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 proven to be successful, and see if these are promising as well.
Radian Group (RDN), through its subsidiaries, provides credit-related insurance coverage and financial services in the United States and internationally. On Nov. 21-23, CEO Sanford Ibrahim bought 35,000 shares collectively after having significant insider buying prior as described here. This has been a victim of the mortgage mess and even though it has some compelling valuations at .1x PEG, .2x P/S and P/B, it looks to be highly speculative as the company lost a massive $700M in net income this past year and burned through $860M in FCF. However, if the mortgage mess turns around soon, RDN would be a big beneficiary and this insider buy is encouraging. Definitely only worth it as a very speculative buy.
OPKO Health (OPK), a pharmaceutical and diagnostics company, engages in the discovery, development, and commercialization of novel and proprietary technologies. On Nov. 29, Chairman and CEO Phillip Frost bought another 25,000 shares, which is in addition to many recent purchases he's made as I described here. I'll continue to say this is a nice speculative buy as the financials aren't pretty with the stock trading at 32x EV/S, 14x P/B, and approximately negative $20M in FCF this past year, but I do agree it has great potential and an excellent management team. Moreover, Dr. Frost's track record is excellent.
OfficeMax (OMX), together with its subsidiaries, distributes business-to-business and retail office products. On Nov. 21, President and CEO Saligram bought a massive 55,500 shares. We brought up recently how its competitor had large insider buying here as well and I can see the value here at just a trailing 10x P/E, 8x forward P/E, .1x P/S, .2x EV/S, and .6x P/B. OMX is a nice buy.
Beazer Homes USA (BZH) designs, builds, and sells single-family and multi-family homes in 16 states in the United States. On Nov. 21, board director Stephen Zelnak bought 25,000 shares. The company has some nice value at just .2x P/S and .9x P/B, but continues to bleed cash heavily while having a relatively big $1.5B debt load. I'd stay away from BZH and all residential homebuilders for the time being as they seem to be a value trap.
Ford Motor Company (F) primarily develops, manufactures, distributes, and services vehicles and parts worldwide. On Nov. 21, Chairman William Ford bought 25,000 shares. F has great value at just a trailing and forward 6x P/E, .3x P/S, and .8x PEG and EV/S.
Chimera Investment Corporation (CIM) operates as a real estate investment trust (REIT) in the United States. On Nov. 22, board director Paul Donlin bought an impressive 100,000 shares. This is one of the riskier of the REITs as CIM's portfolio is predominately non-agency, but showing great value now with a consistent yield now at 20%, .8x P/B, and trailing and forward 5x P/e. I'm continuing to hold CIM and looking to add as I free up more cash.
Boston Scientific (BSX) develops, manufactures, and markets medical devices used in various interventional medical specialties worldwide. On Nov. 21, board director Ernest Mario bought 25,000 shares. I see some attractive valuations at a trailing 15x P/E, 11x forward P/E, .7x P/B, 1x P/S, and 6.5x EV/EBITDA. It is worth noting as a bearish case though that the balance sheet has a massive $16.5B in goodwill and intangible assets combined, which when stripped out, gives BSX actually an approximate negative $3.5/share in book value. BSX looks to have stabilized and this insider buying is encouraging, which gives me the nod in making this a speculative value buy.
Disclosure: I am long CIM.