As January comes to a close, the year has started off well with the general market indexes up approximately 4% and earnings thus far coming in generally well (sans Apple). Of course, one can only look to make money looking forward and so one strategy that may be worth exploring is researching stocks with recent large insider buying. The premise is simple, yet profound, due to one simple reason in that insiders are just like the rest of the public in how they desire to make more money and as a result when people purchase shares who arguably have the best view into a company's operations and future prospects, we can benefit by riding on their coattails. The following are stocks that have recently had notable insider buying of at least $10 million and seemed poised to move higher as the fundamentals and/or future prospects look compelling. As a caveat, please only consider this as a starting point in your investment research as these are only the opinions of the blogger:
CVR Refining (CVRR) just a few days ago went public by offering 24 million shares and billionaire financier, board director, and majority shareholder of CVRR's parent company, CVR Energy, Carl Icahn bought four million shares at $25 per share equating to a sizeable $100 million worth of CVRR stock. It'll be interesting to see the refiner operate as a stand-alone company and the sizeable insider purchase by Mr. Icahn is very encouraging, however investors should be aware that spin-offs typically have erratic trading in the first few weeks when they become public (Orchard Supply Hardware is a prime example). On the flip side, the company is set for an approximate 19% dividend yield at the $25 IPO price and with a hedged average weighted crack spread exceeding $26 per barrel, it looks secure in the foreseeable future. I'd definitely keep this on my radar.
Satellite radio giant Sirius XM Radio (SIRI) has grown into a giant over the last decade and now has well over 22 million subscribers collectively in the United States and Canada and a revenue base exceeding $3.25 billion over the past twelve months. The company's stock has been tremendous up approximately 50% the last twelve months and sitting right near its $3.19 52-week high. Nonetheless, major shareholder Liberty Media sees more upside ahead buying an astounding 50 million shares on the open market on January 15 equating to over $157 million worth of stock. This is obviously a strong vote of confidence and with the company generating returns on equity over 140%, while its PEG is an anemic .1x, one can see some great justification behind it. Add in the fact that the company continues to pay off its sizeable debt while benefiting more through economies of scale with a continually growing revenue base and I think Sirius is worth putting on the radar as a speculative holding.
DaVita HealthCare Partners (DVA) focuses predominately on providing kidney dialysis services and related operations. The stock has done well the past year up approximately 40% and near its $116.50 all-time closing high. Interestingly enough, one would think the stock is fully valued, but famed value investing firm Berkshire Hathaway thinks otherwise gobbling up collectively 179,300 shares from January 11-15 at an average price of $109.67 equating to almost $20 million worth of stock. The company operationally has done well matching consensus analyst estimates in the most recent quarter and exceeding them nicely in the three prior quarters. The company has strong returns on equity exceeding 22% with a conservative 16x forward P/E. This is a solid play on the aging baby boomers and with the backing of Berkshire, I think it is worth a look.
Sears Holding (SHLD) is one of the largest retailers with annual revenues at approximately $40 billion and at one point in history in the 1980s was the largest in the world. Since that time though, its namesake Sears and recently merged company Kmart has been struggling with declining sales and market share. The stock has been erratic and not performing well with the stock just a stone throw from its $38.40 52-week low. Major shareholder and new CEO Edward Lampert sees better days ahead though buying collectively from Jan 9-10 332,048 shares at an average price of $40.89 equating to over $13.5 million worth of stock. I have personally followed this stock closely over the years and have to say it is real confusing whether it should be viewed as a retailer or real estate play or a future holding company for billionaire investor Mr. Lampert, much like Mr. Buffett did with Berkshire decades ago. Nonetheless, one can clearly see that it has lost investors' considerable money over the last five years and the company continues to show no signs of being able to stem the downfall or differentiate itself from WalMart, Target, Amazon, and other competitors. I'm simply continuing to shy away from now until there's more clarity towards what the next move(s) will be ,regardless if the valuations look enticing at .1x price to sales and price to expected growth
Amyris (AMRS) is predominately a renewable energy company focused on biofuels. As this is an evolving field, many of these companies are still in the developmental stage and Amyris is no different. The stock has been atrocious the past 52-weeks and currently sits well off its $10.56 52-week high. This seems to have caught the attention of board director Sheikh Abdullah buying 3,355,704 shares at $2.98 equating to approximately $10 million worth of stock. This is very encouraging whenever a major player puts his money where his mouth is and the stock is virtually unchanged since the time of this purchase. The company simply blew away consensus analyst estimates in the most recent quarter and has the potential to make outsized gains if any of their products gain market acceptance. However, this should be viewed as a very speculative play as the company continues to burn huge amounts of cash, shows horrendous returns on equity, and may look towards some shareholder dilutive efforts in order to raise much needed cash.