Why do insiders purchase shares of their companies? As Peter Lynch pointed out in his book, "One Up On Wall Street," insiders sell for various reasons, which is usually not very informative unless they are dumping shares like there is no tomorrow. Insiders buy for one reason: They are signaling that they have confidence in the company's future performance. Insiders, especially executives and directors of companies, tend to know their company very well. Tracking their stock purchase activities is a very good point to start at for lucrative returns.
This article analyzes insider purchase activities where they bought at least $1,000,000 worth of shares during the past week, filed at the Securities and Exchange Commission. I have written a short analysis of each company. However, these are not buying and selling recommendations. Of course, insiders could be wrong. It is nevertheless a good starting point to add those stocks to your watch list.
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Acelrx Pharmaceuticals (NASDAQ:ACRX) is a healthcare company, specifically in the industry of major drug manufacturers. It has a market cap of $64.00 million. Over the past week, its stock closed at $3.25 per share. Acelrx Pharmaceuticals has two insiders who purchased a total of 569,396 shares at the total value of $1,935,946. Multiple insider purchase occasions are usually a positive sign. The share purchase accounts for a whopping 3.02% of the company's market cap.
One concern is that the company isn't profitable at this point. The trading volume has been consolidating recently. Financially, there isn't enough evidence to back up a bullish case for this company. But the way to play this company is to follow its major drug tests closely.
Furiex Pharmaceuticals (NASDAQ:FURX) is a services company, specifically in the industry of business services. It has a market cap of $195.70 million. Over the past week, its stock closed at $19.67 per share. Furiex Pharmaceuticals has one insider who purchased a total of 168,752 shares at the total value of $3,359,620. The share purchase account for 1.72% of the company's market cap.
The role this company plays is between pharmaceutical and biotech companies to increase the value of early stage drug candidates. The company isn't profitable yet. There are no new developments based on news reports.
Hewlett-Packard (NYSE:HPQ) is a technology company, specifically in the industry of diversified computer systems. It has a market cap of $42 billion. Over the past week, its stock closed at $21.25 per share. Hewlett-Packard has one insider who purchased a total of 9,155,638 shares at the total value of $207,506,069. Its price is near the bottom, at around 3.31% off of its 52-week low.
I have written about this name before, seeing it as a potentially very profitable turnaround play. The company's most recent quarterly earnings report certainly gives investors more confidence. Given the amazingly large purchase, Hewlett-Packard has moved higher on my "closely watched" list.
VMware (NYSE:VMW) is a technology company, specifically in the industry of technical and system software. It has a market cap of $38.22 billion. Over the past week, its stock closed at $89.46 per share. VMware has one insider who purchased a total of 52,800 shares at the total value of $4,997,731. Its price is only around 19.78% off its 52-week low.
While the stock appears as if it might have bottomed, investors should proceed with caution. I like VMware's operating margin of 20.08%, a good sign for the company's financial health. Overall, VMware is richly valued.
Biovail Corp. (NYSE:VRX) is a healthcare company, specifically in the industry of drug delivery. It has a market cap of $14.38 billion. Over the past week, its stock closed at $47.00 per share. Biovail has two insiders who purchased a total of 147,893 shares at the total value of $7,101,285. As noted above, multiple insider purchase occasions are usually a positive sign. I like Biovail's operating margin of 23.99%, a good sign for the company's financial health.
In early May, Biovail's quarterly earnings report spooked investors and the share price has taken a hit of almost $10 in the past month. Insider purchases might be a signal that the worst has passed and the company's situation is not as bad as it seemed.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.