With the general market continuing to face uncertainty over the next moves of the Government and Federal Reserve, investors are hard-pressed to find a winning strategy. One strategy that has shown over time to be effective in beating the market is tracking insider buying. The premise is simple, in that insiders are just like the rest of the public in how they desire to make more money. As a result, when they purchase shares and arguably have the best view inside a company's operations and future prospects, we can join them on the way higher.
The following are stocks that have recently had notable insider buying of at least $100,000 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 our opinion.
Financial giant and Dow Industrials component Bank of America (BAC) has a worldwide presence and generated over $75 billion in revenue the last twelve months, while currently sporting a market capitalization at approximately $120 billion. The company's stock has moved up nicely in the past year, sitting now right near its $12.20 52-week high, leading one to believe that the stock may be getting a little overvalued. However, board director David York feels otherwise, nearly doubling his existing ownership stake on January 24 by acquiring 20,000 shares at $11.53 equating to over $230,000 worth of stock. This is definitely encouraging and the company has been firing on all cylinders as well, smashing consensus analyst estimates in each of the last three quarters by an average of 60%.
Moreover, the stock looks well-priced from a value investor's perspective, trading at just over .5x price to book value and .6x price to expected growth while sporting positive returns on equity and assets. This was not the case during the recent financial meltdown. I think with the continued resurgence in real estate, the assets on the bank's balance sheet might actually be conservatively valued leading to write-ups for a change and leading to an uptrend in the stock. I think this is worth putting on our radar.
UnitedHealth Group (UNH) is simply a behemoth in the medical and health care plan arena, and like Bank of America, a Dow Industrials component. Churning over $110 billion in revenue and $5.5 billion in net income in the past twelve months is no easy feat and consensus analyst estimates still expect the company to grow in excess of 10% per annum over the next five years. The stock has had no clear direction in the past year and currently sits in the middle of its 52-week price range. Board director Rodger Lawson seems to think there is more upside filing an SEC Form 4 on January 22 showing the purchase of 2,000 shares at $54.42 equating to almost $110,000 worth of stock.
The company's earnings have come in nicely, beating the consensus estimates in three of the last four quarters while it now trades at an attractive .5x price to sales and .6x enterprise value to sales. Moreover, the company has a nice and consistently growing 1.5% dividend yield, which should continue to grow as the company continues to generate strong profits. I think UnitedHealth is worth a look.
CVR Refining (CVRR) just recently went public earlier in the month, as it was essentially spun off from its still majority owner CVR Energy (CVI). Through his 80%+ ownership of CVR Energy, billionaire Carl Icahn is the majority owner of CVR Refining, but on January 22, CEO and President of CVR Refining, John Lipinski looked to see upside as well, buying a massive 200,000 shares at the $25 offering price equating to $5,000,000 worth of stock. It'll be interesting to see how this company performs as a stand-alone company, but with such heavy insider buying at the initial public offering-- when it's typically the opposite where insiders are selling-- I'm encouraged. Moreover, with the company now still yielding approximately 16.5% with its recent ascent and with a healthy hedged crack spread in excess of $26 per barrel, the company looks to have a bright future.
Looking into buying CVI instead may be a worthwhile option as an indirect play, as the company has a majority ownership of CVRR while also having other diversified holdings such as nitrogen fertilizer and pipelines. In addition, the company has handsomely exceeded consensus estimates in each of the last three quarters and is showing very healthy returns on assets and equity of 16% and 31% respectively.
Another financial giant and Dow component, JPMorgan Chase (JPM) had some large insider buying as well. On January 29, board director Patrick Flynn nearly doubled his ownership stake by acquiring 6,750 shares at $46.93 equating to over $315,000 worth of stock. The stock has performed exceptionally well sitting right near its $47.35 52-week high. The company has been terrific, exceeding consensus analyst estimates in each of the last four quarters as the company is now churning approximately $95 billion in revenue and $20 billion in net income. Even with the surge in share price, the company still trades at an attractive .9x price to book value and is showing healthy returns on equity in excess of 10%. Perhaps most importantly, the company is yielding a very nice 2.6% dividend yield and with just a 22% payout ratio, investors should be confident that it will be raised again in the near future.