The economy continues to be real volatile showing one day the recovery is in full swing and then the next day employment is not improving as well as previously thought. One strategy that has shown over time though to be effective in beating the market, regardless of the economy, 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 and as a result when these people who arguably have the best view into a company's operations and future prospects purchase shares, we can join them on the way higher. The following are stocks that have recently had notable insider buying of at least $250,000 and seem 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:
Endeavour International (END) is an independent oil and natural gas exploration company based in Houston, Texas. The stock unfortunately has done horribly this past year and things did not get any better recently when it reported a horrendous quarter sending the stock sharply lower and sitting right near its $2.95 52-week low. Major shareholder Steelhead Partners sees better times ahead though, filing on February 19, an SEC form 4 showing the sizable purchase of 250,000 shares at an average price of $3.54, equating to almost $900,000 worth of stock. While I always find insider buying encouraging, I still cannot get behind the company at this time. The company has missed consensus estimates badly in each of the last three quarters and is continuing to hemorrhage a lot of cash. Add in the lack of a dividend and returns on equity coming in at an awful negative 84% and I have to pause before buying Endeavour myself.
DaVita Healthcare Partners (DVA) is a health Services company focused on providing kidney dialysis and renal-related treatment. The stock has been on a tear up approximately 50% and sitting close to its $119.99 52-week high as we recently reported here. Major shareholder and investing guru Berkshire Hathaway sees the stocks moving higher, buying 323,070 shares collectively from February 14-19, equating to almost $38 million worth of stock. Operationally, the company has done real well exceeding consensus estimates in three of the last four quarters. Moreover, with the company still relatively cheap at a 14x forward P/E and 1.1x price to expected growth the company looks even more interesting. Add in the fact that the baby boomers are continuing to age, which will lead to consistent growth going forward for Davita's services, and I think the stock is a buy.
Newcastle Investment (NCT) is a diversified REIT investing in everything from commercial mortgage-backed securities to manufactured housing loans. The stock has been spectacular this past year, up approximately 100% while giving out a great dividend, which at current levels is still at approximately 8%. Board director Wesley Edens continues to see the stock moving higher, buying on February 15, 95,500 shares equating to just over $1 million worth of stock. The stock absolutely hammered consensus estimates this prior quarter, which is always encouraging. Moreover, with a trailing 3.5x and 8.5x forward P/E is definitely reasonable. Finally having returns on assets and equity of 11% and 66% just further demonstrates management's great prowess. I think the stock is a buy as well with the 8% dividend yield giving us a great place to at least park one's money.
Aon (AON) is a diversified insurance services company based out of London and having operations worldwide. The stock has had a nice run recently and currently is right at a new 52-week high at $59.50. Board director Lester Knight sees even more gains doubling his ownership stake by scooping up 50,000 shares on February 15, equating to almost $1.5 million worth of stock. Operationally, the company has done well exceeding analyst estimates in each of the last three quarters. Moreover, strong growth is expected ahead with the trailing 20x P/E expected to go down to 11x over the next 12 months. The company is showing a relatively nice 13% return on equity while generating approximately $1 billion in free-cash-flow. The company is performing well, the stock is reasonably priced, and an insider is making a big purchase leading me to think Aon is a buy as well.
Hybrid mortgage REIT American Capital Mortgage (MTGE) has done well this past year sitting not far off its $26.71 52-week high while continuing to dish out a very nice double-digit dividend yield. CEO Malon Wilkus seems to think the stock will move even higher, buying on February 14, 9,630 shares equating to approximately $250,000 worth of stock. This is even more significant as this more than doubles his ownership stake to 13,540 shares, signifying that he is extremely bullish on the stock. Looking closer, the stock looks attractively priced trading at just 1x price to book and a trailing 3x and 7x forward P/E. Add in the fantastic 44% returns on equity and again a dividend yield at approximately 14% and I think American Capital Mortgage is worth a buy.