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 7. I chose the top five companies with insider buying in dollar terms. Here are the five stocks:
1. Uranium Resources (URRE) explores for, develops and mines uranium. Since its incorporation in 1977, URI has produced over 8 million pounds of uranium by in-situ recovery methods in the state of Texas. URI has over 206,600 acres of uranium mineral holdings and 152.9 million pounds of in-place mineralized uranium material in New Mexico and an NRC license to produce up to 1 million pounds of uranium per year. URI has an additional 1.3 million pounds of in-place mineralized uranium material in Texas and South Dakota. The company acquired these properties over the past 20 years, along with an extensive information database of historic drill hole logs, assay certificates, maps and technical reports. None of URI's properties is currently in production.
URI's strategy is to fully develop its resource base in New Mexico and Texas, expand its asset base both within and outside of New Mexico and Texas, partner with larger mining companies that have undeveloped uranium assets or with junior mining companies that do not have the mining experience of URI, as well as provide restoration expertise to those that require the capability or lack the proficiency.
Resource Capital Fund V purchased 34,330,474 shares on August 31-September 5 via a secondary offering. URI has 158.7 million shares outstanding, with Resource Capital Fund V beneficially owning 44.6 million shares, or 28.1%, of the outstanding shares of URI common stock.
The company reported the second-quarter financial results on August 9 with the following highlights:
|Net loss||$3.7 million|
URI incurred cash expenditures from its operating and investing activities during the first six months of $11.5 million. With current cash on hand and the ATM agreement with BTIG, the company expects it has sufficient funding for approximately twelve months of operations.
Don Ewigleben, President and CEO of URI, commented on August 9:
"While the uranium market faces uncertainty and weakness in the near term, the long-term fundamentals are strong. Two reactors were put back in operation at the Ohi plant in Japan, which is expected to potentially open the door for additional restarts. China's aggressive plan to continually bring new reactors online to meet its growing energy needs also creates new demand for uranium. This expansion, combined with additional emerging markets facing growing energy requirements and the expiration of the HEU agreement with Russia at the end of 2013, we expect will drive uranium prices in the long term. It is our intention to capitalize on the supply-demand imbalance by maintaining our strategic focus and getting back to production."
Resource Capital Fund V has been the only insider buying the shares this year. The latest insider sells are from April 2011. The stock is trading at a forward P/E of 1.55. I believe the long-term fundamentals make this stock an attractive speculative pick currently.
2. 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 the other insiders since February 2012. The stock is currently trading at a forward P/E of 68.79. I would recommend waiting until the $6 price target is hit before buying the stock.
3. Francesca's Collections (FRAN) is a growing specialty retailer with retail locations designed and merchandised to feel like independently owned, upscale boutiques providing customers a fun and differentiated shopping experience. The merchandise assortment is a diverse and balanced mix of apparel, jewelry, accessories and gifts. Francesca's Collections appeals to the 18-35 year-old, fashion conscious, female customers, although the company finds that women of all ages are attracted to the eclectic and sophisticated merchandise selection and boutique setting. Francesca's Collections' boutiques carry a broad selection but limited quantities of individual styles and new merchandise is introduced five days a week.
Neill Davis purchased 25,000 shares on September 7 and currently holds 65,000 shares of the company. Neill Davis has served as the company's President since August 2012 and member of Board of Directors since May 2007.
The company reported the second-quarter financial results on September 4 with the following highlights:
|Net income||$12.7 million|
- For the third quarter ending October 27, 2012, net sales are expected to be between $70.5 million and $71.5 million assuming a low double digit comparable boutique sales increase and the opening of two additional new boutiques. Earnings per diluted share are expected to be in the range of $0.20 to $0.21 compared to earnings per diluted share in the prior year quarter of $0.11.
- For the full fiscal year ending February 2, 2013, net sales are expected to be in the range of $290.0 million to $292.0 million assuming a low double digit comparable boutique sales increase and the opening of 76 new boutiques and an outlet boutique. Earnings per diluted share are expected to be in the range of $0.94 to $0.96 compared to earnings per diluted share in the prior year of $0.52.
The stock has a $46 price target from the Point and Figure chart. Neill Davis was the first insider to buy the shares since July 2011. The stock has seen steady insider selling since July 2011 by the other insiders. The stock is trading at a forward P/E of 25.11. The stock is approaching the 200 day moving average at $26 level which could act like a support for the stock. I would recommend buying the stock at the $26 level.
4. Tuesday Morning (TUES) is a leading closeout retailer of upscale, decorative home accessories, housewares and famous-maker gifts in the United States. The company opened its first store in 1974 and currently operates 852 stores in 43 states. Tuesday Morning is nationally known for bringing its more than 9.0 million loyal customers a unique treasure hunt of high-end, first quality, brand name merchandise...never seconds or irregulars...at prices well below those of department and specialty stores and catalogues.
William Hunckler purchased 70,588 shares on September 5 and currently controls 140,787 shares of the company. William Hunckler serves as a director of the company.
The company reported the fiscal year 2012 (ending June 30) financial results on August 20 with the following highlights:
|Net income||$3.9 million|
Net sales for fiscal 2013 are planned to be in the range of $820 million to $830 million. Comparable store sales are planned to be roughly flat and earnings per diluted share to be in the range of $0.18 to $0.23. For fiscal 2013 capital expenditures are planned to be in the range of $12 to $15 million and total square footage to increase slightly primarily due to relocations.
The stock has a $13.25 price target from the Point and Figure chart. The stock has seen only one insider buy transaction and one insider sell transaction this year. The stock is trading at a forward P/E of 19.88 and has a book value of $6.23 per share. I have a neutral bias for the stock currently.
5. PHI Inc. (PHII) provides helicopter transportation and related services to a broad range of customers including the oil and gas industry, air medical industry and also provides third-party maintenance services to select customers.
Alton Gonsoulin purchased 9,169 shares on September 4 and currently holds 2,325,727 shares of the company. The company has 15,311,608 shares outstanding which makes Alton Gonsoulin a 15.2% owner of the company. Alton Gonsoulin is the CEO of the company.
The company reported the second-quarter financial results on August 6 with the following highlights:
|Net income||$6.1 million|
The stock has a $33.5 price target from the Point and Figure chart. The stock has seen only insider buying since November 2008. The latest insider sell transaction was in August 2008. The stock is trading at a P/E ratio of 31.96 and has a book value of 31.71 per share. I believe the $33.5 price target is achievable during the next 6-12 months.
Disclosure: I am long URRE.