Significant Insider Buying at Visa and Nevada Gold

When we research stocks for our investment management clients, insider purchases play an important role in our research. Why? Quite simply because insiders almost always know more about the business than any analyst could ever know.

Obviously we cannot - and do not - rely solely on insider purchases, but we feel that it is a very good way to find potentially great companies to invest in.

Aligning incentives

Insider buying absolutely indicates an upbeat management team, but it also aligns the incentives of management with those of the owners (shareholders). Management teams that have a significant monetary stake in the performance of the company - through ownership of stock - are far more likely to increase shareholder value more effectively and efficiently than those who do not.

Here are some significant insider purchases that we ran across during our research that we believe warrant further investigation:

Visa, Inc.

Since its initial public offering (IPO) in early 2008, Visa (V) shares are currently 40% below their 52-week high of $89, but still 22% above the listed IPO price of $44 per share. Just yesterday, Visa Chief Executive Joseph Saunders re-iterated the Company’s guidance of 20% growth in 2009, and an adjusted operating margin in the mid-to-high 40 percent range.

Considering the economic conditions in the credit market - and the global economy as a whole - this guidance is extremely positive for the company. Furthermore, Visa is not exposed directly to rising defaults because it does not issue cards directly, similar to Mastercard (MA), but unlike American Express (AXP), Bank of America (BAC), Capital One (COF), Citigroup (C), and JP Morgan (JPM).

It’s no surprise, then, that in December alone, insiders - including Joseph Saunders - have purchased more than $1.1 million worth of stock on the open market.

Allied Nevada Gold Corp.

As we discussed in an earlier article, Gold to $2,000 by 2009? Citigroup Thinks So., we believe that gold could be a great investment to weather the economic downturn, and suggested investors take a look at Yamana Gold (AUY), Kinross Gold Corp (KGC), and GoldCorp (GG) or any number of individual gold stocks.

One additional gold explorer and producer that caught our attention this week was Allied Nevada Gold Corp. (ANV) when a director for the company, Robert Mackay Buchan, reported that he had bought more than $800,000 worth of the stock on the open market back in October, at prices similar to the $3.55 per share we saw on Wednesday.

As always, the companies mentioned in this article should NOT be taken as recommendations, but rather as a list of companies that merit further research.

Disclosure: Freund Investing Managing Member Ryan Freund holds no position in any of the companies mentioned in this article. Freund Investing has a solid Disclosure Policy.

Comments

[sandspider:]

In a world where the markets are manipulated by a few banks in concert with Comex (Crimex) with the Fed (international bankers) passing funds out the back door, and an administration that will bail out who ever because it no longer matters how the senate or the house votes. The Feds control our universe now. Why even be in the markets unless you can guess where the Fed is going to put your money next. What is the politics flavor of the day? I can hardly wait till the UAE and Saudi get there metals exchange up and running. Good places to purchase gold now as it sure is running out in the America's despite all the phantom short selling by our three favorite federalist banks. Gold and silver and markets the evil men of washington can't touch. Everyone touts Brazil but Chila is further removed from the corruption that stalks all the alleys of wall street. And the Middle East exchange is much more fair and realistic to trade in then what ever is back home. Another reason I live in the desert. But gold and silver will soon pop out of the box that even the kings men can not stop it from happening. But they will hold the lid down long enough to destroy all of which we loved. Physical Gold and Silver!

2008 Dec 12 12:33 PM

[rcro:]

ANV. If the director Robert Mackay Buchan is the same person as the Robert M. Buchan who was the former CEO of Kinross Gold, I wouldn't touch the stock with a 10 foot pole. He has the unique talent of converting large shareholder equity into small shareholder equity. He left Kinross after a shareholder suit was filed against him by shareholders in former Russian provinces and also after the class action suit we was filed in the US. He also run PMU into the ground as well as other former gold corporations. The class action suit against him and Kinross has been settled subject to approval of the court Jan 29. 2009. See KINAM GOLD to see how preferred shareholders were screwed. Case was filed as Brown vs Kinross Gold US District Court, Nevada.

2008 Dec 12 12:49 PM

[Ryan:]

Thanks for the warning on Robert Buchan, I'll have to research that further. But I still think that if he's putting a personal stake in the future of the company speaks to the likelihood of good returns (in the short-term).

Regards,
Ryan Freund

2008 Dec 12 01:40 PM

[relmor:]

There are better buys, with more up potential, they are giving you the duds here.....AUY might be an exception, but too many people talk about this stock for me to feel comfortable owning it long term...

2008 Dec 13 09:22 AM

[aber:]

relmor ,
what do you mean exactly about AUY as an exception ?
can be a "trap" because too much "talk" ?
thanks a lot

2008 Dec 16 05:13 AM

[Ryan:]

Testing

2008 Dec 31 12:48 AM

[Ryan Freund:]

testing 2

2008 Dec 31 12:50 AM