stock is trading at a forward P/E ratio of 34.63. The company has a book value of $5.87 per share and a cash position of $4.28 per share. I would expect the book value to act like a support for the stock.

5. Molycorp (NYSE:MCP) is a leading rare earths and rare metals company, and combines a world-class rare earth resource at Mountain Pass, California, with world-class ultra-high-purity rare earth and rare metal materials processing capabilities. With 26 locations across 11 countries, Molycorp is vertically integrated across the global rare earth mine-to-magnetics supply chain. It produces rare earth magnetic materials as well as a variety of high-purity, custom engineered products from 13 different rare earths (lights and heavies) as well as five rare metals (gallium, indium, rhenium, tantalum and niobium), and the transition metals yttrium and zirconium. Through its Molycorp Magnequench subsidiary, the company is a leading global producer of neodymium-iron-boron (NdFeB) magnet powders used to manufacture bonded NdFeB permanent rare earth magnets. Through its joint venture with Daido Steel and Mitsubishi Corporation, Molycorp expects to begin manufacturing next-generation, sintered NdFeB permanent rare earth magnets in early 2013.


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Insider buys

  • Brian Dolan purchased 4,413 shares on November 29 and currently holds 16,566 shares of the company. Brian Dolan serves as a director of the company.
  • Molibdenos Y Metales S.A. purchased 50,700 shares on November 28-29 and currently holds 17,050,700 shares of the company. Molycorp has 137,961,722 shares outstanding which makes Molibdenos Y Metales S.A. a 12.4% owner of Molycorp.
  • John Ashburn purchased 10,000 shares on November 19 and currently holds 189,252 shares of the company. John Ashburn is Executive Vice President and General Counsel of Molycorp.
  • Henry Charles purchased 45,192 shares on November 20 and currently controls 109,183 shares of the company. Henry Charles serves as a director of the company.
  • Mark Smith purchased 20,000 shares on November 1 and currently holds 849,318 shares of the company. Mr. Smith is Chief Executive Officer, member of the Board of Directors and a shareholder of Molycorp Minerals.

Financials

The company reported the third-quarter financial results on November 8 with the following highlights:

Revenue $205.6 million
Net loss $15.5 million
Cash $436.0 million
Debt $1.2 billion

Outlook

Molycorp continues to ramp up Project Phoenix operations at its Mountain Pass, California, facility, and it remains on schedule to achieve a Phase 1 operational rate of 19,050 metric tons [mt] per year in the fourth quarter of 2012. To date, 80% of Project Phoenix facilities are at Phase 1 or greater than Phase 1 operational capabilities.

Mark Smith, President and Chief Executive Officer commented on November 8:

"We are seeing customer demand beginning to stabilize. We have customer agreements in place, or are in advanced discussions and product qualification efforts with customers, on sales in excess of our Phase 1 capacity. In the Lanthanum and NdPr markets, we are seeing demand that will move us into Phase 2 production relatively quickly. With cerium, our commercialization of SorbXTM products continues to gain traction in the marketplace.

Several of our customers continue to work to deplete large volumes of stockpiles. We are seeing signs these customers are coming back into the market, which is very positive going forward.

With regard to global trends, output from China continues to be significantly reduced. Chinese government officials are stepping up their efforts to enforce tougher environmental regulation and to curb illegal mining, and these efforts are putting pressure on production. In addition, a growing number of China's largest producers have either halted operations or are in the process of halting production, including Baotou Steel Rare-Earth, China Minmetals, Chalco Rare Earth, and China Nonferrous Metals. Government and industry leaders in China acknowledge that these and other actions are being implemented for the express purpose of stabilizing or strengthening prices for all rare earth products."

My analysis

The stock made a new 52 -week low in November. There have been six insider buy transactions and there have not been any insider sell transactions during the last 30 days. There are four analyst buy ratings, four neutral ratings and one sell rating with a average target price of $29.13. The stock is trading at a forward P/E ratio of 42.86. The company has a book value of $11.61 per share. The stock could be a good pick below the book value.

Source: 5 Stocks With Recent Intensive Insider Buying