Insider activity is often worth observing and is always newsworthy. While such activity is not a pure indicator of when to buy or sell a stock, it is a good starting point upon which to perform analysis or a method of validating analysis already performed. Insider activity might provide an accurate profile of business prospects, based on the insiders' knowledge of the company and industry.
This list is of six small-cap companies that have experienced noticeable net stock purchases by insiders over the last six months. Insiders such as officers, directors, and beneficial owners must report their trades to the SEC within two business days. No matter the reason, insider activity is important news that the market and press should acknowledge.
Echo Global Logistics, Inc. (ECHO)
- Industry: Trucking
- Market Cap: $320 million
- Insider Activity: Insiders purchased over 200,000 shares or about 1.5% of the float.
- Note: Short interest is about 25%
Flagstar Bancorp Inc. (FBC)
- Industry: Savings & Loans
- Market Cap: $648 million
- Insider Activity: Insiders purchased over 72 million shares or over 35% of the float after a severe downturn in market valuation.
Lincoln Educational Services Corporation (LINC)
- Industry: Education & Training Services
- Market Cap: $330 million
- Insider Activity: Insiders purchased over 290,000 shares, or over 1% of the float.
- Note: Short interest is about 5%
Skilled Healthcare Group, Inc. (SKH)
- Industry: Long-Term Care Facilities
- Market Cap: $388 million
- Insider Activity: Insiders purchased nearly 250,000 hares, or about 1% of the float.
- Note: Short interest is over 13%
Tower International, Inc. (TOWR)
- Industry: Metal Fabrication
- Market Cap: $319 million
- Insider Activity: Insiders purchased 74,000 shares, or over 1% of the float.
- Note: Tower had its new IPO in late 2010
Vantage Drilling Company (VTG)
- Industry: Oil & Gas Drilling & Exploration
- Market Cap: $534 million
- Insider Activity: Insiders purchased over 5 million shares, or over 3% of the float
Take these insider buys with a grain of salt. While many insiders seem to know what they are doing, many have lost money and also might even consider their insider purchase highly speculative. Additionally, several of these companies have significant short positions, indicating that many individuals in the market strongly disagree with this insider sentiment.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.