Corporate insiders have material non-public information and they sometimes trade based on such information. Other times they have an edge because they know their companies and industries better than almost all other investors. Therefore, we believe that by imitating the insiders, investors are more likely to beat the market.
Despite nearly a 20% decline in market indices at certain points, there were insider purchases in only 11 Dow stocks. Some stocks didn't have any insider purchases even though they saw declines of more than 40%. Hewlett Packard (NYSE:HPQ) lost 38% year-to-date even after a 20% increase from its 52-week lows, yet there wasn't a single insider purchase in the company. The most recent insider purchase in Dow stocks occurred at Procter & Gamble (NYSE:PG). PG's CEO spent around $400K and purchased 6299 shares. Here are the other 10 Dow stocks with insider purchases over the past three months.
Alcoa Inc. (NYSE:AA) is engaged in the production and management of aluminum. AA was purchased by one insider over the past three months and lost 24.38% since the beginning of this year. On October 13, Ratan Tata, director of Alcoa, purchased 1,897 shares at $9.87. Tata also bought over 2,000 shares of AA at around $16 in July and April this year. AA returned 14.55% since October 13. It has a market cap of $12.3B and a P/E ratio of 12.31. John Paulson invested $430 million in AA shares.
The Boeing Company (NYSE:BA) is an aerospace company. BA was purchased by one insider over the past three months and gained 6.33% since the beginning of this year. Susan Schwab, director at Boeing, increased her holding of BA by 346 shares on August 11. The stock was trading at $57.96 at that time and it now is priced at $68.17. BA has a market cap of $50.7B and a P/E ratio of 13.5. Ken Fisher invested $382 million in BA shares. Legendary short seller Jim Chanos is also long BA because he is hedging his short bets in EADS and he thinks BA is a better investment than EADS.
Caterpillar Inc. (NYSE:CAT) is a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. CAT was purchased by one insider over the past three months and returned 5.34% since the beginning of this year. Director of Caterpillar, Jesse Greene, purchased 1,000 shares at $90.84 on August 5. Greene also bought 1,000 shares at $111.22 in May and another 2,000 shares at $99.232 in February this year. CAT is now trading at about $97. It has a market cap of $62.6B and a P/E ratio of 14.81. Ken Fisher invested $480 million in CAT shares.
The Walt Disney Company (NYSE:DIS) is a diversified worldwide entertainment company. DIS was purchased by one insider over the past three months and lost 3.47% since the beginning of this year. John Pepper, former CEO of Procter & Gamble (PG) and currently a member of Disney’s board, increased his position in DIS by 3,000 shares on August 11. DIS was trading at $31.83 on that day and it returned about 13% since then. Two years ago, Pepper also bought 3,000 shares of DIS at around $25. DIS has a market cap of $67.2B and a P/E ratio of 15.34. Mason Hawkins invested over $1 billion in DIS shares.
Johnson & Johnson (NYSE:JNJ) is engaged in the research and development, manufacture and sale of products in the healthcare field. JNJ was purchased by one insider over the past three months and returned 8.92% since the beginning of this year. William Perez is the director at Johnson & Johnson. He bought 1,000 shares of JNJ at $61.85 on August 8. Prior to that, he also bought 2,000 shares in total at $64 to $65 per share on August 1 and July 28. JNJ is now trading at $65.6. It has a market cap of $179.8B and a P/E ratio of 16. Warren Buffett had $2.8 billion invested in JNJ. Ken Fisher also had $713 million JNJ shares.
Pfizer (NYSE:PFE) is a research-based, global biopharmaceutical company. PFE was purchased by one insider over the past three months and returned 16.79% since the beginning of this year. David Simmons bought 2,000 shares at $17.819 on August 3. PFE returned about 10% since Simmons’ purchase. Earlier in February this year, Don Cornwell, director of the company, also increased his PFE position by 100 shares at $19.05 per share. It has a market cap of $154.6B and a P/E ratio of 18.52. David Einhorn and Ken Fisher both had over $400 million invested in PFE shares.
Exxon Mobil (NYSE:XOM) is a manufacturer and marketer of commodity petrochemicals. XOM was purchased by one insider over the past three months and gained 13.40% since the beginning of this year. Edward Whitacre, director at Exxon Mobil, was bullish about the stock of his company. Whitacre purchased 10,000 shares at $70 on August 11. XOM’s price increased about $10 per shares since then. XOM has a market cap of $396.2B and a P/E ratio of 9.82. Ken Fisher had over $200 million invested in XOM shares.
Kraft Foods (KFT) manufactures and markets packaged food products. KFT was purchased by two insiders over the past three months and returned 15.31% since the beginning of this year. In early August, Director of Kraft, Fredric Reynolds and Strategy EVP of the company, Brian Sam Rovit bought 45,000 shares in total at around $33 per share. KFT is now trading at $35.40. It has a market cap of $62.5B and a P/E ratio of 20.34. Warren Buffett had $3.5 billion invested in KFT shares. Bill Ackman and Nelson Peltz also had over $600 million invested in KFT.
Merck & Co., Inc. (NYSE:MRK) is a global health care company. MRK was purchased by two insiders over the past three months and returned 0.83% since the beginning of this year. Kenneth Frazier, President and CEO of the company, bought over 20,000 shares at lower than $32 per share on August 15. Three days before his purchase, EVP and CFO at Merck, Peter Kellogg, purchased 15,800 shares at similar prices. MRK is now trading at above $35 per share. It has a market cap of $108.2B and a P/E ratio of 24.05. Ric Dillon invested $173 million in MRK shares.
JPMorgan (NYSE:JPM) is a financial holding company. JPM was purchased by three insiders over the past three months and lost 11.63% since the beginning of this year. James Crown, Director at JPMorgan, bought 176,609 shares at $35.0759 on August 11. Crown also purchased 17,500 shares at $34.5 a day earlier. Another director of the company, Laban Jackson, also bought 1,292 shares at $35.4 on August 9. On August 8, CIO of JPMorgan, Ina Drew, bought 492 shares of JPM. JPM’s stock price increased about $2 since then. It has a market cap of $143.1B and a P/E ratio of 7.82. John Paulson invested $252 million in JPM shares at the end of June.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.