When a stock is tanking, it's good to know someone has your back and if that someone is an insider at a company, all the better. As the theory goes, insiders have a better sense of a company's prospects - even without inside knowledge. Moreover, increasing ownership by insiders (even when generated by stock purchase plans or option exercises) helps align management interests with shareholder interests. It's good to be aligned.
I recently ran a screen for stocks with insider ownership rising by over 20% over the past six months. I filtered this screen for stocks trading within 10% of their 52-week low.
Call this screen: "Loved from the inside, but not the outside." Here's what I came up with:
| Ticker | Company | Industry |
| (ATVI) | Activision Blizzard, Inc. | Multimedia & Graphics Software |
| (EXC) | Exelon Corporation | Diversified Utilities |
| (F) | Ford Motor Co. | Auto Manufacturers - Major |
| (FB) | Facebook, Inc. | Internet Information Providers |
Below I listed the dividend yield and payout ratio for each stock. Nothing much to get excited about - the only stock with a high dividend yield comes with a massive payout ratio. I question the sustainability of that dividend.
Despite their low yields, ATVI and F have the sort of dividend that can add a nice kick to a stock position.
| Ticker | Dividend Yield | Payout Ratio |
| ATVI | 1.53% | 25.47% |
| EXC | 5.75% | 110.45% |
| F | 2.15% | 2.15% |
| FB | n/a | 0.00% |
Looking at valuations, ATVI and EXC look reasonably priced while F looks downright cheap. FB on the other hand is priced for perfection and could experience more downside if future earnings announcements disappoint.
| Ticker | P/E | Forward P/E | P/B |
| ATVI | 16.6 | 11.02 | 1.24 |
| EXC | 15 | 13.49 | 1.4 |
| F | 2.11 | 6.21 | 2.1 |
| FB | 106 | 30.32 | 3.07 |
In terms of profitability, ATVI and EXC provide reasonable ROA, ROE and operating profit. F has an extremely high ROE, which I see as a warning sign that the company might be overleveraged.
| Ticker | Return on Assets | Return on Equity | Operating Margin |
| ATVI | 6.73% | 7.62% | 21.03% |
| EXC | 2.62% | 9.37% | 16.65% |
| F | 10.14% | 158.42% | 4.61% |
| FB | n/a | n/a | 13.84% |
Looking at the Debt-to-Equity ratio it becomes apparent that F is heavily leveraged. Should a reversal of fortunes occur, excessive leverage could amplify negative results.
At the other end of the spectrum, ATVI and FB have attractively low Debt-to-Equity ratios.
| Ticker | Total Debt/Equity |
| ATVI | 0 |
| EXC | 0.88 |
| F | 5.86 |
| FB | 0.05 |
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: This is not advice. While the author makes every effort to provide high quality information, the information is not guaranteed to be accurate and should not be relied on. Investing involves risk and you could lose all your money. Consult a professional advisor before making any investing decisions.
