Here are some stocks that have been experiencing abnormally high insider buying. This can be a great screening tool as insiders generally have a great view into the company's operations and when they buy it's generally for only one reason: they believe their stock is going higher. Moreover, they tend to buy right before a big catalyst, meaning it can lead to out-sized gains in a short period of time. Let's analyze these stocks below experiencing notable insider buying as we've seen others proved to be successful and see if these are promising as well.
8x8 (EGHT) develops and markets telecommunications services for Internet protocol, telephony and video applications. On Nov. 3, board director Guy Heckler bought 41,480 shares. The company looks to be rather expensive at a trailing 44x P/E, forward 21x P/E, 1.2x PEG, 3.5x P/S, and 35x EV/EBITDA. The company does have a clean balance sheet with no debt and approximately $.30/share in cash, but I don't see a compelling reason to buy EGHT at this time even with this bullish insider buying.
Old Republic International (ORI), through its subsidiaries, engages in insurance underwriting business. On Nov. 4, Chairman and CEO Aldo Zucaro bought 10,000 shares on the open market, which is in addition to another buy he had here. This company has definitely been experiencing headwinds as housing continues to struggle, but is showing great value at .5x P/S, .6x P/B, and consistently growing 8.5% dividend yield. Moreover, this company looks to turn profitable again this upcoming year and while investors wait, they can collect a great dividend. I'd be a buyer here right near its low.
OPKO Health (OPK), a pharmaceutical and diagnostics company, engages in the discovery, development, and commercialization of novel and proprietary technologies. On Nov. 4, Chairman and CEO Phillip Frost bought 25,000 shares, which is in addition many recent purchases he's made as I described here. Just this past Friday, Nov. 11, an analyst at Jeffries & Co. initiated coverage on OPK with a buy rating and $8 price target citing the strong existing portfolio and excellent track record of Dr. Frost. I'd put this as a speculative buy as the financials aren't pretty with the stock trading at 36x EV/S, 14x P/B, and approximately negative $20M in FCF this past year, but do agree it has great potential and an excellent management team.
Universal Display (PANL) engages in the research, development, and commercialization of organic light emitting diode technologies and materials for use in flat panel display, solid-state lighting, and other product applications. On Nov. 3, major shareholder Discovery Capital Management bought 150,000 shares, which was in addition to a recent purchase it made (see here). The company has a sterling balance sheet with no debt and over $7/share in net cash and no intangible assets of goodwill. However, the company lost approximately $8M in net income this past year, has a very high forward P/E of 59x, and trades at 39x EV/S. While the strong insider buying is encouraging, I can't quite see the value and can't rate this a buy at this time.
Wright Medical Group (WMGI), an orthopedic medical device company, engages in the design, manufacture and marketing of devices and biologic products for the extremity, hip, and knee repair and reconstruction. On Nov. 3, major shareholder OEPW bought 189,810 shares. The company has an astronomical 217x trailing P/E, but more reasonable 22x forward P/E, 1.1x P/S and EV/S, and 1.2x P/B. The company doesn't have a dividend though and doesn't have any compelling value from what I see, so I wouldn't jump in at these levels.
Corinthian Colleges (COCO) operates as a post-secondary education company in the United States and Canada. On Nov. 3, board director Paul Pierre bought 100,000 shares. The company has an ugly chart and lost more than $150M in net income this past year, but analyst expect it to return to profitability this upcoming year. Moreover, valuations look cheap at forward 8x P/E, .1x P/S, .2x EV/S, and 2.7x EV/EBITDA. The .4x P/B is misleading as a big portion of the value is in goodwill and intangible assets, but the stock still looks good for a speculative turnaround buy.
Ameriprise Financial (AMP), through its subsidiaries, provides financial planning, products, and services primarily in the United States. On Nov. 3, board director Robert Sharpe bought 16,000 shares. This one-time spinoff of American Express (AXP), looks attractively priced at trailing 10.5x P/E, 7.8x forward P/E, .7x PEG, 1x P/S and P/B, and with a consistently growing 2% dividend yield. I think this is a high-qaulity, stable company paying a respectable dividend and would follow this insider in buying at these levels.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.