There can be several reasons why insiders might sell their own company's stock: Making a big personal purchase like a house, a need for cash to fund a charity, or other times insiders might sell because their stock is overvalued and no longer attractive at current prices.
However, when insiders are buying shares, this warrants a second look at the company's financials and vision. These four companies are experiencing heavy insider buying, and seem to have a vision of where the company is going. The financials are solid and the stock prices point towards upward movement.
Cirrus Logic, Inc. (CRUS) develops high-precision, analog and mixed-signal integrated circuits for a range of audio and energy markets. The current market price is $16.99 with a 1 year analyst price target of $25. This represents a 47.15% upside potential. The company's gross margin has been higher than its subsector average for each of the past five years. Also, CRUS's trailing P/E, forward P/E, and forward PEG multiples are all significantly below their 5-year averages. CRUS's current forward PEG of 0.5 represents a 56% discount to its Semiconductors subsector average. Despite the low price, CRUS has an operating profit margin of 18.02% compared to the industry average of 6.59%. This shows a company that is highly undervalued despite outperforming the industry. If this was not enough, the best news is Cirrus Logic has no debt! Recently a director bought 132,000 shares, or about $2M worth of stock at a price of $15.21. This shows extreme confidence in the organization.
Schlumberger Limited (SLB) is a supplier of technology, integrated project management and information solutions to the international oil and gas exploration and production industry. The current market price is $75.23 with a 1 year analyst price target of $97.85. This represents a 30.07% upside potential, not including its 1.5% dividend yield. Schlumberger is a market leader in value-added products and services critical for oilfield operations, and is one of the largest technology development companies. SLB will benefit from the strong drilling demand and sharp growth in the seismic field. Schlumberger will also see the benefits of increased deepwater activity in 2012. SLB has a high margin of growth given the company’s fundamentals and the current price. SLB's 0.7 forward PEG is at the low end of its 5-year range (lowest 0.5 to highest 5.0), which shows a deep discount in price. It seems like insiders and analysts agree on this stock. S&P has a 5-star rating on this stock, and recently the CEO bought 6,000 shares, or $414,000 worth of stock at a price of $69 per share.
Popular, Inc. (BPOP) is a diversified, publicly owned bank holding company. The Company operates in three markets: Puerto Rico, the United States mainland and providing processing and other technology services in Puerto Rico, Florida, Venezuela, the Dominican Republic, El Salvador and Costa Rica. In the past 52 weeks, shares of Banco Popular have traded between a low of $1.20 and a high of $3.59 and are now at $1.85, which is 54% above that low price. The 1 year analyst price target is $3.5, which represents an 89.19% upside potential. This stock is heavily underpriced and insiders are taking advantage. BPOP's current forward PEG of 0.9 represents a 55% discount to its Banks subsector average, and a forward P/E of 6.1x represents a 64%discount to the subsector average. This discount may not last for long because the stock has recovered 53.8% from its recent low price of $1.2, which occurred on October 3, 2011. The current price is above the 50 day moving average of $1.72. Also, the president of the company just bought 105,000 shares, or $189,000 worth of stock at a price of $1.8 per share.
Dollar Tree, Inc. (DLTR) operates discount variety stores in the United States and Canada. Its stores offer merchandise primarily at the fixed price of $1.00. The market price for one share of DLTR is currently $80.15. I feel that the roll-out of coolers, along with increased debit card acceptance in stores, will positively impact traffic to its stores and ultimately increase revenues. Dollar Tree has a lot of technology investments which will benefit the company in the coming years. Dollar Tree also stands to benefit from technology investments, a shift toward larger stores, and expanded marketing and merchandising initiatives. DLTR is trading at fresh new highs. Inventory management and solid expense control will likely support margins going forward. Insiders are also seeing value; a director just bought 5,000 shares, or $399,211 worth of stock at a price of $79.84 per share. This same director bought 5,000 shares in June at a price of $63.14. It seems there is still value at the current price!