Insider Buying at Corning; Stock Shouldn't Go Much Lower

In the past week, three prominent insiders have purchased a large number of shares of Corning (GLW). The ex-CEO and a descendant of the company's founder, James Houghton led the way by purchasing 100,000 shares valued in excess of $1 million. He was followed by CFO James Flaws and board member Gordon Gund, who each also purchased 100,000 shares valued at more than $1 million.

Gordon Gund has made great insider purchases in the past. In mid-2002, Gund made the following purchase:

31 Jul 2002

GUND GORDON

Buy 1,000,000

1.6-1.85

$1,725,000

While the stock continued to fall a bit through early October that year, Gund's purchase would be valued at nearly $10 million today and in excess of $29 million at the peak of the stock's value between 2002 and today. That's quite an impressive return.

While the markets may drag GLW down more, it is reasonable to believe that GLW will outperform the markets. Based on the insider buying, it is also reasonable to assume that an acquisition at today's prices are low risk in the long term.

Now consider that another economic stimulus package may be headed to the consumers just in time for Christmas season and you can see why insiders might be so confident. People will be looking to entertainment to help divert their thoughts from the sagging economy.

Oh yeah, you also have the fact that GLW is now very close to tangible book value which sits around $8.50. The PEG is below 0.5 and the forward P/E is below 8. The company is still profitable and cash flow positive, has a lot of cash and liquid assets and has very little debt. Even in today's irrational market, it is difficult to see this going much lower, it at all.

One last thing: Why hasn't Eric Savitz, who writes a lot of articles on Corning, written about this significant insider buying? 

Disclosure: Author holds a long position in GLW

Comments

[andyn:]

Agree... this selloff has been overdone, almost assuming people are NOT going to spend anything this holiday season.

I think people are going to nest more and that means more home entertainment like LCD tvs, video games etc.

Also, remember that the analog TVs are going off air in 2009 which should also help the replacement cycle of TVs.

All in all, bullish for GLW... buy here and get a 30% return in 3 months.

2008 Nov 12 09:37 AM

[ATLBob:]

It seems that every decade or so there is some sort of crisis in the US and/or the global market, where panic selling runs rampant and good companies are punished along with the bad. GLW seems to be one of the good companies suffering collateral damage. It has an improving balance sheet, good management, a solid history of innovation/R&D, and has business lines/products that are in world-wide leadership positions. Yes: demand for their products has been temporarily curtailed due to the economic/financial mess; however, history tells us that this too shall pass (I only wish I knew when!)

I've been long GLW for years and will continue to pick up shares while prices are on sale.

2008 Nov 12 12:15 PM

[Urbane Gori...:]

GLW is a good company, but I'm not buying till the market turns back up. I doubt that there will be a big rush on LCD screens this Xmas, and if so, then it will be just to clear out excess product form Overstock.com and Circuit City.

As to management buying their company... Mmmmm Yeah, but! Aubrey McClendon was buying CHk at much higher prices than you can buy the stock at right now, and I really consider him a pretty bright guy. He isn;t the only one to do so. Also, anyone who can dump several million into a stock purchase is clearly way outside my league. People that can do so usually leave their cash (stocks) to their heirs, or endow them to a college or museum.

As to the issue of the older TV becoming obsolete in 2009.... (1) That's 2009, (2) How many homes really only get TV reception from the airwaves (5%??? ). Everyone else has cable or Dish... (3) You can get a converter box for $35, and (4) Go to Freecycle.com and post a desire for a used newer TV... They're giving them away...

jegan ;-)

2008 Nov 12 04:44 PM

[Hunt MD:]

I disagree as far as, they have made many poor decisions in the past few years mainly due to poor management practices...The only reason this company is still going is the fact they have a sound research department and a viable product...But lets be honest this stock will continue to drop, I like everyone else would just like to know how far, the only hope for investment in this company is long term because I truelly beleive they will come back...Bad!!!!! investment at least at this point in time....

2008 Nov 12 05:23 PM

[jepittman:]

Unless you are close to the company and know their business well most will be forced out at inopportune times by volatility. I have owned GLW for years and not made much. I am moving to ETFs more now.

2008 Nov 13 09:26 AM

[wobatus:]

Jegan,

The difference is that Aubrey was buying at the peak. I own some chk, which i initially bought in the mid 20s a couple of years ago. I dumped half in the mid-high 40s, then was kicking myself when Aubrey was still buying in the 60s. what am I missing, i thought to myself. I wasn't missing much, it turned out. Now I wish i had dumped the rest. :)

Hindsight is 20/20, but I think insider buying near 52 week lows is a little more encouraging than aubrey's buying, which was foolhardy at the 52 week highs.

On Nov 12 04:44 PM jegan ;-) wrote:

> GLW is a good company, but I'm not buying till the market turns back
> up. I doubt that there will be a big rush on LCD screens this Xmas,
> and if so, then it will be just to clear out excess product form
> Overstock.com and Circuit City.
>
> As to management buying their company... Mmmmm Yeah, but! Aubrey
> McClendon was buying CHk at much higher prices than you can buy the
> stock at right now, and I really consider him a pretty bright guy.
> He isn;t the only one to do so. Also, anyone who can dump several
> million into a stock purchase is clearly way outside my league. People
> that can do so usually leave their cash (stocks) to their heirs,
> or endow them to a college or museum.
>
> As to the issue of the older TV becoming obsolete in 2009.... (1)
> That's 2009, (2) How many homes really only get TV reception from
> the airwaves (5%??? ). Everyone else has cable or Dish... (3) You
> can get a converter box for $35, and (4) Go to Freecycle.com and
> post a desire for a used newer TV... They're giving them away...
>
>
> jegan ;-)

2008 Nov 13 12:09 PM