As the sequester fiasco continues to cause uncertainty investors are left wondering what to do. One strategy that has shown over time to be effective in beating the market, regardless of the economy, is tracking insider buying. The premise is simple in that insiders desire to make money and as a result when these knowledgeable individuals purchase shares we can reasonably expect the stock to move 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 the opinions of the blogger:
Packaged food giant Mondelez (NASDAQ:MDLZ) was formerly known as Kraft foods until October 2012. This one-time Dow component had what seems to be a big plunge when looking at its stock chart, when it was in fact just a spin off its Kraft Foods unit (NASDAQ: KRFT) this past year. The stock has not done much though, but board director Frederic Reynolds sees it moving higher. Mr. Reynolds bought 38,000 shares on February 22 equating to over $1 million worth of stock. This strong vote of confidence is encouraging, but looking deeper the company whiffed in their most recent quarterly earnings report. Moreover, the company is now yielding a considerably less 1.9% when it was previously yielding approximately 4%. Analysts do expect much better growth eclipsing 13% annually over the next five years, but I like Kraft personally more being the conservative investor that I am.
Kraft Foods as a stand-alone company now yields a very nice 4.2% dividend yield. Moreover, the company smashed consensus estimates this past quarter and shows returns on equity exceeding 16%. I think with its established brand names, including Oscar Mayer, Planters, Maxwell House and JELL-O, the company should continue to experience worldwide growth as the "BRIC" countries continue to increase the size of their middle class. In the meantime, we collect a very nice dividend yield and quality company at a fair price.
Two Harbors Investment (TWO) is a diversified REIT investing in everything from residential mortgage backed securities to hybrid mortgage loans. The stock has done well, up approximately 25% the past year while shelling out a massive dividend yield which now sits at 17.6%. CEO and President Thomas Siering continues to see the stock moving higher buying on February 19 16,800 shares equating to just over $210,000 worth of stock. The stock trades at an attractive 10x trailing P/E and just barely above book value. Returns on equity are a respectable 12% while the company is showing strong year over year growth. I think the stock is further worth a look due to its enticing 17.6% dividend yield. If looking to diversify this holding, one should check out Newcastle as I described here.
Moody's (MCO) is a credit ratings agency that has been around for over 120 years. The company has annual revenues near $3 billion and a market capitalization exceeding $10 billion. The stock has moved up approximately 15% this past year and board director John Wulff seems to think it will go higher. On February 20, he filed an SEC Form 4 showing the purchase of 3,000 shares on February 15th equating to almost $150,000 worth of stock. This strong purchase is encouraging and looking closer at the fundamentals we see that the company is performing well. Moody's has smashed consensus estimates the past four quarters. Moreover, analysts are expecting accelerating earnings growth up to 14.5% per annum over the next five years. The company is also trading at a reasonable 15x trailing and 12x forward P/E. Lastly, management has showed its prowess with the company earning an incredible 377% return on equity and not too shabby 20% return on assets the past twelve months. I think the company is worth a look along with its formidable competitor McGraw-Hill (MHP).
McGraw-Hill is known to many as a book publishing company, but to savvy investors, they know that the real value lies with its Standard & Poor's Ratings segment. The company as a whole has operationally performed well by exceeding analyst estimates in each of the last four quarters. Moreover, those same analysts are calling for much greater growth in the near future from 13.5% per annum to 18.5% per annum over the next five years. The company trades at a nice 12.5x forward P/E and paltry .8x price to expected growth. Add in the consistently growing 2.4% dividend yield and I think it is a winner.