Corporate insiders have material non-public information about their companies. Although trading on such information is prohibited and insiders usually obey the rules, the information may still affect their buy or sell decisions. For example, if insiders know their company is about to release bad news, they will postpone their purchases, avoiding big losses. Academic studies have shown that insider purchases have been able to beat the market on the average.
Below we compiled a list of Dow stocks with insider purchases over the past three months.
Alcoa, Inc. (AA): Alcoa is an aluminum production company. During the past three months, one insider purchased AA. On October 13, Ratan Tata bought 597 shares at $9.8669 and another 1,300 shares at $9.87. Now the stock is trading at $9.85. It has a market cap of $10.6B and a P/E ratio of 10.55. John Paulson’s Paulson & Co had nearly $300 million invested in AA.
Boeing Co. (BA): Boeing is an aerospace company. BA was bought by one insider during the past three months. Lawrence Kellner purchased 1,000 shares at $65.0714 on November 3. Now the stock is trading at $70.9. It has a market cap of $52.7B and a P/E ratio of 14.03. Ken Fisher’s Fisher Asset Management invested over $300 million in BA shares at the end of the third quarter.
Walt Disney Co. (DIS): Walt Disney is a worldwide entertainment company. During the past three months, one insider purchased DIS. John Pepper, director at Walt Disney, purchased 1,000 shares at $35 on November 18. Pepper also bought 1,000 shares at $36 on November 14. Now the stock is trading at $36.9. It has a market cap of $66.2B and a P/E ratio of 14.62. Jim Simons was bullish about DIS. His Renaissance Technologies owned more than $100 million worth of DIS stocks as of September 30.
Hewlett-Packard Company (HPQ): Hewlett-Packard provides technologies and software solutions to individuals and institutions. There is one insider purchase in HPQ over the past three month. On December 2, John Hammergren bought 1,000 shares at $28.2075. Now the stock is trading at $28.32. It has a market cap of $56B and a P/E ratio of 8.62. Seth Klarman’s Baupost Group invested $466 million in HPQ shares.
The Coca-Cola Company (KO): Coca-Cola is a non-alcoholic beverage company. During the past three months, one insider purchased KO. At the beginning of November, Barry Diller purchased 100,000 shares at $67.1129. The stock is currently trading at $66.62. It has a market cap of $151B and a P/E ratio of 12.28. Warren Buffett’s Berkshire Hathaway had $13.5 billion invested in Coca-Cola.
Procter & Gamble Co. (PG): Procter & Gamble provides consumer packaged goods. PG was purchased by one insider over the past three months. Robert Mcdonald purchased 6,299 shares at $64.78 per share at the end of October. Now the stock is trading at $64.9. It has a market cap of $178B and a P/E ratio of 16.46. Warren Buffett had $4.9 billion invested in PG. Ken Fisher also invested $266 million in the stock.
Our favorite insider purchase in this list is HPQ. HPQ is one of the big losers in Dow this year, however the stock is up 30% after hitting its 52-week low this summer. PC-related stocks are currently suffering because of the game changing innovations brought by Apple (AAPL). Microsoft (MSFT) and Dell (DELL) are also trading at unusually low multiples. Interestingly, Apple’s forward PE ratio is unconventionally low. The market can’t be right about all of these stocks. We believe a basket of HPQ, MSFT, DELL and AAPL, where Apple has 40% of the weight and the other stocks have equal weights, will make investors happy over the next couple of years.
Disclosure: I am long MSFT.