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 21. I chose the top five companies with insider buying in dollar terms. Here are the five stocks:
1. Forest Laboratories' (FRX) longstanding global partnerships and track record developing and marketing pharmaceutical products in the United States have yielded its well-established central nervous system and cardiovascular franchises and innovations in anti-infective, respiratory, gastrointestinal, and pain management medicine. The company's pipeline, the most robust in its history, includes product candidates in all stages of development across a wide range of therapeutic areas.
Carl Icahn purchased 1,962,011 shares on August 17-21 and currently controls 28,523,697 shares of the company. The company has 265,693,834 shares outstanding which makes Carl Icahn a 10.7% owner of the company.
The company reported the fiscal year first-quarter 2013 (ending June 30) financial results on July 17 with the following highlights:
|Net income||$55.3 million|
From July 17:
The company expects to hear from the U.S. Food and Drug Administration (FDA) in the coming weeks regarding the approval status of aclidinium for the long-term maintenance treatment of COPD and later this summer the company expects to hear on the approval status of linaclotide for the treatment of irritable bowel syndrome with constipation (IBS-C) and chronic constipation (CC). Assuming approval for both products the company will have two new product launches during fiscal 2013.
The stock did see some insider selling in December 2011 - April 2012 time frame. The stock could reach $40 after the coming approvals of aclidinium and linaclotide in the near future.
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 924,000 shares on August 20-21 and 338,121 shares on August 15-17. Red Mountain Capital Partners currently holds 6,204,132 shares of the company. The company has 41.3 million shares outstanding which makes Red Mountain Capital Partners a 15% 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. If the $3 level gives away I would expect the stock to find additional support at $2 level which is the company's cash per share value.
3. The Children's Place (PLCE) is the largest pure-play children's specialty apparel retailer in North America. The company designs, contracts to manufacture and sells fashionable, high-quality merchandise at value prices, primarily under the proprietary "The Children's Place" brand name. As of July 28, 2012, the company operated 1,080 stores and an online store at childrensplace.com.
Norman Matthews purchased 13,350 shares on August 21 and currently holds 67,210 shares of the company. Norman Matthews serves as the Chairman of The Board.
The company reported the second-quarter financial results on August 16 with the following highlights:
|Net loss||$18 million|
- The company updated its earnings guidance for fiscal 2012 and now projects that non-GAAP adjusted earnings per diluted share will be between $3.20 and $3.30, compared to its previous guidance of $3.15 to $3.30, assuming positive low-single digit comparable retail sales.
- The company provided initial guidance for the third quarter of 2012, and is forecasting non-GAAP adjusted earnings per diluted share between $1.53 and $1.58, assuming positive low-single digit comparable retail sales.
The stock has a $69 price target from the Point and Figure chart. The stock is currently trading at a forward P/E of 14.72. The stock has seen steady insider selling since April 2011. Norman Matthews has been the only insider buyer this year.
4. RCM Technologies (RCMT) is a premier provider of business and technology solutions designed to enhance and maximize the operational performance of its customers through the adaptation and deployment of advanced information technology and engineering services. RCM is an innovative leader in the delivery of these solutions to commercial and government sectors. RCM is also a provider of specialty healthcare services to major health care institutions and educational facilities. RCM's offices are located in major metropolitan centers throughout North America.
The company reported the second-quarter financial results on August 13 with the following highlights:
|Net income||$0.5 million|
Leon Kopyt, Chairman and CEO of RCM, commented:
Adjusting for historical seasonality relating to summer school closings for our Specialty Health Care segment in the third quarter and increased summer vacations and holidays for all billable resources in the third and fourth quarters, we anticipate that our second half performance will exceed the first half of fiscal 2012.
The stock has a $10.25 price target from the Point and Figure chart. The last time the stock was trading at $10 was in 2007. The company is currently trading at a Price/Sales ratio of 0.47. The last insider sell is from November 2003.
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 65,000 shares on August 20, and currently controls 131,070,400 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.
The company has several catalysts pending for 2012 and 2013. I would be watching the $4 level closely to see if it holds or not. The 200 day moving average is currently at $4.8 which could act like resistance for the stock. Phillip Frost has been buying about 10% of the shares traded each day.
Disclosure: I am long OPK.