Scanning insider activity the past week I noticed multiple large purchases in a few stocks. I would not just buy a stock because of insider buying, but it can add to my interest. With that in mind I looked for confirmation that a change in stock direction was occurring by looking for recent good news and by looking for a bottoming chart pattern. With that in mind, let's look at two companies that fit the bill.
Paramount Gold & Silver Corp.
The CEO of Paramount Gold and Silver Corp. (PZG) bought $3.95 million dollars worth of his company's stock a few days ago. Additionally, a director of the company bought $423,000 worth of stock just prior to the CEO's purchase. The company fundamentals look unimpressive, basically because it is a development-stage company that is not making a profit yet. But analysts expect it to earn .07 per share next year, giving Paramount a forward P/E of 31.57.
Recent news: Test results at their two mines have come back quite good since September. The preliminary economic assessment at their Sleeper Mine in Nevada predicted a 17 year operation with annual gold production of 172,000 oz and pre-tax NPV of $695 million at a $1383 gold price. There is even more measured and inferred gold deposits at the San Miguel Mine (Mexico) than at the Sleeper Mine, with a higher gold content per ton. The market cap is currently $326 million dollars. This seems to indicate to me that its value in a buyout could be significantly higher.
An additional positive for this company is the fact that its operations are located in stable countries. Unlike the recent troubles for companies with mines in South Africa, the major mines for Paramount are not experiencing labor issues because they aren't producing much yet, but even if they were, their locations in Nevada and Mexico make labor unrest less likely.
Chart pattern: Paramount can't sustain stock price increases in the form of a trend, which could be the nature of a development stage company or could be because of the lack of gold and silver price appreciation the past 18 months. But it does appear to have solid support at $2.00, going back to August 2011. During that time it has touched $2.00 four times and each time it receives buying support at that level. That sees to indicate the floor for the next few months is at $2.00. Additionally, a higher low occurred on December 21, which is a positive sign. A trend may be able to develop if gold prices start to increase, or if this company starts to produce earnings like it is projected to.
A Senior VP at VOXX International (VOXX) purchased $9,000 worth of shares, which is isn't that large of a purchase. But insiders also bought in October ($42,000) and November ($60,000), so let's take a closer look. VOXX is an international producer of electronic accessories and consumer electronics. The company's products include mainly: 1) auto electronics, such as radios, amps, video screens, speakers, MP3 players, rear-view video cameras, and CD changers; and 2) electronic accessories, such as HDTV antennas, cables, and universal remote controls. They have deals with all of the major car makers, making this a possible play on the resurgence of the consumer and increased auto purchases.
Looking at the company financials provides evidence that this stock may be undervalued. VOXX has a forward P/E of 7.10 and a PEG of .97. It trades at a price-to-book ratio of only .51. All of this despite the fact that analysts see it increasing earnings by 88% this year, and 10% annually for the next 5 years. This stock does not get a lot of coverage because it is small -- market capitalization of only $223 million.
Recent news: This past quarter's EPS beat the two analyst's estimates by a wide margin.
Chart pattern: VOXX formed a rounded base, and then broke out hard on earnings. It has rallied an amazing 45% this month, so I would be hesitant in buying it at the moment, but it is worth taking a look at.
Disclaimer: We do not know your personal financial situation, so the information contained in this article represents my opinion, and should not be construed as personalized investment advice. Past performance is no guarantee of future results. Do your own research on individual issues.