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 24. 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 1,343,837 shares on August 22-24, 1,962,011 shares on August 17-21 and currently controls 29,867,534 shares of the company. The company has 265,693,834 shares outstanding which makes Carl Icahn a 11.2% 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. Carl Icahn has been the only insider buyer in the stock since December 2010. The stock could reach $40 after the coming approvals of aclidinium and linaclotide in the near future.
2. Molycorp (MCP) is a leading rare earths and rare metals company, and combines a world-class rare earth resource at Mountain Pass, California, with world-class ultra-high-purity rare earth and rare metal materials processing capabilities. With 26 locations across 11 countries, Molycorp is vertically integrated across the global rare earth mine-to-magnetics supply chain. It produces rare earth magnetic materials as well as a variety of high-purity, custom engineered products from 13 different rare earths (lights and heavies) as well as five rare metals (gallium, indium, rhenium, tantalum and niobium), and the transition metals yttrium and zirconium. Through its Molycorp Magnequench subsidiary, the company is a leading global producer of neodymium-iron-boron (NdFeB) magnet powders, used to manufacture bonded NdFeB permanent rare earth magnets. Through its joint venture with Daido Steel and Mitsubishi Corporation, Molycorp expects to begin manufacturing next-generation, sintered NdFeB permanent rare earth magnets in early 2013.
- Ross Bhappu purchased 2,500,000 shares on August 22 via Resource Capital Fund IV. The shares were purchased through a secondary offering. Resource Capital Fund IV currently holds 16,343,863 shares of the company. The company had 99.2 million shares outstanding as of June 30 which makes Resource Capital Fund IV a 16.4% owner of Molycorp. Ross Bhappu serves as a director of Molycorp.
- Mark Smith purchased 50,000 shares on August 22 through a secondary offering and currently holds 829,318 shares of the company. Mr. Smith is Chief Executive Officer, member of the Board of Directors and a shareholder of Molycorp Minerals.
- Michael Doolan purchased 25,000 shares on August 22 through a secondary offering. Michael Doolan serves as Executive VP and CFO of the company.
- Russell Ball purchased 5,000 shares on August 22 through a secondary offering and currently holds 14,500 shares of the company. Russell Ball serves as a director of the company.
- Constantine Karayannopoulos purchased 10,000 shares on August 22 through a secondary offering and currently holds 13,265 shares of the company. Constantine Karayannopoulos is a director of Molycorp and serves as the Board's Vice Chair.
- Molibdenos Y Metales S.A. purchased 4,500,000 shares on August 22 through a secondary offering and currently holds 17,000,000 shares of the company. The company had 99.2 million shares outstanding as of June 30 which makes Molibdenos Y Metales S.A. a 17.1% owner of Molycorp.
The company reported the second-quarter financial results on August 2 with the following highlights:
|Net loss||$0.71 per share|
Earnings decreased substantially from the prior year period as a result of lower product volumes, lower prices, costs related to the Project Phoenix transition, and other transaction costs related to acquiring Molycorp Canada. Adjusted loss per diluted share of $0.03 reflects operational expansion items, out-of-ordinary business expenses, and certain non-cash items as compared to U.S. GAAP loss per share, such as $52.8 million related to the acquisition of Molycorp Canada, $19.5 million in consolidated inventory write-downs, and $8.4 million in purchase accounting adjustments impacted earnings, among others.
As of August 2, 2012, the company is re-affirming its annual production of REO equivalent products to be in the range of 8,000 mt to 10,000 mt for the full year across its Mountain Pass, Sillamäe and Tolleson facilities, which does not include production from its newly acquired Molycorp Canada operations. The company continues to believe it is well positioned for year-over-year sales growth given the Mountain Pass ramp-up, existing customer orders, a growing pipeline of global business opportunities, and its acquisitions.
Capital expenditures for Project Phoenix Phase 1 and Phase 2, commissioning and start-up, and other capital projects at the company's Molycorp Mountain Pass facility are expected to be approximately $289 million on an accrual basis for the remainder of 2012. All other capital expenditures across the company (including Molycorp Canada) are expected to be approximately $17 million for the remainder of 2012.
