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 27. I chose the top five companies with insider buying in dollar terms. Here are the five stocks:
1. 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 587,579 shares on August 23-24, 413,382 shares on August 20, 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 36,037,579 shares of the company. The company has 280 million shares outstanding which makes Empire Capital Management a 12.9% 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 $1.90. I would expect the $1.2 level hold for the stock. Empire Capital Management has purchased 7.5 million shares since May 1.
2. Providence Service Corporation (PRSC) provides home and community based social services and non-emergency transportation services management to government sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections. Providence is different from many of its competitors in that it provides its social services primarily in the client's own home or in community based settings versus treatment facilities or hospitals and provides its NET management services through local transportation providers rather than owning its own fleet of vehicles. The company provides a range of services through its direct entities to approximately 53,000 clients through 629 active contracts at June 30, 2012, with an approximate 13.6 million individuals eligible to receive the company's non-emergency transportation services. Combined, the company has an approximately $1 billion book of business including managed entities.
Coliseum Capital Management purchased 67,743 shares on August 23-27, 12,099 shares on August 17 and 246,242 shares on August 14-16. Coliseum Capital Management currently holds 1,954,530 shares of the company. The company has 14.8 million shares outstanding, which makes Coliseum Capital Management a 13.5% owner of the company.
The company reported the second-quarter financial results on August 8, with the following highlights:
|Earnings per share||$0.11|
The company has elected to withdraw previously issued earnings guidance for 2012, citing a number of unknowns, including continued and unpredictable start-up costs related to LogistiCare's multiple contract wins, new contract opportunities for the NET segment, new bidding activity in Canada and recent social services wins in a Southwest and Midwest state, along with managed care transitions in a number of states.
The stock has met its bearish $10 price target from the Point and Figure chart. The company has a book value of $8.17 per share, which I expect to act like a support for the stock. There has been more insider buying than selling in the stock this year. I would be interested in buying the stock around $10 level.
3. Alleghany Corporation (Y) creates stockholder value through the ownership and management of operating subsidiaries and investments, anchored by a core position in property and casualty reinsurance and insurance. Alleghany's property and casualty subsidiaries include: Transatlantic Holdings, a leading global reinsurance organization headquartered in New York; RSUI Group, a national underwriter of specialty property and liability insurance coverages; Capitol Transamerica Corporation, an underwriter of specialty property, casualty and surety insurance coverages; and Pacific Compensation Corporation, an underwriter of workers' compensation insurance primarily in California.
The company reported the second-quarter financial results on August 6 with the following highlights:
|Net income||$109.3 million|
The stock has a $428 price target from the Point and Figure chart. The stock has seen more insider buying than selling since May 2012. The company has a book value of $370 per share. I would recommend buying the shares below the book value.
4. Winthrop Realty Trust (FUR), headquartered in Boston, Massachusetts, is a NYSE-listed real estate investment trust (REIT) focused on acquiring, owning, operating and investing in real property as well as real estate financial instruments including CMBS, Bonds, REIT Preferred and common stock.
Michael Ashner purchased 22,400 shares on August 23-24 and currently controls 3,700,242 shares of the company. The company has 33.1 million shares outstanding which makes Michael Ashner a 11.2% owner of the company. Mr. Ashner has served as the Chairman and Chief Executive Officer of Winthrop Realty Trust since 2004.
The company reported the second-quarter financial results on August 2 with the following highlights:
|Funds From Operations (FFO)||$8.1 million|
|Book value||$13.82 per share|
The stock has a $19 price target from the Point and Figure chart. The stock has seen steady insider buying since February 2006. There has only been five insider sell transactions since February 2006. The stock has a forward P/E of 7.10 and a dividend yield of 5.98%. I recommend buying the shares below the book value of $13.82 per share.
5. Polycom (PLCM) is the global leader in open standards-based unified communications (UC) solutions for telepresence, video, and voice, powered by the Polycom RealPresence Platform. The RealPresence Platform interoperates with the broadest range of business, mobile and social applications and devices. More than 400,000 organizations trust Polycom solutions to collaborate and meet face to face from any location for more productive and effective engagement with colleagues, partners, customers, specialists, and prospects. Polycom, together with its broad partner ecosystem, provides customers with the best total cost of ownership, interoperability, scalability, and security for video collaboration, whether on-premises, hosted or cloud delivered.
Scott Mercer purchased 25,000 shares on August 23. Scott Mercer serves as a director of the company.
The company reported the second-quarter financial results on July 24 with the following highlights:
|Net income||$6.5 million|
Andrew M. Miller, Polycom President and Chief Executive Officer commented on July 24:
"Demand for our best in class UC solutions was solid in Q2, which allowed us to exceed both revenue and earnings expectations.In the second half of this year, we will be launching a series of products that we believe will be game-changing and will allow us to expand our addressable market and extend our advantages versus the competition. Most recently, we launched the new Polycom RealPresence Resource Manager offering that further differentiates our Polycom RealPresence Platform with support for large scale video deployments of up to 10,000 endpoints, including mobile devices, multi-tenancy for service providers to deliver Video-as-a-Service cost-effectively, and a new suite of rich, open APIs that extends the value and ecosystem around our RealPresence Platform."
Scott Mercer's insider buy on August 23 was the first one in the stock since at least May 2011. The stock has seen steady insider selling since July 2011. The company has a book value of $8.02 per share. I would expect the $8 level hold for the stock.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SONS over the next 72 hours.