Large insider purchases have slowed down recently, perhaps related to the uncertainty in the markets and debt ceiling debate. This week’s edition of CFO buys only has three stocks with purchases of at least $10,000. Two are small companies, one would be classified as tiny, and the other buy is from a new publicly traded company.
CFOs should have the best understanding of a company’s financials. For that reason, it’s worthwhile to follow their buys. If they think an investment in their own company would be profitable personally, then there’s good reason to believe it would be profitable for investors. CEOs and CFOs would also be more likely to know of a coming catalyst for the stock. The bottom line is that putting your money where your mouth is frequently is good policy. As always, use this list as a starting point for research.
Methode Electronics (MEI): Methode Electronics is a small, Chicago-based, $391 million market cap electro-mechanical device manufacturer. CFO Douglas Koman bought 1,263 shares at $13.29 on July 12. All is not what it seems, though, if you just saw this transaction on a screen. If you look at the filing, you’ll see a footnote saying, “Shares purchased during the fiscal year with periodic payroll withholding and quarterly dividends received on Methode common stock held in the Methode 401(k) Plan.” This also explains the other four insider buys on July 12. The $13.29 price listed is the average purchase price throughout the year.
Shares are currently at the $10.50 range, halfway between the 52 week high and low. CEO Donald Duda sounded an optimistic tone on their most recent conference call on June 30, noting that they sold their ownership stake in a Czech Republic fiber optic interconnect company for $10 million and one of their torque sensors will be used in Ford’s new 8-speed automatic transmission. Methode currently pays a 2.7% dividend.
dELIA's (DLIA): CFO David Dick bought 7,500 company shares on July 7 and 8 for $1.75 per share. This appears to be a somewhat coordinated effort to gain attention in the markets. The president and a director also bought a relatively large number of shares since July 1. dELIA*s sells clothes, shoes, and accessories primarily to teenage girls through their retail stores, catalogs and online.
A Dealbook article reported that dELIA*s had put itself up for sale, attempting to attract attention from private equity firms. It appears there was little interest. Two well known value investors own significant chunks of the business as of the first quarter. Whitney Tilson owns 9.8% of the outstanding shares and Chuck Royce owns 7.9%. However, these stakes were bought years ago and may not reflect the current difficulties the company is facing.
IF Bancorp (IROQ): As I reported in my article about recent CEO buys, IF Bancorp shares began trading on July 8, 2011 after the mutual-to-stock conversion of Iroquois Federal on July 7. CFO Pamela Verkler bought 12,500 shares in the offering at $10 per share. She was joined by CEO Alan Martin and 10 other insiders. Shares now trade for $11.65. You can find more information on the company in their 10Q here. The bank is well-capitalized, conservatively run, and its non-performing assets are low.