We track corporate insiders because we believe they have an edge over ordinary investors. Our past studies have shown that insider purchases on average beat the market in the following 12-month period. Even small insider purchases are marginally profitable. The reason is simple. Insiders understand their companies and the industry way better than other investors and they sometimes have material non-public information. They usually have a lot of exposure to their companies' performance and they will not increase their exposure unless they believe that their purchases are very likely to be profitable.
In this article, we are going to look at the large cap stocks insiders are buying this month. Below we compiled a list of such stocks. All companies have at least $10 billion market cap and were purchased by at least one insider so far in January. The market data is sourced from Finviz.
One large-cap stock that insiders are buying this month is PNC Financial Services Group Inc. (PNC). Helge Wehmeier, director at PNC, bought 320 shares at $59.1372 and another 20 shares at $59.15 on January 3. Wehmeier also purchased hundreds of PNC shares in July, April, and January last year at prices ranging from $59.95 to $63.8346. PNC is trading at $59.73 per share today. It has a market cap of $31B and a low P/E ratio of 9.44. There are 26 hedge funds reported to own PNC in their 13F portfolios at the end of the third quarter last year. Ken Fisher is the most bullish fund manager about PNC. Fisher Asset Management had nearly $300 million invested in PNC. Ken Griffin, Ric Dillion and Bill Miller are also bullish about PNC. Their funds all invested $100+ million in this stock.
Another large-cap stock with insider purchases this month is VMware Inc. (VMW). VMware is a provider of virtualization solutions from the desktop to the data center. The company reported net income of $178 million for the third quarter of 2011, up from $85 million for the third quarter of 2010. As the large shareholder of VMware, EMC Corp have been continuously purchasing VMW stocks over the past few months. In January, EMC bought 47700 shares at $84.0773, 71900 shares at $83.3502, 121500 shares at $82.2229, 122800 shares at $81.3767, and 119200 shares at $83.8693. VMW is now trading at $86.85. It has a market cap of $37B and a P/E ratio of 58.75. As of September 30, 2011, twenty-eight hedge funds disclosed owning VMW stocks. Jim Simons' Renaissance Technologies boosted its VMW stakes by 10% over the third quarter. The fund had $67 million invested in VMW at the end of September.
Alcoa Inc. (AA) is also purchased by one insider in January. Ratan Tata, director at Alcoa, bought 1985 shares at $9.4169 per share on January 11. Tata also bought 1897 shares at about $9.87 in mid-October last year. Now AA is trading at $10.17 per share. It has a market cap of $11B and a P/E ratio of 19.19. The aluminum company reported net income of $172 million for the third quarter of 2011, up from $61 million for the same quarter of 2010. As of September 30, 2011, there are 25 hedge funds with AA positions. Among them, John Paulson's Paulson & Co had the largest AA position. The fund invested $281 million in this stock at the end of September.
Ventas Inc. (VTR) was also bought by one insider in January. Wells Fargo & Company (WFC), BlackRock Inc. (BLK), Consolidated Edison Inc. (ED), and Fastenal Company (FAST) were also purchased by corporate insiders recently. All four stocks were bought by insiders in late December. We believe investors are more likely to outperform the market in the long term by imitating the corporate insiders. We strongly recommend investors to focus on the stocks insiders are buying recently and do some in-depth research on these stocks for their own portfolios.