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 10. I chose the top five companies with insider buying in dollar terms. Here are the five stocks:
1. Calix (CALX) is a global leader in access innovation. Its Unified Access portfolio of broadband communications access systems and software enables communications service providers worldwide to be the broadband provider of choice to their subscribers.
Michael Ashby purchased 50,000 shares on September 10 and currently holds 1,489,794 shares of the company. Michael Ashby is executive vice president and chief financial officer of Calix, and a member of the board of directors.
The company reported the second-quarter financial results on July 31 with the following highlights:
|Net income||$1.9 million|
On August 22, 2012 Calix and Ericsson announced 1) the signing of a definitive agreement under which Calix will acquire Ericsson's fiber access assets and 2) a global reseller agreement, under which Calix will become Ericsson's preferred global partner for broadband access applications. These agreements, which are expected be completed in the fourth quarter of 2012, will expand Calix global customer footprint and marketing reach by enabling Ericsson to sell Calix Unified Access systems and software as well as the products Calix will acquire from Ericsson through Ericsson's global sales channels in 180 countries. The majority of Ericsson's current customers are large international tier one accounts, so this new reseller agreement complements Calix's existing international expansion activities which will continue to focus predominantly on tier two and tier three customers. This pending partnership, built on a clear alignment of corporate strategy and direction, allows Ericsson to fully leverage its strengths in wireless and end-to-end services while relying on Calix to provide innovation and expertise in fixed-line broadband access.
The stock has seen only insider buying (no selling) this year. The latest insider sell transaction was in September 2011. The stock is trading at a forward P/E of 15.19 and has a book value of $5.68 per share. I would recommend buying the stock below the book value.
2. Prospect Capital Corporation (PSEC) is a leading provider of flexible private debt and equity capital to sponsor-owned and non-sponsor-owned middle market companies in the United States and Canada. PSEC is a publicly-traded closed-end investment company that has elected to be treated as a business development company under the Investment Company Act of 1940, as amended. PSEC is managed by Prospect Capital Management LLC.
Brian Oswald purchased 23,500 shares on September 6-7 and currently holds 50,500 shares of the company. Mr. Oswald is Chief Financial Officer and Chief Compliance Officer of Prospect Capital Corporation.
The company reported financial results for the fiscal year ended June 30, 2012 on August 22 with the following highlights:
|Net Investment Income||$186.7 million|
|Net Asset Value||$10.83 per share|
The stock has a $21 price target from the Point and Figure chart. There has been two insider buy transactions this year. There has not been any insider selling this year. The stock is trading at a P/E ratio of 6.55 and has a 10.46% dividend yield. I would recommend buying the stock at the book value of $10.83 per share.
3. DGT Holdings Corporation (DGTC.OB) previously manufactured proprietary high-voltage power conversion subsystems including electronic filters, high voltage capacitors, pulse modulators, transformers and reactors, and a variety of other products designed for industrial, medical, military and other commercial applications through its Power Conversion Group's RFI Corporation subsidiary. This business was sold on August 16, 2012. The company currently owns and leases two industrial buildings.
The company reported preliminary financial results for its fiscal 2012 year ended July 28, 2012 on August 29 with the following highlights:
|Net income||$4.7 million|
The stock has a $18.5 price target from the Point and Figure chart. The stock has seen steady insider buying since August 2003. There has only been two insider sell transactions since August 2003. The company has a cash position of $11.27 per share which could be a good entry point for the stock.
4. Opko Health (OPK) is a publicly traded healthcare company involved in the discovery, development, and commercialization of pharmaceutical products, vaccines, and diagnostic products.
Phillip Frost purchased 50,000 shares on September 7 and currently controls 131,465,400 shares of the company. The company has 297,836,707 shares outstanding, which makes Frost a 44.1% owner of the company. Phillip Frost is the CEO and chairman of the company. Frost has been a buyer almost every day this year. His net worth was $2.3 billion as of March 2012.
The company reported the second-quarter financial results on August 9 with the following highlights:
|Net loss||$10.8 million|
- The company expects to begin marketing its test for Alzheimer's disease in 2013. The company believes that this test could initially be useful in stratifying patients for ongoing clinical trials of potential Alzheimer's drugs, as well as to confirm the diagnosis in a clinical setting and to track the progression of the disease or effectiveness of a therapeutic in a clinical trial.
- The company has already obtained a CE Mark for its point-of-care diagnostic test for prostate specific antigen [PSA] using its system in Europe, and the company intends to launch the PSA test in Europe in the second half of 2012.
- In December 2011, the company commenced a multi-center study in the U.S. for the PSA test, which is designed for 510(k) clearance and potential waiver under The Clinical Laboratory Improvement Amendments of 1988. The company intends to submit its application to the Food and Drug Administration for clearance of the PSA test in 2012 and expects to begin marketing the test in the U.S. in 2013.
On August 22 OPKO Health was awarded a contract and selected to participate in a development project directed by NASA to implement the OPKO point-of-care diagnostic platform (Claros-1) with the objective of in-orbit use on the International Space Station.
OPKO will provide a panel of assays, including Vitamin D for bone metabolism, immune health, and inflammation to be used on its Claros-1 portable analyzer. According to Phillip Frost, M.D., OPKO's Chairman and Chief Executive Officer:
"This contract is an opportunity to demonstrate the robustness and ease-of-deployment of the OPKO point-of-care system as well as the wide range of complex and high performance diagnostic tests which can be rapidly implemented for use in any environment."
The stock has a $2.75 price target from the Point and Figure chart. The company has several catalysts pending for 2012 and 2013. I would be watching the $4 level closely to see if it holds or not. The 200 day moving average is currently at $4.8 which could act like resistance for the stock. Phillip Frost has been buying 5-10% of the shares traded each day for months already.
5. The Dolan Company (DM) is a leading provider of professional services and business information to the legal, financial and real estate sectors. Its Professional Services Division provides specialized outsourced services to the legal profession through its subsidiaries, NDeX, DiscoverReady and Counsel Press. NDeX is a leading provider of mortgage default processing services in the United States. DiscoverReady provides outsourced discovery management and document review services to major companies and law firms. Counsel Press is the nation's largest provider of appellate services to the legal community. The company's Business Information Division publishes business journals, court and commercial media and other highly focused information products and services, operates web sites and produces events for targeted legal and professional audiences in each of the 20 geographic markets that it serves across the United States.
Tony Christianson purchased 48,105 shares on September 7 and currently controls 421,145 shares of the company. Tony Christianson serves as a director of the company.
The company reported the second-quarter financial results on August 1 with the following highlights:
|Net income||$4.9 million|
Based on second quarter results and the outlook for the remainder of 2012, the company revised its full-year financial guidance on August 1 as follows:
|Adjusted EBITDA||$43-$51 million|
|Net income||$0.23-$0.38 per share|
There has been two insider buy transactions in the stock this year and one insider sell transaction this year. The stock is trading at a forward P/E ratio of 18.95 and has a book value of $10.20 per share. The recent insider buying could indicate that the bottom for the stock has been found.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OPK over the next 72 hours.