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Scanning recent insider purchases over the past week, I noticed two stocks that had multiple insider buys of stock valued at over $200,000. I thought I'd explore these two companies and see if there additional factors that may provide a good reason to buy them, such as solid fundamentals.

Transdigm Group Incorporated

Robert Small, a director at Transdigm Group Incorporated (TDG), purchased $3.1, $9.2, and $13.3 million dollars worth of TDG stock from February 6th to February 8th.

Transdigm is an aerospace supplier to commercial and military aircraft customers. The company has a current P/E of 23.96 and a forward P/E of 18.04.

The company most recently announced Q/Q sales increases of 34.89% and Q/Q EPS increases of 35.23%. The company is very profitable. Its return on equity is 31.70%. Its gross margins and operating margins are 55.62% and 41.16%, which are over double the industry averages. These high margins are likely due to good management, but also due to the nature of its business model -- engineered components to which it owns intellectual property rights. It also performs a lot of repairs and replacements on their parts in use by aerospace companies, which help margins. It has also reported solid inventory turnover recently.

Despite potential defense industry spending cuts, the company is in an advantageous position due to its intellectual property concerning its product line, and looks attractive going forward. The director seems to agree.

Competitors include Honeywell (HON) and United Technologies (UTX).


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Texas Industries

Bernard Lannigan, a director at Texas Industries (TXI), purchased $479,993 worth of TXI on February 6th; then purchased $222,208 and $325,664 on February 7th.

Texas Industries manufactures and sells specialty cements to construction customers; aggregates like sand and gravel; and packaged concretes and other aggregates, which it also sells to the construction industry. It operates in the American Southwest. This company is poised to take advantage of the continuing recovery of the U.S. housing market, which I mentioned as a top investing theme for 2013.

Analysts expect EPS to increase 111% this year and 85% next year. In addition to increased sales numbers Y/Y, the company recently reported Y/Y increases in gross margins, operating margins, and net margins.

Analysts also expect 5 year EPS growth of only 6% per year. The 6% growth in EPS may be a low estimate since the housing numbers seem to have bottomed last year, and since this company recently announced firmer cement pricing and sales increases. The 6% growth estimate may also be an accurate reflection of the continued fragility of the housing market and of this company missing earnings estimates 12 of the last 13 quarters.

Either way, a strong residential construction market could provide the price increases in cement that TXI appears to need in order to start turning a significant profit. Texas Industries' stock price is extremely dependent on a continued housing revival. Without that the stock may struggle. However, the director that purchased TXI stock seems to think there are reasons to own it going forward.

Texas Industries competes against Vulcan Materials (VMC) and Martin Marietta (MLM).


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Source: Large Insider Buys From Last Week