7 Reasons To Get Behind Insiders On ShoreTel

 |  About: ShoreTel, Inc. (SHOR), Includes: MSFT
by: Bret Jensen

Although the speculative portion of my portfolio never makes up more than 20% of my portfolio (and is usually is around 10%), the research, investing and writing I do on this part of my allocation provides me with the most satisfaction. Yes, getting 30% returns over the last year with the largest stake in my portfolio, Microsoft (NASDAQ:MSFT) is gratifying; but it cannot compare to the excitement with getting a 50% return on my small position in SciClone Pharmaceuticals (NASDAQ:SCLN) in six weeks. I think this is basic human nature, for good or for ill. One small cap stock in my portfolio that I am particularly excited right now is ShoreTel (NASDAQ:SHOR).

ShoreTel, Inc., together with its subsidiaries, engages in the development and sale of Internet protocol (IP) communications systems for enterprises in the United States and internationally. (Business Description from Yahoo Finance).

Seven Reasons to pick up ShoreTel at just over $5 a share:

  • Several insiders made significant new buys in February and there has been net insider buying in the stock since the first of the year.

  • The company has a robust balance sheet with over $2 a share in net cash. Net cash represents approximately 40% of its market capitalization.

  • The company is expected to continue to achieve impressive revenue growth. Analysts have it producing around 15% sales increases in FY2012 and over 18% revenue growth in FY2013.

  • Analysts also have a consensus price target on ShoreTel that is much higher than the company's current share price. The median price target on SHOR for the nine analysts that cover the stock is $9 a share, more than 50% above the stock price of $5.65 as of Friday's close.

  • Given the small market capitalization, cash on the balance sheet and sales to a diverse client base; this would be an easy and logical acquisition for a larger player in the space.

  • The recent acquisition of M5 Networks establishes the company in the cloud and will reach a large and growing market segment of customers that are looking to deploy IP communications through a hosted model.

  • The stock has long term technical support at just below current price levels (See Chart).

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Disclosure: I am long MSFT, SHOR.