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 September 4. I chose the top five companies with insider buying in dollar terms. Here are the five stocks:
1. EverBank Financial Corp (EVER) provides a diverse range of financial products and services directly to clients nationwide through multiple business channels. Headquartered in Jacksonville, Florida, EverBank has $15.0 billion in assets and $10.8 billion in deposits as of June 30, 2012. With an emphasis on value, innovation and service, EverBank offers a broad selection of banking, lending and investing products to consumers and businesses. EverBank provides services to customers through the internet, over the phone, through the mail and at its Florida-based financial centers.
Alok Singh purchased 967,076 shares on August 27 by New Mountain Partners III. New Mountain Partners III currently holds 8,737,104 shares of EverBank. Alok Singh serves as a director of EverBank.
The company reported the second-quarter financial results on July 25 with the following highlights:
|Net income [GAAP]||$11.2 million|
|Book value||$10.14 per share|
The stock is currently trading at a forward P/E of 12.91. The stock has seen insider buying since the IPO in May 2012. There has not been any insider selling since the company became public. I am not expecting the stock to dip below its book value of $10.14 per share.
2. Regis Corporation (RGS) is the beauty industry's global leader in beauty salons, hair restoration centers and cosmetology education. As of June 30, 2012, the company owned, franchised or held ownership interests in approximately 12,600 worldwide locations. Regis' corporate and franchised locations operate under concepts such as Supercuts, Sassoon Salon, Regis Salons, MasterCuts, SmartStyle, Cost Cutters, Cool Cuts 4 Kids and Hair Club for Men and Women. In addition, Regis maintains an ownership interest in Provalliance, which operates salons primarily in Europe, under the brands of Jean Louis David, Franck Provost and Saint Algue. Regis also maintains ownership interests in Empire Education Group and the MY Style concepts in Japan. System-wide, these and other concepts are located in the U.S. and in over 30 other countries in North America, South America, Europe, Africa and Asia.
Birch Run Capital purchased 551,883 shares on August 30 - September 4. Birch Run Capital currently holds 6,519,080 shares of the company. Regis has 57,407,876 shares outstanding which makes Birch Run Capital a 11.4% owner of Regis.
The company reported the fourth-quarter fiscal 2012 (ending June 30) financial results on August 23 with the following highlights:
|Net loss||$63.6 million|
These results include non-operational after-tax items of $89.2 million, primarily related to goodwill impairment in the company's Regis salon division and the write-down of the equity investment in Empire Education. Excluding non-operational items, fourth quarter operational earnings increased to $0.40 per diluted share from $0.37 in the year-earlier quarter.
The stock has a $14 price target from the Point and Figure chart. Birch Run Capital has been the only insider buying the shares this year. The last insider sell transactions were in May 2011. The stock is currently trading at a forward P/E of 13.69 and has a book value of $15.48 per share. I would expect the stock to find support at $15.48 level.
3. VMware (VMW) is the leader in virtualization and cloud infrastructure solutions that enable businesses to thrive in the Cloud Era. Customers rely on VMware to help them transform the way they build, deliver and consume Information Technology resources in a manner that is evolutionary and based on their specific needs. With 2011 revenues of $3.77 billion, VMware has more than 350,000 customers and 50,000 partners.
Emc Corporation purchased 44,993 shares on August 30-31 and currently holds 39,117,394 shares of the company. Emc Corporation is a 10% owner of VMware according to SEC filings.
The company reported the second-quarter financial results on July 23 with the following highlights:
|Net income||$192 million|
Carl Eschenbach, chief operating officer, VMware commented on July 23:
"Third quarter 2012 revenues are expected to be in the range of $1.11 and $1.15 billion. Annual 2012 revenues are expected to be in the range of $4.540 and $4.635 billion, an increase of 20.5% to 23.0% from 2011. Annual license revenues are expected to grow between 11% and 15%."
The stock has a $81 price target from the Point and Figure chart. Emc Corporation has been the only insider buying the shares since August 2011. The stock has seen insider selling by other insiders since August 2011. The stock is currently trading at a forward P/E of 28.01. I would recommend waiting until the $81 price target is hit before buying the shares.
