5 Insider Stock Picks Undervalued By EPS Trends

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 |  Includes: CODI, END, FDML, LM, NCT
by: Kapitall

Wish you could get an inside peek at your favorite companies? One way to do that is by examining insider stock purchases.

With that idea in mind, we ran a screen on stocks that have seen significant net insider purchases over the last six months, representing at least 1% of share float. Since most companies don't have many insiders, which include members of the board and upper management, net purchases representing 1% of share float is a considerable show of confidence that the company will outperform.

We then screened these insider stock picks for those that appear undervalued relative to EPS trends. Based on the assumption that P/E is equal to a constant k, increases in EPS should be matched by increases in price. When they don't match up, a mispricing may have occurred.

We screened for stocks with faster growth in EPS estimates than price over the last month, which may indicate that these names are being undervalued.

Interactive Chart: Press Play to compare changes in market cap over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

Do you think these insider picks are undervalued and ready to move higher? Use this list as a starting point for your own analysis.

List sorted by net insider purchases over the last six months as a percent of share float.

1. Federal-Mogul Corp. (FDML): Supplies powertrain and safety technologies worldwide. Market cap at $1.54B. Price at $15.73. The EPS estimate for the company's current year increased from 2.04 to 2.06 over the last 30 days, an increase of 0.98%. This increase came during a time when the stock price changed by -10.68% (from 17.7 to 15.81 over the last 30 days). Over the last six months, insiders were net buyers of 1,143,330 shares, which represents about 5.09% of the company's 22.46M share float.

2. Compass Diversified Holdings (CODI): A public investment firm specializing in acquiring controlling stakes in small to middle market companies. Market cap at $711.94M. Price at $14.99. The EPS estimate for the company's current year increased from 1.5 to 1.53 over the last 30 days, an increase of 2.%. This increase came during a time when the stock price changed by -3% (from 14.99 to 14.54 over the last 30 days). Over the last six months, insiders were net buyers of 1,589,160 shares, which represents about 4.05% of the company's 39.21M share float.

3. Legg Mason Inc. (LM): Operates as an asset management company worldwide. Market cap at $3.55B. Price at $25.86. The EPS estimate for the company's current year increased from 1.46 to 1.48 over the last 30 days, an increase of 1.37%. This increase came during a time when the stock price changed by -12.02% (from 28.94 to 25.46 over the last 30 days). Over the last six months, insiders were net buyers of 3,465,000 shares, which represents about 3.07% of the company's 112.88M share float.

4. Endeavour International Corporation (END): Engages in the acquisition, exploration, development, and production of crude oil and natural gas in the United States and the United Kingdom. Market cap at $462.60M. Price at $12.57. The EPS estimate for the company's current year increased from 2 to 2.23 over the last 30 days, an increase of 11.5%. This increase came during a time when the stock price changed by -9.78% (from 13.29 to 11.99 over the last 30 days). Over the last six months, insiders were net buyers of 431,000 shares, which represents about 1.79% of the company's 24.11M share float.

5. Newcastle Investment Corp. (NCT): Operates as a real estate investment and finance company that invests in and manages a portfolio consisting primarily of real estate securities. Market cap at $393.21M. Price at $6.50. The EPS estimate for the company's current year increased from 1.3 to 1.34 over the last 30 days, an increase of 3.08%. This increase came during a time when the stock price changed by -5.74% (from 6.62 to 6.24 over the last 30 days). Over the last six months, insiders were net buyers of 1,314,780 shares, which represents about 1.29% of the company's 102.16M share float.

Insider data sourced from Yahoo Finance; all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.