There can be many reasons why insiders might sell their own company's stock: a big personal purchase like a house; cash to fund a charity; and many other reasons.
Whichever the case is, insiders usually buy shares 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, the 4 companies below have seen heavy insider buying.
Genomic Health, Inc. (GHDX) is a molecular diagnostics company focused on the development and global commercialization of genomic-based clinical laboratory services, which analyzes the underlying biology of cancer, allowing physicians and patients to make individualized treatment decisions. The Company's Oncotype DX platform utilizes genomic analysis in standard tumor pathology specimens to provide tumor-specific information, or the oncotype of a tumor. The current market price is $28.11, which is toward the top of its 52-week price range of $19 - $30.09. GHDX has a market cap of $833.26M and an enterprise value of $732.82M. The current EPS is 0.26 with a trailing P/E of 108.12x and forward P/E of 122.22x. Genomic Health, Inc.'s days sales in receivables of 26.1 is substantially shorter than the Biotech & Med. Research Industry average of 60.3. Oncotype DX sales were $146.6 million in 2009, and $174.5 million in 2010, which represented 34.9% and 19.3% increases over 2008 and 2009, respectively. GHDX posted $0.08 vs. $0.06 Q4 EPS on 13% higher total revenue and yet it was still downgraded from buy to hold. For fiscal year 2012, analysts estimate that GHDX will earn $0.03. For fiscal year 2013, analysts estimate that GHDX's earnings per share will grow by 1167% to $0.38. If this was not intriguing enough news, a director reported buying 184,980 shares on February 16, for $29.73, amounting to roughly $5.5M. I believe this warrants a second look.
Kronos Worldwide, Inc. (KRO) is a global producer and marketer of titanium dioxide pigments (TiO2). The Company, along with its distributors and agents sell and provide technical services for the products to over 4,000 customers in approximately 100 countries, with sales in Europe and North America. TiO2 is an inorganic pigment used to impart whiteness, brightness and opacity for products, such as coatings, plastics, paper, fibers, food, ceramics and cosmetics. The current market price is $22.56 with a one-year analyst price target of $27.67. This represents a 22.65% upside potential. KRO has a market cap of $2.61B and an enterprise value of $2.86B. The current EPS is 2.38 with a P/E of 9.49x, also KRO's ROE is the highest within its Specialty Chemicals Industry. Based on Trailing P/E, KRO currently trades at a 39% discount to its peers. For fiscal year 2012, analysts estimate that KRO's earnings per share will grow by 13% to $3.04.
Moving Average Convergence/Divergence indicates a Bullish Trend. Also, The 21- and 50-day moving averages of $23.30 and $21$14 respectively indicate a bullish upward momentum. Perhaps the most interesting news on Kronos is the fact that its Director of the Board just bought 129,500 shares at $22.5 amounting to $2,913,750, warranting a second look.
CVS Caremark Corporation (CVS) is a pharmacy healthcare provider in the United States. It provides pharmacy services through its pharmacy benefit management (PBM) mail order and specialty pharmacy division, Caremark Pharmacy Services; approximately 7,000 CVS/pharmacy retail stores; retail-based health clinic subsidiary, MinuteClinic, and through its online pharmacy, CVS.com. The current market price is $44.01 with a one-year analyst price target of $48.50. This represents an upside potential of 10.2%. CVS has a market cap of $57.32B and an enterprise value of $66.11B. Current EPS are 2.57 with a P/E of 17.14x. The company's net margin has been higher than its Industry average for each of the past five years. Total sales are expected to rise 12.5% in 2012, to $120.9 billion from $107.5 billion in 2011. CVS posted $0.84 vs. $0.74 Q4 EPS on 15% higher net revenue, and for fiscal year 2012, analysts estimate that CVS will earn $3.28. For fiscal year 2013, analysts estimate that CVS' earnings per share will grow by 13% to $3.69. CVS also sports a nice 5-star S&P rating, but perhaps the most uplifting news is the fact that the EVP and President, Caremark just bought 46,400 shares at $42.99 amounting to roughly $2M.
Arthur J. Gallagher & Co. (AJG) together with its subsidiaries is engaged in providing insurance brokerage and third-party claims settlement and administration services to entities in the United States and abroad. The Company has three operating segments: brokerage, risk management and corporate. The current market price is $34.49 with a one-year analyst price target of $37.42. This represents 8.5%. AJG has a market cap of $3.96B and an enterprise value of $4.37B. Current EPS are 1.28 with a P/E of 26.89x. Despite the distraught view of this sector, AJG has continued to show consistent growth. For Q4 2011, AJG reported revenue of $578.4 million compared with $459.1 million for the same period a year ago. Earnings from continuing operations before income tax of $47.4 million compared with $25.8 million for the same period a year ago. Earnings from continuing operations of $40.5 million or $0.35 per diluted share compared with $46.0 million or $0.43 per diluted share for the same period a year ago. The Moving Average Convergence/Divergence indicates a Bullish Trend along with its upward slope. The 10-, 21-, 50-, and 200-day moving averages of $35.19, $34.50, $33.50, and $29.78 respectively all show a bullish upward trend. Perhaps the best news is the fact that the President and CEO just bought 50,000 shares at $35.11, amounting to $1,755,250.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.