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 6. 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 5,536,346 shares on September 4-5, 24,871,581 shares on August 29-31, 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 3,161,666,979 shares of Sirius. Sirius has 6.5 billion shares outstanding, which makes Liberty Media Corporation a 48.6% 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 has been the only insider buying the shares since at least June 2009. There has been steady insider selling by the other insiders since June 2009. The stock is trading at a forward P/E of 23.09. Liberty Media Corporation intends to increase its ownership of Sirius to 50% and above. The stock could be a good speculative pick currently.
2. VMware (VMW) is a 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.
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 $109 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 the other insiders since October 2011. The stock is currently trading at a forward P/E of 29.94. I believe the $109 price target could be met during the next 6-12 months.
3. Mattersight (MATR) is a leader in enterprise analytics focused on customer and employee interactions and behaviors. Mattersight's Behavioral Analytics service captures and analyzes customer and employee interactions, employee desktop data, and other contextual information to improve operational performance and predict future customer and employee outcomes. Mattersight's analytics are based on millions of proprietary algorithms and the application of unique behavioral models. The company's SaaS+ delivery model combines analytics in the cloud with deep customer partnerships to drive significant business value. Mattersight's applications are used by leading companies in Healthcare, Insurance, Financial Services, Telecommunications, Cable, Utilities and Government.
Sutter Hill Ventures purchased 185,962 shares on September 4 and 18,640 shares on August 30. Sutter Hill Ventures currently holds 2,218,043 shares of the company. The company has 16,892,297 shares outstanding which makes Sutter Hill Ventures a 13% owner of Mattersight.
The company reported the second-quarter financial results on August 8 with the following highlights:
|Net loss||$3.7 million|
Mattersight currently expects its total services revenues will be between $8.0 million and $8.3 million. Mattersight is currently 100% sold to $8.3 million.
4. Wausau Paper (WPP) produces and markets specialty papers for industrial, commercial and consumer end markets as well as a complete line of away-from-home towel and tissue products.
The company reported the second-quarter financial results on July 30 with the following highlights:
|Adjusted net earnings per share||$0.09|
Henry C. Newell, president and CEO said commented on July 30:
"We will see increasing intensity as we move through the second half; we expect to continue our growth momentum in both tissue and technical markets and the startup of the new paper machine will dominate our priorities. We are cautious in our guidance for the second half due primarily to a challenging economic environment and expect full year adjusted net earnings to be in the $0.39 - $0.41 per share range versus prior-year adjusted net earnings of $0.33 per share."
The stock has a $17 price target from the Point and Figure chart. The latest insider sell transaction was in May 2009. Since May 2009 there has been several insider buy transactions. The stock is trading at a forward P/E of 19. The stock has not traded at $17 since 2005.
5. LHC Group (LHCG) is a national provider of post-acute care, providing quality, cost-effective health care to patients within the comfort and privacy of their home or place of residence. LHC Group provides a comprehensive array of post-acute healthcare services through home health, hospice and private duty locations in its home-based division and long-term acute care hospitals in its facility-based division.
Coliseum Capital Management purchased 34,947 shares on September 4-5 and currently holds 2,248,617 shares of LHC Group. LHC Group has 18,264,503 shares outstanding which makes Coliseum Capital Management a 12.3% owner of LHC Group.
The company reported the second-quarter financial results on August 6 with the following highlights:
|Net income||$6.0 million|
The company is reaffirming its full year 2012 guidance issued January 4 2012, for net service revenue of $640 million to $660 million and fully diluted earnings per share in the range of $1.45 to $1.65. This guidance does not take into account the impact of any future acquisitions or share repurchases, if made, de novo locations, if opened, future reimbursement changes, if any, or future legal or other expenses associated with the company's ongoing investigations.
The stock has a $13.5 price target from the Point and Figure chart. Coliseum Capital Management has been the only insider buying the shares this year. There has only been two insider sell transactions this year. The stock is currently trading at a forward P/E of 11.87. I believe the stock could be a good pick here despite the bearish price target from the Point and Figure chart.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SIRI over the next 72 hours.