13 Oversold Stocks Insiders Are Buying

|
 |  Includes: ACIIQ, BMC, CHK, EQT, FSLR, FTR, GMCR, HFC, MCPIQ, NIHD, S, SHLD, UAL
by: Insider Monkey

Oversold stocks are those stocks that suffered big losses recently. It is very likely that prices of these stocks have fallen sharply to a level below their true values. Therefore, oversold stocks are likely to be good investments as they are trading at discounts. One of the most practical ways of picking oversold stocks is to focus on what insiders are bullish about. Our past studies have shown that insider purchases on average beat the market in the following 12-month period. Corporate insiders know their companies much better than ordinary investors. They usually have large exposure to their companies' performance. So it does not make sense for them to increase their exposure unless they believe that their purchases are very likely to be profitable.

Below we compiled a list of oversold stocks insiders are bullish about. All stocks have market caps over $2 billion and were purchased by at least one insider over the past three months. These stocks lost at least 10% over the past three months, during which the market was up about 8%.

Ticker

Company

Return

Insiders

(ACI)

Arch Coal Inc.

-15.08%

1

(NASDAQ:BMC)

BMC Software Inc.

-15.87%

1

(NASDAQ:FSLR)

First Solar, Inc.

-29.78%

1

(NASDAQ:FTR)

Frontier Communications

-12.16%

1

(MCP)

Molycorp, Inc.

-22.81%

1

(NYSE:S)

Sprint Nextel Corp.

-16.91%

1

(NASDAQ:SHLD)

Sears Holdings Corporation

-51.75%

1

(NYSE:UAL)

United Continental

-11.94%

1

(NYSE:CHK)

Chesapeake Energy

-19.96%

2

(NYSE:HFC)

HollyFrontier Corporation

-14.39%

2

(NYSE:EQT)

EQT Corporation

-19.15%

3

(NASDAQ:GMCR)

Green Mountain

-48.46%

3

(NASDAQ:NIHD)

NII Holdings Inc.

-24.56%

4

Click to enlarge

NII Holdings Inc (NIHD) was purchased by most insiders over the past three months. Ruben Butvilofsky, President of Nextel Argentina at NII, purchased thousands of NIHD shares at around $21 per share on December 28 and December 27. Gokul Hemmady also bought 3500 shares at $21.1769 on December 23, and Gary Begeman bought 5000 shares at $21.1 on December 22. Sergio Chaia also purchased more than 10000 shares in early December at around $21. NIHD is now priced at $21.23 per share. It has a market cap of $3.6B and a relatively low P/E ratio of 11.99, indicating that the stock is trading at a discount. The stock is down 24.56% over the past quarter, underperforming the market by 32 percentage points. Steven Mandel's Lone Pine Capital had $189 million invested in NIHD at the end of the third quarter. Lee Ainslie and Steven Cohen also invested certain part of their portfolios in NIHD.

Another oversold stock that insiders love is EQT Corporation (EQT). The stock lost 19.15% during the past three months and was purchased by three insiders. On January 3, James Rohr, Bray Cary and Philip Behrman bought 730, 770 and 330 EQT shares respectively at prices ranging from $53.36 to $54.79. Rohr, Cary and Behrman also purchased hundreds of shares of the stock last year at prices ranging from $44.84 to $53.56. Today EQT is trading at $48.8 per share. It has a market cap of $7.3B and a P/E ratio of 15.84. At the end of the third quarter, there are 24 hedge funds with EQT positions. For example, Steven Cohen's SAC Capital Advisors significantly boosted its EQT stakes by 1165% to $45 million during the third quarter.

Insiders also like Chesapeake Energy Corporation (CHK). During the past three months, there are two insiders purchased CHK. Aubrey McClendon, director at Chesapeake, bought 11000 shares at $22.7622 on November 25. Another director, Louis Simpson, also purchased 100,000 shares at $26.6911 on November 8. CHK is currently trading at $21.41 per share. It has a market cap of $14 billion. The stock lost 19.96% over the past three months and has a relatively low P/E ratio of 11.51. T Boone Pickens' BP Capital invested 12.59% of its total portfolio in CHK. At the end of the third quarter, BP Capital reported to own $15 million worth of CHK shares.

Insiders also purchased Arch Coal Inc (ACI), Molycorp Inc (MCP), and Sears Holdings Corporation (SHLD) over the past month, and they bought BMC Software Inc (BMC), First Solar Inc (FSLR), Frontier Communications Corporation (FTR), Sprint Nextel Corp (S), United Continental Holdings Inc (UAL), HollyFrontier Corporation (HFC) and Green Mountain Coffee Roasters Inc (GMCR) during the last three months. Academic research has shown that corporate insiders have an edge over ordinary investors, especially when it comes to purchasing stocks. We believe that by focusing on the stocks that insiders love, especially those that are trading at discounts, investors will be more likely to outperform the market in the long term.

Disclosure: I am long (FTR), (CHK).