2 Stocks With Recent Insider Buying And Compelling Outlooks

Includes: CVS, NAV, PCAR, RAD, WBA
by: Brian Gorban

Insiders are just like the rest of the public in how they desire to make more money and as a result when these well-informed individuals purchase shares it is a strong indicator that the stock will increase. The following are stocks that have recently had notable insider buying of at least $200,000 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:

Walgreen (WAG) is a large national drugstore with over $70 billion in annual revenues and a market capitalization nearing $50 billion. The stock has performed beautifully the past year as the company sits at a new high at approximately $50 per share. Nevertheless, board director Stefano Pessina sees the stock moving even higher. On April 19, he purchased a massive 83,299 shares equating to just over $4 million worth of stock. The stock looks reasonably priced trading at .65x price to sales and a forward 13.5x price to earnings ratio. What stands out to me the most is the consistently rising 2.2% dividend yield. I think one would be wise to diversify this position with CVS Caremark (NYSE:CVS) and/or Rite Aid (NYSE:RAD) for differing reasons.

CVS Caremark is considerably larger than Walgreen with over $120 billion in annual revenues and a market capitalization in excess of $70 billion. The company trades though at real similar valuations of just .6x price to sales and a forward 13x price to earnings ratio. Moreover, the company has a consistently rising dividend yield as well which currently sits at a 1.6% yield. At the current dividend, the payout ratio is below 25% signaling that it is extremely safe since under a 70% payout ratio is considered healthy.

Rite Aid differs from its two competitors in that it is considerably smaller with a revenue base just at approximately $25 billion and a far smaller market capitalization at approximately $2 billion. The far smaller valuation being justified in that the company was having legitimate bankruptcy rumors due to its massive $6 billion debt load and declining sales until the last few quarters. However, the company seems to have turned things around as it has blown past consensus estimates in each of the last four quarters and forecasts better days ahead in its most recent quarter. Moreover, as the company currently sits at a new 52-week high, it still sits at a paltry .1x price to sales and reasonable 16.5x price to earnings ratio.

Navistar (NYSE:NAV) is a manufacturer of commercial and military trucks and has operations around the globe. The company has a presence in the trucking industry with approximately $12.5 billion in annual sales and currently sits not far from its $37.65 52-week high. Board director John Pope sees the stock moving higher in the near future. He initiated a position on April 15 by buying 6,370 equating to approximately $200,000 worth of stock. This is significant in that he did not own shares before and now is signaling better times ahead. To me, this company is speculative as it really is being controlled by two shareholder activists, Carl Icahn and Dr. Rachesky, and is not being traded really for its fundamentals, but more people betting what these two intelligent investors will decide what direction to take the company. They have be doing a great job the past year as demonstrated by the stock, but it makes it hard for me to determine the future stock performance based on the current factors. I think fellow competitor PACCAR (NASDAQ:PCAR) is worth a look for somebody looking at a more stable, dividend-paying company.

PACCAR, like Navistar, builds and distributes a variety of different trucks, including well-known brand names Kenworth and Peterbilt. The company is considerably bigger with over $17 billion in annual revenues and a market capitalization matching that amount. Operationally, the company has performed beautifully exceeding analyst estimates in each of the past four quarters. Trading at just a 1x price to sales ratio while generating returns on equity at approximately 20% shows to me that the stock is attractively priced. The 1.7% dividend yield at just a 51% payout ratio signals to me that the dividend is not only safe, but poised to be raised in the near future making it even more attractive.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.