There can be several reasons why insiders might sell their own company's stock: Buying a big personal purchase like a house; sometimes they need cash to fund a charity; other times insiders might sell because their stock is overvalued and no longer attractive at current prices.
Whichever the case is, we can all agree why insiders buy shares, and this is because they think the stock is a bargain and has upside potential. When mutual funds or hedge fund managers (and even everyday investors) see a lot of insider activity, it most definitely triggers a reason to take a second look at the company. Recently, a number of corporate insiders have bought large amounts of stock in their own companies. The four stocks below have seen heavy insider buying.
Quad/Graphics, Inc. (QUAD) is a printer of magazines, catalogs and other commercial products. The company provides services ranging from front-end design and photography through digital imaging, printing, list management, finishing and dependable distribution. The current market price is $13.52 with a one-year analyst price target of $18.67. This represents a 38.09% upside potential, and this does not include the 5.5% dividend yield. Quad Graphics has a market cap of $762.43 million and an enterprise value of $2.43 billion. QUAD's year-over-year revenue growth of 130.2% is the highest within its publishing industry. Also, QUAD's forward P/E of 6.7 represents a 34% discount to its 5-year average of 10.2. A main reason this stock warrants a second look is because the CEO and Chairman just bought 61,900 shares at $16.02, substantially higher than current market price, worth $991,669.
TriQuint Semiconductor, Inc. (TQNT) is a supplier of modules, components and foundry services for communications applications. The current market price is $4.37 with a one-year analyst price target of $6.38. This represents a 46% upside potential. The balance sheet is very attractive for TriQuint with a $147.22 million cash position and no debt. TQNT is currently valued at a discount to the S&P 500 index based on both Trailing P/E and Forward PEG. I feel the recent downward pressure on this stock pushed a low that is set up this stock for a recovery. ZTE has chosen to include TriQuint's power amplifier modules in the award-winning ZTE Blade and the new ZTE Skate, two standout offerings in ZTE's global line of smartphones. Also its partners are saying nothing but good things:
"TriQuint has demonstrated a strong management commitment and flexible support in securing supply for Sony Ericsson's portfolio," said Peter Carlsson, Sony Ericsson Vice President, Head of Sourcing and Partner Management. "We consider TriQuint and its innovative RF technology solutions an important partner for delivering our mobile communications products."
I like the fact that a director just bought 100,000 shares at $4.31 amounting to $431,200 and also another 14,333 shares at $4.76 worth $68,211.
Furiex Pharmaceuticals, Inc. (FURX) is a drug development collaboration company. The company's product pipeline includes two marketed products and three programs in development, including late-stage compounds, in multiple therapeutic areas. The current market price is $16.25 with a one-year analyst price target of $25. This represents a 53.85% upside potential. Furiex Pharmaceuticals has a market cap of $179.74 million and an enterprise value of $136.81 million. Its estimated growth rate for next year is 74.4%. I love the fact that FURX has $54.81 million in cash on its books and only $10 million in short-term debt and zero in long-term debt. The company is only at its early stage; therefore the high costs and big losses are natural for this type of company. A plus side to FURX is that fact that it could receive payments from Takeda Pharmaceutical for its orally ingested drug Nesina once approved by the FDA (which is expected in early 2012). Another great reason to keep an eye on this stock is because all of the insider buying recently. A director just bought 163,342 shares at $17.62 per share amounting to $2.9 million. Also, a couple other directors just bought $50,000 worth of stock.
Valeant Pharmaceuticals International, Inc., (VRX) formerly Biovail Corporation, is a multinational, specialty pharmaceutical company that develops, manufactures and markets a range of pharmaceutical products. The current market price is $45.73 with a one-year analyst price target of $52.38. This represents a 14.54% upside potential. I like the fact that Valeant has a diversified revenue base and is not dependent on a single product to drive performance. The company's days' sales in inventory has been higher than its Industry average for each of the past five years, but its dividend growth rate of -100.0% is the lowest within its diversified pharmaceuticals industry. Valeant Pharmaceuticals has a market cap of $14.40 billion and an enterprise value of $19.31 billion. Compared to the diversified pharmaceuticals industry, VRX is currently trading at a significant discount based on both Trailing P/E and Forward PEG. VRX's 0.7 Forward PEG is at the low end of its 5-year range (lowest 0.5 to highest 5.0). Another reason this stock warrants a closer look, besides its 5-star S&P rating, is the fact that the CFO just bought 32,500 shares at $46.05-46.26 amounting to $1.5 million. This CFO also bought another 11,000 shares at $46.82 worth $515,020.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.