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 when looking for lucrative returns.
This article analyzes insider purchase activities wherein 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 watch list.
Last week was relatively quiet on large sum insider buys. Only two companies made the list.
Akamai Technologies Inc (NASDAQ:AKAM) is a technology company, specifically in the industry of internet information providers. It has a market cap of $5.4 billion. Its stock closed at $30.12 per share last Friday. Over the past week, Akamai Technologies had 2 insiders who purchased a total of 176,422 shares at the total value of $4,882,195. Multiple insider purchase occasions are usually a positive sign.
I like Akamai Technologies' operating margin of 30.05%, a good sign for the company's financial health. Recently, the stock has not been traded actively. There are no obvious new developments at Akamai. These two insiders appear to have been betting on the issue that the recent plunge of the stock is unjustified. In a case like this, I would keep watching closely instead of taking a position quickly.
AutoNation Inc (NYSE:AN) is a services company, specifically in the industry of auto dealerships. It has a market cap of $4.5 billion. Its stock closed at $37.22 per share last Friday. Over the past week, AutoNation had one insider who purchased a total of 61,884 shares at the total value of $2,165,695. Given that its price is only 10.42% lower than its 52-week high, the overall market sentiment appears positive. The sub-one PEG ratio suggests it's somewhat undervalued.
Thinning trading volume suggests that trading interest in the company is waning. AutoNation's case is a strong speculative play, as the purchase was made by a 10% or more owner (usually categorized as insiders), Cascade Investment LLC. Such 10% or more owners usually have goals other than personal investment returns, so it has to be judged on a case-by-case basis. Based on Cascade's history, I find it somewhat unappealing to follow the trades of this company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.