Even though the markets have rallied sharply over new hopes for a solution in Europe, many stocks remain at depressed levels. Picking stocks can be tough in a volatile market, so it helps to pay extra attention when top executives and other company insiders scoop up shares, especially when the stock has dropped in value. Insiders tend to know their companies better than analysts or other investors, so
when they buy after a big decline, it can be a strong sign the stock is a bargain. Most insiders already own shares or options in the companies they work for, so when they pull out their checkbooks to buy additional shares, it makes sense to consider investing along with them. Here are two stocks that are trading below $6 per share, with new insider buying:
Boston Scientific (BSX) shares were regularly trading over $6 in May, but the market correction and other issues have brought this stock down to near 52-week lows. This company designs and manufactures stents, catheters, pacemakers, and other medical device products. Normally, a company in this industry would have a fairly high P/E ratio, but Boston Scientific trades for just about 12 times earnings. It seems that some investors are concerned about the impact of new regulations and taxes on medical device makers that will come when "Obamacare" is implemented. One of the new taxes created by Obamacare will be on medical device manufacturers at a rate of 2.3%. While this is not good news, it might be already priced into the shares by now. Furthermore, the company might be able to pass on those costs to some customers. Boston Scientific recently reported a quarterly profit of 11 cents per share on an adjusted basis, which beat estimates by a penny. While this might not be the most exciting medical devices maker, it seems to offer value and it even trades below book value, which is $5.58 per share. At least one insider wants more shares at these levels: On July 31, 2012, William Kucheman, the CEO, bought 10,000 shares in a transaction valued at about $52,000.
Here are some key points for BSX:
Current share price: $5.26
The 52 week range is $4.79 to $6.90
Earnings estimates for 2012: 42 cents per share
Earnings estimates for 2013: 47 cents per share
Annual dividend: none
Radian Group, Inc. (RDN) shares have been a roller-coaster ride for investors as optimism on recent housing data takes the shares up, only to drop again shortly thereafter when negativity takes a firm grip. Radian provides mortgage insurance, and this sector has been challenged ever since the housing crisis began. The struggles have continued for Radian, and its shares seemed to have been impacted after MGIC Investment (MTG) announced a significant loss for the recent quarter. The loss caused the company to breach capital limits that are set by regulators. This news caused MGIC shares to plunge from about $2.50 to even below $1 recently, and it also seemed to impact other mortgage insurers like Genworth (GNW). However, if MGIC Investment is unable to continue as a going concern, rivals like Radian and Genworth are bound to benefit. Since Genworth is currently profitable, and because it has other lines of business such as long-term care and annuities, I believe it is a much better way to play this sector for an eventual rebound in housing. However, Radian is probably more of a "pure play" on mortgage insurance, and if a true turnaround occurs, it might have more upside for investors willing to bear the extra risk. At least one insider thinks the shares are worth buying right now: On August 3, 2012, Sanford Ibrahim, the CEO, bought 15,000 shares in a transaction valued at about $41,000.
Here are some key points for RDN:
Current share price: $3.11
The 52 week range is $1.80 to $4.68
Earnings estimates for 2012: a loss of $3.05 per share
Earnings estimates for 2013: a loss of 42 cents per share
Annual dividend: 1 cent per share, which yields .5%
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I am long GNW.