I wrote an article about Molycorp on June 16. The stock is currently down 50% from the June 2012 period. I believe the long-term potential is still the same and would recommend buying the stock at the current level. The stock is currently trading at a forward P/E of 5.16.
3. Home Loan Servicing Solutions (HLSS) is an internally managed owner of non-agency mortgage servicing assets with historically stable valuations and cash flows. HLSS' assets are predominately mortgage servicing advances that, along with the related servicing rights, are over-collateralized 30 times by residential real estate. HLSS' objective is to generate stable, recurring fee-based earnings and dividends throughout the economic cycle.
William Erbey purchased 42,221 shares on August 24, 19,906 shares on August 23 and 14,976 shares on August 22. William Erbey currently holds 291,245 shares of the company. William Erbey serves as a director of the company.
The company reported the second-quarter financial results on July 12 with the following highlights:
|Net income||$0.33 per share|
|Monthly dividend||$0.10 per share|
|Net book value||$12.82 per share|
HLSS expects Q3 results to be consistent with Q2:
- Q3 12 EPS guidance of $0.32-$0.33 per share
The stock has a 7.76% dividend yield and a book value of $12.82 per share. The stock has seen steady insider buying since the company's IPO in March 2012. The company filed a prospectus on August 17 for up to $150 million worth of securities. I would recommend buying the stock at its net book value.
4. Solar Senior Capital (SUNS) invests primarily in leveraged, middle-market companies in the form of senior secured loans, including first lien, unitranche and second lien debt instruments. Solar Senior Capital's investment objective is to maximize current income consistent with the preservation of capital. Solar Senior Capital does this through applying private equity style investing to credit. Solar Senior Capital maintains this investment philosophy through a disciplined approach to rigorous monitoring.
Solar Senior Capital is a closed-end, externally managed investment company that has elected to be treated as business development company under the investment Company Act of 1940 and intends to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code.
Michael Gross purchased 25,523 shares on August 22-24, 23,481 shares on August 13-15, 26,250 shares on August 8-10 and 16,574 shares on August 3-7. Michael Gross currently controls 710,358 shares of the company. Michael Gross has been the chairman of the board of directors, chief executive officer and president of Solar Senior Capital since December 2010.
The company reported the second-quarter financial results on July 31 with the following highlights:
|Earnings per share||$0.38|
|Net Asset Value||$18.54 per share|
|Shares outstanding||9.5 million|
|Monthly dividend||$0.115 per share|
Michael Gross, Chairman and CEO of Solar Senior Capital, commented:
"Our second quarter results reflect continued success in leveraging our origination platform to source attractive middle market senior secured loans and to further diversify our portfolio across a broader number of positions and industry groups. The portfolio is 100% performing and the weighted average yield is 8.0% at current fair value. Continued growth in our net investment income allowed us to increase the monthly dividend since quarter end by 15% to 11.5 cents per share. NII per share exceeded dividends paid in the current quarter and year to date. We believe that we are on course to further increase our monthly dividend as we continue to grow the portfolio to our target leverage level."
The stock has a 7.93% dividend yield and a forward P/E of 11.68. I would recommend buying the shares below the Net Asset Value of $18.54 per share.
5. Healthcare Trust of America (HTA), a publicly traded real estate investment trust, is a fully integrated, leading owner of medical office buildings. HTA listed its shares on the New York Stock Exchange on June 6, 2012. HTA is a full-service real estate company focused on acquiring, owning and operating high-quality medical office buildings that are located on the campuses of nationally recognized healthcare systems in the major U.S. metropolitan areas. Since its formation in 2006, HTA has built a portfolio of properties that totals approximately $2.5 billion based on purchase price and is comprised of approximately 12.4 million square feet of gross leasable area located in 26 states.
The company reported the second-quarter financial results on August 7 with the following highlights:
|Funds from Operations (FFO)||$11.7 million|
Gary Wescombe's insider buy was the first one in the stock since the IPO in June 2012. The trust has a book value of $6.44 per share and a dividend yield of 6.29%. I would recommend buying the trust at its book value of $6.44 per share.
Disclosure: I am long MCP.