Opko Health And Ladenburg Thalmann Showing Strong Insider Support And Growth Prospects

 |  Includes: LTS, OPK, TEVA
by: Brian Gorban

I'm sure you've heard the saying "Talk is cheap," and the vast majority of the time people are just talking rather than putting money behind their words. However, I did a quick scan and found two enticing companies that have had some very nice insider buying along with some interesting growth prospects.

Dr. Phillip Frost is a billionaire who initially was a professor of dermatology at the University of Miami from 1966-1972 and chairman of the same department from 1972-1990. During that time, he forged a history of building up pharmaceutical companies and selling them at a great profit, most notably Key Pharmaceuticals which was acquired by Schering-Plough for $600 million in 1986 and Ivax Corp. sold to Teva Pharmaceuticals (NASDAQ:TEVA) and who he currently serves as its chairman for $7.4 billion in 2006. His new target very clearly looks to be Opko Health (NYSEMKT:OPK), which he serves as both the chairman and chief executive officer. Opko is a multi-national pharmaceutical and diagnostics company focused on wide array of areas, most notably, Alzheimer's and Parkinson's disease, along with non-small cell lung cancer. These of course are very lucrative markets if any of their various products in Phase II and Phase III gain FDA approval. I personally tend to stay away from these riskier biotechnology/pharmaceutical stocks which don't have a steady stream of revenue or free cash flow, but this to me is more a management play than betting on the next big wonder drug. Moreover, other insiders as well are buying on the open market as well and that shows me that they have a lot of confidence in their drug pipeline.

Dr. Frost himself seems to have a religious conviction of buying at least 10,000 shares per trading day for the better part of two years and now owns over 105 million shares of the approximately 285 million weighted average number of shares outstanding, basic and diluted according to their most recent SEC 10-Q ending June 30, 2011. That is well over 33% of the firm owned by him and he seems to have the capital and strong will to continue gobbling more of it. OPK had a 27 million secondary offering on March 14, 2011 at $3.75 per share and was actually oversubscribed by 2.397 million shares showing strong support at that price. Moreover, on June 20, 2011, OPK repurchased 2.398 million shares from an early investor in Acuity Pharmaceuticals at a price of $3.25 per share. On a valuation basis, Opko can't really be measured, much like most other high growth companies, since their potential profits come from expected revenue streams yet to be realized and so little, if any, in terms of revenue, book value, and free cash flow are existent. Hence, I'll look more to the management once again as they have really proven to me that they are confident in the company and gladly snap up shares that others are giving away cheaply. I'm thinking of starting a position at $3.75 matching the secondary price and if by any chance it drops to $3.25, really look to back up the truck as the company itself is repurchasing shares at that level.

The heavy insider buying in Ladenburg Thalmann Financial Services (NYSEMKT:LTS) not only by Dr. Frost, but other insiders as well, is encouraging. Along with Dr. Frost's 100,000 share buy on August. 18, he followed that up with a 60,000 share buy on August 24 and 40,000 share buy on August 25. Moreover, many insiders have bought over the last two weeks more than 100,000 shares collectively, including CEO Richard Lampen. Putting aside the heavy insider buying, I find this as one of the very few financial services company based in Miami, which of course is still a premiere destination for retirees worldwide and as such, Ladenburg's financial advisory and asset management divisions will look to capitalize greatly as the baby boomers continue to retire. Just recently on August 17th, Ladenburg acquired Securities America from Ameriprise Financial and its $50 billion in assets under management, along with their 1,700 financial professionals for $150 million in cash and other considerations.

This more than tripled Ladenburg's size from $20 billion to now collectively $70 billion in assets under management, allowing them now to benefit from scales of economy and doing it at a price that was less than one-third the cost if Ladenburg were to acquire its own shares (Ladenburg essentially paid 30x for the assets under management of Securities America, whereas at the time of the announcement, Ladenburg was trading at 110x its own assets under management). I think this company is worth buying at $1.20 per share when it's trading at approximately 1x Price/sales and at $1 per share has been showing very strong insider support and worth increasing one's holdings considerably.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OPK, LTS, CSCO, INTC, MSFT over the next 72 hours.