Insider trading is definitely illegal (yes, we are looking at you Raj Rajaratnam), but investors can yield solid clues on what is about to happen in a stock by paying attention to what its insiders are doing – are they buying or selling?
The stocks on this list were screened using the screener at Finviz.com. Each has a dividend yield over 5%, an analyst recommendation of buy or better and very positive insider transactions (over 20%):
- Ares Capital Corporation (ARCC) has a 9.80% dividend yield. The $2.93 billion market cap company recently traded at $14.26. Current estimates put the stock at $17.45 within the next 12 months. The financial company is larger than its direct competitors, boasting a larger market cap and stronger quarterly growth than American Capital, Ltd. (ACAS), its nearest rival.
- Rhino Resource Partners LP (RNO) delivers an impressive 9.30% dividend yield. The coal company recently traded at $19.54 with expectations to hit $28.25 within the next 12 months. Rhino is much smaller than its nearest competitor Alpha Natural Resources, Inc. (ANR), coming in at a market cap of just $541 million compared to ANR’s $4.68 billion, and it has slower growth but analysts are confident. Amongst hedge fund managers, Charles Davidson is most bullish. His Wexford Capital fund has a stake valued at over $200 million in the company.
- American Capital Agency Corp. (AGNC) offers an astounding 20.70% dividend yield, meaning it is a little risky, but analysts are giving this company a 2.0 on a 1.0 to 5.0 scale in which 1.0 is a strong sell, up from a 2.1 rating last week. Sure, this is a speculative stock, but it is also garner lots of attention from hedge fund managers. John Burbank bought a new $233 million position during the second quarter for his Passport Capital fund. AGNC now takes up over 8.6% of his portfolio.
- Reynolds American Inc. (RAI) offers a more modest dividend yield of 5.50%. It isn’t expected to grow much, but it is expected to grow. Further, RAI has a debt to equity ratio of 0.55 and a return on equity of 20.6%. In other words, it is a solid stock. Jim Simons of Renaissance Technologies has $43 million of his fund invested in RAI.
- Lockheed Martin Corporation (LMT) has a 5.30% dividend yield. It is currently trading at $76.41 and is expected to grow to $85.29 a share within the next 12 months, although some analysts are predicting it could pop to $102. LMT has a higher market cap and stronger growth than rival Northrop Grumman Corp (NOC).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.