Insider buying is often a sign of potential positive developments within a company, particularly if the insiders who are buying have a good track record with respect to their own buying. This is, however, only a secondary indicator and should not be relied upon solely when making the decision on whether to purchase a security. Insider buying in and by itself will not make a stock move higher, but can provide a further clue if all the other pieces of the puzzle - e.g., earnings, sales, return on equity, profit margins, etc. - are in place.
I screened for companies where at least one insider made a buy filed on August 17. I chose the top five companies with insider buying in dollar terms. Here are the five stocks:
1. Sirius XM Radio (SIRI) is the world's largest radio broadcaster measured by revenue and has nearly 23 million subscribers. SiriusXM creates and broadcasts commercial-free music; premier sports talk and live events; comedy; news; exclusive talk and entertainment; and the most comprehensive Latin music, sports and talk programming in radio. SiriusXM is available in vehicles from every major car company in the U.S., from retailers nationwide, and online at siriusxm.com. SiriusXM programming is also available through the SiriusXM Internet Radio App for Android, Apple, and BlackBerry smartphones and other connected devices. SiriusXM also holds a minority interest in SiriusXM Canada which has more than 2 million subscribers.
Liberty Media Corporation purchased 4,348,369 shares on August 15-16 and 89,970,000 shares on August 10-14. Liberty Media Corporation currently holds 3,090,798,249 shares of Sirius. Sirius has 6.5 billion shares outstanding - which makes Liberty Media Corporation a 48.1% owner of Sirius. Liberty Media Corporation intends to acquire beneficial ownership of additional shares of common stock that, together with its current beneficial ownership, would represent more than 50% of the outstanding shares of common stock of Sirius.
The company reported the second-quarter financial results on August 7 with the following highlights:
|Net income||$0.48 per share|
Included in the second quarter 2012 net income was an income tax benefit of approximately $3.0 billion related to a reversal of substantially all of the company's deferred income tax valuation allowance.
Mel Karmazin, Chief Executive Officer, SiriusXM commented:
"Our increase in adjusted EBITDA guidance to approximately $900 million indicates strong confidence in our ability to continue to execute in the back half of the year. We were also pleased to raise our subscriber guidance for the second time this year just last month."
The company's 2012 subscriber, revenue, adjusted EBITDA and free cash flow guidance are as follows:
- Net subscriber growth approaching 1.6 million,
- Revenue approaching $3.4 billion,
- Adjusted EBITDA of approximately $900 million, and
- Free cash flow of approximately $700 million.
The stock has a $4.75 price target from the Point and Figure chart. Liberty Media Corporation intends to increase its ownership of Sirius to 50%. The stock could be a good speculative pick now.
2. STR Holdings (STRI) is a leading global provider of high quality, superior performance encapsulants to the photovoltaic module industry.
Red Mountain Capital Partners purchased 338,121 shares on August 15-17 and currently holds 5,280,132 shares of the company. The company has 41.3 million shares outstanding which makes Red Mountain Capital Partners a 12.8% owner of the company.
The company reported the second-quarter financial results on August 8 with the following highlights:
|Net loss||$0.06 per share|
The company provided guidance for the third quarter and updated its full-year 2012 guidance as follows:
|Amounts in millions, except per share amounts|
|Quarter ending September 30, 2012||Low||High|
|Diluted non-GAAP EPS||$||(0.03||)||$||0.00|
|Year ending December 31, 2012||Low||High|
|Diluted non-GAAP EPS||$||0.01||$||0.07|
The company has a book value of $6.08 per share and cash $1.73 per share. Red Mountain Capital Partners has been buying the shares below the book value. The stock has been building a base at $3 level for three months already. I am not currently planning to take a position in the stock.
3. NexPoint Credit Strategies Fund (HCF) is a non-diversified, closed-end management investment company. The Fund's investment objectives are to provide both current income and capital appreciation. The Fund seeks to primarily invest in secured and unsecured floating and fixed rate loans, bonds and other debt obligations, debt obligations of stressed, distressed and bankrupt issuers, structured products and equities. Within the categories of obligations and securities in which the Fund invests, the investment adviser employs various trading strategies, including capital structure arbitrage, pair trades and shorting. NexPoint Advisors, L.P. has served as the Fund's investment adviser since June 11th, 2012 and is an affiliate of Pyxis Capital, L.P., the Fund's investment adviser from December 15th, 2011 to June 8th, 2012 and Highland Capital Management, L.P., the Fund's investment adviser from inception in 2006 to December 14th, 2011.
- James Dondero purchased 153,678 shares on August 15 and currently holds 262,205 shares of the company. James Dondero is affiliated person to the company.
- Brian Mitts purchased 1,536 shares on August 15 and currently holds 4,252 shares of the company. Brian Mitts serves as a Treasurer of the company.
- Ethan Powell purchased 7,683 shares on August 15 and currently holds 7,818 shares of the company. Ethan Powell serves as the President of the company.
The fund had a Net Asset Value of $6.91 per share as of May 18.
4. Ares Commercial Real Estate Corporation (ACRE) is a specialty finance company that originates, invests in and manages middle-market commercial real estate loans and other commercial real estate investments. Through its national direct origination platform, Ares Commercial Real Estate Corporation provides flexible financing solutions for middle-market borrowers. Ares Commercial Real Estate Corporation intends to elect to be taxed as a real estate investment trust and is externally managed by an affiliate of Ares Management LLC, a global alternative asset manager with approximately $54 billion in committed capital under management as of June 30, 2012.
Michael Arougheti purchased 46,800 shares on August 15. Michael Arougheti serves as a director of the company.
The company reported the second-quarter financial results on August 14 with the following highlights:
|Net loss||$0.03 per share|
|Quarterly dividend||$0.06 per share|
The stock has seen steady insider buying since the IPO in May. I am not planning a position in the stock currently.
5. Opko Health (OPK) is a publicly traded healthcare company involved in the discovery, development, and commercialization of pharmaceutical products, vaccines, and diagnostic products.
Phillip Frost purchased 60,000 shares on August 16, and currently controls 130,930,400 shares of the company. The company has 297,836,707 shares outstanding, which makes Frost a 43.9% owner of the company. Phillip Frost is the CEO and chairman of the company. Frost has been a buyer almost every day this year. His net worth was $2.3 billion as of March 2012.
The company reported the second-quarter financial results on August 9 with the following highlights:
|Net loss per share||$0.04|
|Cash per share||$0.19|
- The company expects to begin marketing its test for Alzheimer's disease in 2013. The company believes that this test could initially be useful in stratifying patients for ongoing clinical trials of potential Alzheimer's drugs, as well as to confirm the diagnosis in a clinical setting and to track the progression of the disease or effectiveness of a therapeutic in a clinical trial.
- The company has already obtained a CE Mark for its point-of-care diagnostic test for prostate specific antigen (PSA) using its system in Europe, and the company intends to launch the PSA test in Europe in the second half of 2012.
- In December 2011, the company commenced a multi-center study in the U.S. for the PSA test, which is designed for 510(k) clearance and potential waiver under The Clinical Laboratory Improvement Amendments of 1988. The company intends to submit its application to the Food and Drug Administration for clearance of the PSA test in 2012 and expects to begin marketing the test in the U.S. in 2013.
Disclosure: I am long OPK.