4. ServiceSource (SREV) is the global leader in service revenue management, partnering with technology-based companies to optimize maintenance, support and subscription revenue streams, while also improving customer relationships and loyalty. ServiceSource helps customers increase service revenue contract renewal rates, on average, by over 15 percentage points and, in some cases, up to 44 percentage points. ServiceSource delivers these results via a cloud-based solution, combining its Service Revenue Performance Suite of applications with dedicated service sales teams, leveraging a proprietary Service Revenue Intelligence Platform of transaction data, benchmarks and best practices. ServiceSource offers its service revenue management solution on a unique pay-for-performance business model that enables a success-driven, shared-risk partnership. The company is headquartered in San Francisco, and manages service revenue performance for customers across the globe in more than 35 languages.
The company reported the second-quarter financial results on July 31 with the following highlights:
|Non-GAAP net income||$0.6 million|
The company provided the following commentary on its expected business outlook:
- Third quarter 2012: The company expects revenue for the third quarter of 2012 to be in the range of $57.5 to $59.5 million, adjusted EBITDA of approximately $0.5 to $1.5 million, GAAP net loss of $7.5 to $8.5 million and non-GAAP net loss per share to be between breakeven to a loss of $0.02 per share.
- Full year 2012: The company reiterated its guidance for 2012 revenue of $246 to $249 million, adjusted EBITDA between $16 to $18 million and non-GAAP net income per diluted share in the range of $0.05 to $0.07. Reflecting the one-time, non-cash charge related to the deferred tax assets and the revised outlook on GAAP taxes for the year, the company has revised its guidance for GAAP net loss to range from $46.5 to $48.5 million.
The stock has a $6 price target from the Point and Figure chart. Barry Reynolds has been the only insider buying the shares since at least February 2012. The stock has seen steady insider selling by other insiders since February 2012. The stock is currently trading at a forward P/E of 67.00. I would recommend waiting until the $6 price target is hit before buying the stock.
5. 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 86,848 shares on August 30 - September 4, 331,406 shares on August 27-29, 1,343,837 shares on August 22-24 and 1,962,011 shares on August 17-21. Carl Icahn currently controls 30,285,788 shares of the company. The company has 265,693,834 shares outstanding which makes Carl Icahn a 11.4% 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.
Ironwood Pharmaceuticals (IRWD) and Forest Laboratories announced on August 30 that LINZESS (linaclotide) was approved by the U.S. Food and Drug Administration [FDA] as a once-daily treatment for adult men and women suffering from irritable bowel syndrome with constipation [IBS-C] or chronic idiopathic constipation [CIC].
Forest Laboratories announced on August 27 that its newly constituted Board of Directors adopted a stockholder rights plan and declared a dividend distribution of one Preferred Share Purchase Right on each outstanding share of Forest Laboratories common stock.
The Board adopted the rights plan in response to the recent rapid accumulation of a significant portion of Forest's outstanding common stock. The rights plan is intended to protect the company and its stockholders from efforts to obtain control of the company that are inconsistent with the best interests of the company and its stockholders. The rights plan also has an exception for an offer for all shares that is accepted by a majority of the company's shares and treats all shareholders equally.
Howard Solomon, Chairman and Chief Executive Officer of Forest, said:
"After concluding a second proxy contest during which he repeatedly - and erroneously - disparaged Forest's business model and growth prospects, Mr. Icahn increased his already significant position in Forest with rapid open market purchases. In light of these recent developments, the Board has adopted a stockholder rights plan that is designed to ensure that all of Forest Laboratories' stockholders receive fair and equal treatment in the event of any proposed takeover of the Company, to guard against abusive tactics to gain control of Forest Laboratories without paying all stockholders a premium for that control, and to enable all Forest Laboratories stockholders to realize the long-term value of their investment in the Company."
The Rights will expire in 12 months unless the rights plan is ratified by the company's stockholders. The Rights will be exercisable only if a person or group acquires 12% (or 20% in the case of a 13G Institutional Investor, as defined in the rights plan) or more of Forest's common stock.
The stock did see some insider selling in the December 2011 - April 2012 time frame. Carl Icahn has been the only insider buying the shares since December 2010. Carl Icahn owns currently 11.4% of the shares. With the rights plan announced on Monday, Carl Icahn can't acquire more than 12% of the company's stock. I believe the stock could reach $40 after the coming approval of aclidinium in the near future.