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 of 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 30. I chose the top five companies with insider buying in dollar terms. Here are the five stocks:
1. 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 255,311 shares on August 28, 361,989 shares on August 21-23, 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 7,852,175 shares of the company. The company has 39.8 million shares outstanding, which makes Stephen Case a 19.8% 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 buying the stock since April 2011. The last insider sells were at $18 level back in April 2011. The stock is trading at a forward P/E of 47.53. I am not currently planning to buy this stock.
2. Axis Capital (AXS) is a Bermuda-based global provider of specialty lines insurance and treaty reinsurance with shareholders' equity at June 30, 2012 of $5.7 billion and locations in Bermuda, the United States, Europe, Singapore, Canada, Australia and Latin America. Its operating subsidiaries have been assigned a rating of "A+" ("Strong") by Standard & Poor's and "A" ("Excellent") by A.M. Best. Axis Capital and Axis Specialty Finance LLC have been assigned senior unsecured debt ratings of A- (stable) by Standard & Poor's and Baa1 (stable) by Moody's Investors Service.
John Nichols purchased 30,000 shares on August 30 and currently holds 80,000 shares of the company. John Nichols joined the company in April 2012 as Chief Executive Officer of AXIS Re.
The company reported the second-quarter financial results on July 31, with the following highlights:
|Net income||$168 million|
|Book value||$40.55 per share|
John Nichols' insider buy was the first one in the stock since at least February 2010. The stock has seen steady insider selling since February 2010. The stock is currently trading at a P/E ratio of 7.33 and a forward P/E of 8.92. I would recommend buying the shares below the book value of $40.55 per share.
3. 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 290,149 shares on August 28-29, 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 36,450,149 shares of the company. The company has 280 million shares outstanding which makes Empire Capital Management a 13% 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 provided 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 $1.91. I would expect the $1.2 level hold for the stock. Empire Capital Management has purchased 7.9 million shares since May 1.
4. 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.
Joseph Brandon purchased 1,000 shares on August 28-30 and 1,506 shares on August 23-27. Joseph Brandon currently holds 19,660 shares of the company. Joseph Brandon has served as Executive Vice President of the company since March 2012.
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.
5. Delta Air Lines (DAL) serves more than 160 million customers each year. With an industry-leading global network, Delta and the Delta Connection carriers offer service to nearly 350 destinations in 65 countries on six continents. Headquartered in Atlanta, Delta employs 80,000 employees worldwide and operates a mainline fleet of more than 700 aircraft. A founding member of the SkyTeam global alliance, Delta participates in the industry's leading trans-Atlantic joint venture with Air France-KLM and Alitalia. Including its worldwide alliance partners, Delta offers customers more than 13,000 daily flights, with hubs in Amsterdam, Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-LaGuardia, New York-JFK, Paris-Charles de Gaulle, Salt Lake City and Tokyo-Narita.
- Kenneth Woodrow purchased 25,000 shares on August 28 and currently holds 74,183 shares of the company. Kenneth Woodrow serves as a director of the company.
- Paul Jacobson purchased 50,000 shares on August 6 and currently holds 153,881 shares of the company. Paul Jacobson has been senior vice president and chief financial officer for Delta Air Lines since March 2012.
- Paula Reynolds purchased 10,000 shares on May 2 and currently holds 47,973 shares of the company. Paula Reynolds serves as a Director of the company.
The company reported the second-quarter financial results on July 25, with the following highlights:
|Net income excluding special items||$0.69 per share|
Richard Anderson, Delta's chief executive officer:
"Moving forward, we expect to have strong profitability in the September quarter with a 10-12% operating margin as we continue to reap the benefits of investments we've made in our operation and customer experience."
The stock has a $4.5 price target from the Point and Figure chart. There has been three insider buy transactions and 16 insider sell transactions this year. The stock is currently trading at a forward P/E of 3.04. I am not planning to take any positions in the stock currently.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SONS over the next 72 hours.