Seeking Alpha
Long only, contrarian, special situations, value
Profile| Send Message|
( followers)  

The market has rallied pretty continuously since a brief post-election sell-off. One sign that the rally might be getting a bit long in the tooth is that insider buying is at the lowest level since April of last year. There are still reasonable bargains in the market but fewer than were present three months ago. Here are two manufacturers that have cheap valuations and also rare recent insider buying. Both are worth considering for value investors.

General Dynamics Corporation (GD) provides business aviation; combat vehicles, weapons systems, and munitions; military and commercial shipbuilding; and communications and information technology products and services worldwide.

4 reasons GD is a good value play at $66 a share:

  1. A director bought over $300K in new shares at the end of January. It was the first insider purchase in over a year.
  2. The stock yields 3.1% and has grown its dividend payouts at a 10% CAGR over the past five years.
  3. Given its dividend yield, GD is cheap at less than 10x forward earnings. Credit Suisse has an "outperform" rating on the stock. It also raised its price target to $83 from $77 a share at the end of January. The stock could get a boost once sequester talks are completed, suspended or pushed back to a later date.
  4. The stock has solid technical support around 5% below current levels, so downside appears limited (See Chart).

(click to enlarge)

Triumph (TGI) designs and manufactures aerostructures, aircraft components, accessories, subassemblies and systems worldwide.

Here are four reasons this stock offers solid value at just under $73 a share:

  1. Two directors picked up more than $900K in new shares in early February. They were the first insider purchases since June.
  2. The stock sells for less than 11x forward earnings and the company has beaten consensus earnings estimates by double-digit percentages in each of the last six quarters. The average beat over consensus over the past four quarters has been 14%.
  3. The company is ideally positioned to benefit from growing demand for airline travel in the emerging and developing world. This is long term secular tailwind.
  4. S&P has its highest rating "Strong Buy" on the shares with an $86 a share price target on TGI. The analyst firm cites the company's growing operating margins in part for its ratings. Margins were 11% in FY2011 but are projected to come in at 15% in FY2013.
Source: 2 Cheap Manufacturers With Rare Recent Insider Buying