My favorite place to look for new ideas is in the 52 week low bin. Most of the companies on the list are there for good reasons, but occasionally you can pick up a great stock that's just temporarily been derailed. Sometimes a company finds itself on the list because of a problem that’s specific to the company, and other times it’s because the industry is out of favor. Just in the last few weeks we’ve seen a group of shippers on the list at the same time, and we’ve seen groups of banks and insurers make appearances as well.
Insiders sell for many reasons. Sometimes even directors and management need to diversify. Other times there may be something going on in their personal life such as buying a new house where they need to get some liquidity. Then, of course, sometimes that just may think that valuations are high.
On the other hand, there’s usually only one reason for an insider to buy on the open market: They think the stock price is going up, or they want to give the impression they think that. Insiders fall victim to the same emotions as all investors, so it doesn’t pay to blindly follow an insider purchase, but it is a great place to start some research.
Below are three stocks that are near their 52 week lows and that also have insider buying. By combining these two indicators, we can drill down into just a few names in which to focus.
First South Bancorp (NASDAQ:FSBK): First South has been bumping along the new low list since December when they announced a preliminary quarterly loss and a suspension of their dividend. In this situation, you have to wonder if the bank can even survive. CFO William Wall seems to think so. He’s made two purchases in the last few weeks. Tempering the enthusiasm, they’ve only been for $1,500 and $3,000. Even so, no one forced him to buy and I don’t think he would believe a purchase so small would inspire confidence in and of itself. Wall owns about 100,000 shares of FSBK stock in total.
MannKind Corp. (NASDAQ:MNKD): CEO Alfred Mann has been buying up MannKind shares since October 700,000 shares at a time. He’s made seven separate 700,000 share purchases with his final purchase coming after their insular inhaler rejection by the FDA. That rejection pushed MannKind to 52 week lows. Biotechs can be different than other stocks, and billionaire Mann isn’t going broke any time soon, but the fact he bought after the rejection letter means there may be some potential left.
Strayer (NASDAQ:STRA): Strayer has had a rough six months. In August, Congress and the administration started cracking down on for-profit schools like Strayer, sending their stock price down from the $240s to $120 where it stands today. Two directors have been buying since October. Robert Grusky has made four separate purchases for a total of 1,400 shares. That’s worth about $168,000 at today’s price. Todd Milano has made two smaller purchases worth about $16,000. It should also be noted that Milano made a $240,000 purchase in August when shares were in the $160s. Some value investors also moving in to Strayer for a fallen angel trade.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.