Every investor or trader is always searching to find stocks that hopefully outperform the general market and alternative investment classes. Of course, during these unstable times that is rather difficult to execute and has us uncertain as to what is an effective strategy or criteria to use. One strategy that has proven to be effective over time in determining whether a stock is moving higher is insider accumulation due to one simple reason: insiders buy shares, just like us, to make more money. Furthermore, they have an enviable vantage point of the day-to-day operations of the company and/or have a large investment of their own which they like to see increase in value. The following are stocks that have recently had notable insider buying and serve as a nice stating point in your investment research:
Janus Capital Group (JNS) is a well-known asset management company based in Denver, Colorado with offices worldwide. The company has over $150 billion in assets under management and provides services ranging from retirement planning to investment for college to tax planning services. The company is currently sitting near its $9.70 52-week high giving reason to believe that the company isn't cheap, but major shareholder Dai Ichi Life Insurance Company thinks otherwise. On October 3, the Dai Chi filed an SEC Form 4 showing the purchase of just over 1.5 million shares in the open market at an average price of $9.42 equating to $14.5 million worth of stock.
This strong accumulation is encouraging, and looking deeper into Janus' fundamentals, I can see some reasoning behind the purchase. The company sports an attractive 2.7% dividend yield and with just a 35% dividend payout ratio, investors should reasonably expect the payment will either continue or even be raised. Moreover, the company continues to generate nice free-cash-flow of approximately $200 million annually giving more reason to believe that the dividend will be raised in the near future. I'd look to buy Janus. If you wish to diversify with another high quality financial, dividend paying holding stock, JPMorgan Chase (JPM) may fit the bill. The company is trading at a discount to book value while generating a great return on equity exceeding 10%. Moreover, with a 2.8% dividend yield and only 24% payout ratio, the dividend looks extremely safe and likely to rise in the near future.
Extreme Networks (EXTR) was once a high-flying tech darling back in the late 90's / 2000 technology bubble trading well north of $100 per share and then unfortunately became one of the many casualties. Now the network infrastructure and services provider is trading in the single digits and its prospects seem bleak, but board director Edward Terino sees it otherwise. On October 1, Mr. Terino bought a sizeable 100,000 shares in the open market with that purchase making up his entire investment thus far in EXTR, indicating he sees something he really likes. The company has a debt-free balance sheet and at its current market capitalization it is trading at about 25% net cash, which is strong. However, the company is in a very competitive industry dominated by companies such as Cisco Systems (CSCO) and Juniper Networks (JNPR), while paying no dividend. Being the more conservative investor that I am, I'd look to put money more towards Cisco, as the company is sitting on a very strong net cash position exceeding $30 billion, while yielding a very attractive 3% dividend and Extreme or Juniper yield nothing. Cisco sports stronger margins and a more stable revenue base than the two aforementioned companies, and I think Cisco will serve the long-term investor well.