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 28. 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 40,460,803 shares on August 24-28, 4,348,369 shares on August 15-16 and 89,970,000 shares on August 10-14. Liberty Media Corporation currently holds 3,131,259,052 shares of Sirius. Sirius has 6.5 billion shares outstanding - which makes Liberty Media Corporation a 48.2% 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 currently.
2. 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 51,000 shares on August 27-28, 42,221 shares on August 24, 19,906 shares on August 23 and 14,976 shares on August 22. William Erbey currently holds 342,245 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 7.47% 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.
3. Choice Hotels International (CHH) franchises approximately 6,200 hotels, representing more than 495,000 rooms, in the United States and more than 30 other countries and territories. As of June 30, 2012, more than 375 hotels were under construction, awaiting conversion or approved for development in the United States, representing more than 30,000 rooms. Approximately 75 hotels, representing approximately 6,700 rooms, were under construction, awaiting conversion or approved for development in approximately 15 other countries and territories. The company's Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge and Rodeway Inn brands, as well as its Ascend Hotel Collection membership program, serve guests worldwide.
The company reported the second-quarter financial results on July 26 with the following highlights:
|Net income||$31.9 million|
The company's third quarter 2012 diluted EPS is expected to be $0.61. The company expects full-year 2012 diluted EPS to range between $1.91 and $1.94. EBITDA for full-year 2012 are expected to range between $201.0 million and $203.5 million. These estimates include the following assumptions:
- The company expects net domestic unit growth to range between flat and a 1% increase in 2012;
- RevPAR is expected to increase approximately 5% for third quarter of 2012 and increase between 6% and 7% for full-year 2012;
- The effective royalty rate is expected to remain flat for full-year 2012;
- All figures assume the existing share count and an effective tax rate of 34.0% for the third quarter and 33.8% for full-year 2012.
- Diluted EPS guidance for full-year 2012 reflects the impact of increased borrowing costs to be incurred as the result of the declaration of a $600 million special cash dividend to be paid in the third quarter of 2012 which is expected to total approximately $14 million or $0.16 per share.
The stock has a $60 price target from the Point and Figure chart. The stock has seen two insider buy transactions and four insider sell transactions this year. The stock is currently trading at a forward P/E of 16.38. I have a neutral bias for the stock currently.
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 122,421 shares on August 27, 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 36,160,000 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 $1.92. I would expect the $1.2 level hold for the stock. Empire Capital Management has purchased 7.6 million shares since May 1.
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 42,500 shares on August 27 and currently controls 131,307,900 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.
On August 22 OPKO Health was awarded a contract and selected to participate in a development project directed by NASA to implement the OPKO point-of-care diagnostic platform (Claros-1) with the objective of in-orbit use on the International Space Station.
OPKO will provide a panel of assays, including Vitamin D for bone metabolism, immune health, and inflammation to be used on its Claros-1 portable analyzer. According to Phillip Frost, M.D., OPKO's Chairman and Chief Executive Officer:
"This contract is an opportunity to demonstrate the robustness and ease-of-deployment of the OPKO point-of-care system as well as the wide range of complex and high performance diagnostic tests which can be rapidly implemented for use in any environment."
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 5-10% of the shares traded each day for months already.
Disclosure: I am long OPK.