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 20. I chose the top five companies with insider buying in dollar terms. Here are the five stocks:
1. Dole Food Company (DOLE) engages in sourcing, growing, processing, marketing, and distributing fresh fruits and vegetables, and food products to wholesale, retail, and institutional customers worldwide. It operates in three segments: Fresh Fruit, Fresh Vegetables, and Packaged Foods.
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David Murdock purchased 1,000,000 shares on August 16, 847,228 shares on August 13-15, 112,531 shares on August 9-10, 789,500 shares on August 6-8, 411,600 shares on August 2-3, 617,400 shares on July 30-August 1 and 278,800 shares on July 24-25. The company has 88,946,386 shares outstanding. Mr. Murdock has beneficial ownership of an aggregate of 55,767,059 shares or 62.7% of the company's stock. Mr. Murdock, 86, joined Dole as Chairman of the Board and Chief Executive Officer in July 1985.
The company reported the second-quarter financial results on July 19 with the following highlights:
|Earnings per share||$0.73|
David A. DeLorenzo, Dole's President and CEO, commented on the company's strategic review during its second-quarter earnings announcement:
We are continuing to look at a wide variety of potential alternatives as part of the strategic review of our businesses. As part of this review, we are exploring transactions that may include a full or partial separation of one or more of our businesses through a spin-off or other capital markets transaction, as well as joint venture and sale transactions, all of which are aimed at enhancing shareholder value. This review continues to be a company priority in our efforts to enhance shareholder value.
The stock has a $24 price target from the Point and Figure chart. The company has a forward P/E of 9.02. David Murdock has purchased a total of 4,057,059 shares since July 24. David Murdock's net worth was estimated at $2.7 billion as of March 2012.
2. Wausau Paper (WPP) produces and markets specialty papers for industrial, commercial and consumer end markets as well as a complete line of away-from-home towel and tissue products.
Starboard Value LP purchased 350,000 shares on August 16-17 and currently holds 5,425,000 shares of the company. The company has 49.3 million shares outstanding which makes Starboard Value LP a 11% owner of the company.
The company reported the second-quarter financial results on July 30 with the following highlights:
|Adjusted net earnings per share||$0.09|
Henry C. Newell, president and CEO said commented on July 30:
"We will see increasing intensity as we move through the second half; we expect to continue our growth momentum in both tissue and technical markets and the startup of the new paper machine will dominate our priorities. We are cautious in our guidance for the second half due primarily to a challenging economic environment and expect full year adjusted net earnings to be in the $0.39 - $0.41 per share range versus prior-year adjusted net earnings of $0.33per share."
The stock has a $17 price target from the Point and Figure chart. The last insider sell was in May 2009. Since May 2009 there has been several insider buys. The stock has not traded at $17 since 2005.
3. Tronox (TROX) is a global leader in the production and marketing of titanium bearing mineral sands and titanium dioxide pigment. Through the integration of its pigment and mineral sands business, the company provides its customers a dependable supply of brightening solutions for a variety of end uses.
- Thomas Casey purchased 40,000 shares on August 17 and currently holds 919,530 shares of the company. Thomas Casey serves as Chairman of the Board and Chief Executive Officer of Tronox.
- Willem de Klerk purchased 5,000 shares on August 17. Willem de Klerk has been a director of the company since the integration of Tronox and Exxaro Mineral Sands in June 2012.
The company reported the second-quarter financial results on August 1 with the following highlights:
|Adjusted EBITDA||$146.2 million|
Full-year 2012 outlook:
- Pro forma revenue of $2.5 - $2.6 billion
- Pro forma Adjusted EBITDA margin of 35-37 percent
The stock is currently trading at a forward P/E of 7.59 and has a book value of $56.20 per share. The stock could be a good pick from here.
4. Sonus Networks (SONS) helps the world's leading communications service providers and enterprises embrace the next generation of SIP-based solutions, including VoIP, video and Unified Communications through secure, reliable and scalable IP networks. With customers around the globe and 15 years of experience transforming networks to IP, Sonus has enabled service providers to capture and retain users and both service providers and enterprises to generate significant ROI. Sonus products include session border controllers, policy/routing servers, subscriber feature servers and media and signaling gateways. Sonus products are supported by a global services team with experience in design, deployment and maintenance of some of the world's largest and most complex IP networks.
Empire Capital Management purchased 415,919 shares on August 16-17, 143,468 shares on August 14 and 428,163 shares on August 10. Empire Capital Management currently holds 35,036,618 shares of the company. The company has 280 million shares outstanding which makes Empire Capital Management a 12.5% owner of the company.
The company reported the second-quarter financial results on August 7 with the following highlights:
|Net loss||$0.04 per share|
|Cash per share||$1.22|
For the third quarter of 2012, management provides the following outlook on a non-GAAP basis:
- Total revenue of $51 million to $53 million
- SBC total revenue, including maintenance and services, of $17 million to $19 million, up 23% to 37% from the third quarter of 2011
- SBC product revenue of $14 million to $16 million, up 35% to 54% from the third quarter of 2011
- Gross margins between 58% and 59%
- Operating expenses of $39 million to $40 million
- Loss per share of $0.03
- Basic shares of 280 million
- Cash and investments of approximately $300 million, assuming the NET acquisition closes in the third quarter
The company has a strong cash position of $1.22 per share compared to the current share price of $1.83. I would expect the $1.2 level hold for the stock and would recommend buying the shares around $1.5 level. Empire Capital Management has purchased 6.5 million shares since May 1.
5. Zipcar (ZIP) is the world's leading car-sharing network with more than 731,000 members and 11,000 vehicles in urban areas and college campuses throughout the United States, Canada, the United Kingdom, Spain and Austria. Zipcar offers more than 30 makes and models of self-service vehicles by the hour or day to residents and businesses looking for an alternative to the high costs and hassles of owning a car.
Stephen Case purchased 55,024 shares on August 16-20, 61,700 shares on August 10 and 265,976 shares on August 7-9. Stephen Case currently controls 7,234,875 shares of the company. The company has 39.8 million shares outstanding, which makes Stephen Case a 18.1% owner of the company. Stephen Case also serves as a director of the company.
The company reported the second-quarter financial results on August 2 with the following highlights:
|Net loss||$0.01 per share|
The company gave the following outlook on August 2:
For the full year 2012, revenue is now expected in the range of $272 million to $278 million. Full year 2012 adjusted EBITDA is now expected to range from $12 million to $16 million and US GAAP net income is now expected to range from breakeven to $4 million. For the third quarter of 2012, Zipcar expects revenue in the range of $74 million to $77 million. Adjusted EBITDA for the period is expected to range from $2.5 million to $5 million and US GAAP net income is expected to range from a loss of $0.5 million to a profit of $2 million. Zipcar's average share count is expected to be between 39.5 million and 40.5 million for the third quarter and the full year. Common stock equivalents of approximately 1.5 to 2.5 million shares would be included to the extent Zipcar records positive US GAAP net income.
The stock is down from a $30 level in 2011 to the current $8 level. Stephen Case has been the only insider buyer in the stock since April 2011. The last insider sells were at $18 level back in April 2011. The company has a book value of $5.57 per share. I would expect that level to hold for the stock.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in DOLE over the next 72 hours.