Every week I peruse Barron's top 20 top insider buy list for new ideas. I have found over the years that often just before a stock starts a significant climb, insiders make new purchases. This seems to be particularly true in the small cap space (~$1B market capitalization or less). Here are two small cap selections off this week's top 20 list that look intriguing at current levels.
Tessera Technologies (TSRA) is a maker of miniaturization technologies and products for electronic devices worldwide. The company continues to show up on top insider buy lists as insiders have bought millions of dollars' worth of shares during August. The company recently benefited by a litigation settlement with Freescale Semiconductor (FSL). The company's CEO recently stated the company could net $200mm in IP revenue over the next four quarters.
The company already has almost $400mm in net cash on the balance sheet which represents ~40% of its current market capitalization. This is after the company paid a special dividend of 30 cents a share in May. I would look for future dividend payouts in the near future based on recent litigation settlements. Forbes recently called the shares oversold and the one analyst that covers the stock believes the company could make over $1.60 a share in 2014 and has a $27 a share price target on the shares.
ION Geophysical Corporation (IO) is a small energy services firm that provides geophysical technology, services, and solutions for the oil and gas industry internationally. The stock recently sold off as it had disappointing earnings results. This does not seem to be deterring insider confidence given a director has stepped up and bought over $600K in shares in two transactions in August.
After increasing in the low single digits in 2013, analysts' project revenues will accelerate and produce low double digit gains in 2014. The stock sells for less than twelve times forward earnings (~11.7), a discount to its five year average (13.5). Four analysts cover the stock have price targets ranging from $6 to $8 a share, all substantially above the current stock price of $4.80 a share. IO is also price right over long term technical support (See Chart).