Many investors like to follow the buying trends of company insiders because, after all, insiders know more about their companies than anyone else. If a company is seeing a lot of insider buying, company employees are showing confidence in the firm.
We ran a screen on companies that appear undervalued relative to trailing-twelve-month (TTM) cash flow, with P/CF under 5. These companies also have low debt, with most recent quarter total debt to assets below 0.20. From this universe, we searched for companies with significant net insider buying over the last six months.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.
Do you think insiders are calling it right on these names? Use this list as a starting-off point for your own analysis.
List sorted by net insider purchases as a percent of share float.
1. AbitibiBowater Inc. Common Stoc (ABH): Paper & Paper Products Industry. Market cap of $1.96B. P/CF at 0.57. MRQ total debt to assets at 0.14. Net insider purchases over the last six months at 3.61M, representing 4.38% of the company's 82.31M share float. The stock is a short squeeze candidate, with a short float at 8.17% (equivalent to 9.7 days of average volume). The stock has performed poorly over the last month, losing 13.67%.
2. American International Group, Inc. (NYSE:AIG): Property & Casualty Insurance Industry. Market cap of $54.87B. P/CF at 1.18. MRQ total debt to assets at 0.13. Net insider purchases over the last six months at 6.98M, representing 3.06% of the company's 228.47M share float. The stock has lost 2.92% over the last year.
3. Lincoln Educational Services Corporation (NASDAQ:LINC): Education & Training Services Industry. Market cap of $422.47M. P/CF at 4.89. MRQ total debt to assets at 0.10. Net insider purchases over the last six months at 291.38K, representing 1.38% of the company's 21.19M share float. Exhibiting strong upside momentum--currently trading 11.4% above its SMA20, 19.57% above its SMA50, and 25.78% above its SMA200. The stock has had a good month, gaining 30.2%.
*Insider data sourced from Yahoo! Finance, P/CF and debt to assets data sourced from Screener.co, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.