Insider Buying 6 Month Follow-Up: Did the Stocks Go Up?

by: The Keating Letter

Each week I write an article about large CEO and CFO insider buys. The theory goes that those stocks have a better chance of outperforming the overall market because those insiders know about any potential catalysts or strength in the business. I like to treat the lists as an invitation to look deeper into some of the more interesting names, not as a list of stocks to buy. However, I thought it would be a worthwhile exercise to follow-up on some of these articles.

Six months ago today, February 16, I wrote about nine stocks with insider buys: 3 CEO buys and 6 CFO buys. Let’s take a look at how they’ve performed in that six month period. For comparison’s sake, the S&P 500 was down 8.2% over that period.

First, the CEO buys. Two of these three are a few of the worst performing stocks you can find. The other, News Corp. (NASDAQ:NWS), is in the midst of an embarrassing and potentially debilitating scandal. I think you can say at this point that the CEO buys did not work out.

American Online (NYSE:AOL): Shares were down 42% from February 16 to August 15. CEO Tim Armstrong had bought $10 million worth of shares in February after the company bought Huffington Post. Things have not been working out so far.

News Corp.: Rupert Murdoch trumped Armstrong by buying $20 million worth of company shares. Shares are down 5.8% in the last six months, beating the overall market. However, the ongoing News Corp. scandal has played havoc with their reputation and succession plans.

Genworth Financial (NYSE:GNW): Genworth Financial shares are down 51% since February 16. CEO Michael Fraizer’s purchase wasn’t a large one compared to his overall holdings, but he’s considerably poorer today. Genworth’s mortgage insurance operations have crushed the stock and there are plans being made to possibly split these operations from the life insurance and wealth management business.

Now, the CFO buys. Three of the stocks performed better than the S&P 500 and three performed worse.

Black Hills Corp. (NYSE:BKH): Amazingly enough, Black Hills shares are trading at the same price they did on February 16, $30.04. This was a safer place to be than the S&P 500 during that period. The stock’s 4.8% annual dividend hasn’t hurt.

Micronetics (NASDAQ:NOIZ): Micronetics shares rose 74% over the past six months. I’m sure CFO Carl Lueders wishes he would have bought more than just 2,000 shares.

Peapack-Gladstone Financial Corp. (NASDAQ:PGC): PGC shares fell 15% from February 16 to today. This $98 million market cap bank has earned a consistent profit since 2009 and counts noted value investor Chuck Royce as an investor. Royce owns 7.7% of the bank.

Research Frontiers (NASDAQ:REFR): Shares are down 53% over the past six months. Research Frontiers is a lightly traded $73 million market cap “smart glass” company. Shares are near 52 week lows.

Summit Hotel Properties (NYSE:INN): Summit Hotel shares are down 10%, slightly trailing the returns of the S&P 500 over the same period. CFO Stuart Becker had joined other insiders by participating in the hotel investment company’s IPO in early February. Shares have fallen more than 20% in the past three weeks.

TRC Companies (NYSE:TRR): Shares are up 5.2% since February 16, handily beating the overall market. This $117 million market cap construction management company focuses on infrastructure and energy projects. CFO Thomas Bennet even bought shares considerably cheaper than the February 16 price.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.