I screened with Open Insider for insider buy transactions filed during the week ending October 26. From this list, I chose the top five stocks with insider buying in dollar terms. Here is a look at these five stocks:
1. Navistar International Corporation (NAV) is a holding company whose subsidiaries and affiliates produce International brand commercial and military trucks, MaxxForce brand diesel engines, IC Bus brand school and commercial buses, Monaco RV brands of recreational vehicles, and Workhorse brand chassis for motor homes and step vans. The company is also a private-label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets. It also provides truck and diesel engine service parts, another affiliate offers financing services.
- Dr. Mark H. Rachesky, M.D., purchased 1,598,000 shares through his funds on October 24 pursuant to a public offering. Mark Rachesky currently controls 14.98% of the company. Dr. Rachesky co-founded MHR Fund Management in 1996 and serves as its President. He served at Icahn Holding Corp. from February 1, 1990, to June 11, 1996, as the Managing Director.
- Carl Icahn purchased 1,594,667 shares on October 25 pursuant to a public offering. Carl Icahn currently controls 14.95% of the company. As of September 2012, Carl Icahn's net worth was estimated to be $14.8 billion.
- Franklin Resources (BEN) filed a 18.8% ownership on July 10. Franklin Resources was a 12.4% owner as of May 10. Franklin Resources is a global investment management organization known as Franklin Templeton Investments. The company has an extensive global presence, including offices in over 30 countries and clients in more than 150.
- Mario Gabelli purchased 9,050 shares on October 22-24 through his funds. Mario Gabelli currently controls 8.26% of the company. Mario Gabelli is an American stock investor, investment advisor, and financial analyst. He is the founder, chairman, and CEO of Gabelli Asset Management Company Investors (GAMCO Investors (GBL), a $30 billion dollar global investment firm headquartered in Rye, New York. As of September 2012, Mario Gabelli's net worth was estimated to be $1.1 billion.
The company reported the third-quarter, which ended July 31, financial results on September 6 with the following highlights:
|Net income||$84 million|
The third quarter results included an income tax benefit of $196 million that primarily resulted from a third quarter change in the company's estimated annual effective tax rate, as well as the impact of $16 million in costs related to engineering integration and $10 million in non-conformance penalties [NCPs].
The company received $192 million from the public offering which was closed on October 25.
The company is completing a voluntary separation program and a reduction in force of its salaried workforce. It anticipates these actions will generate $70 - $80 million in annual savings, which will contribute to Navistar's overall goal to reduce costs by $150 - $175 million year-over-year, starting in fiscal year 2013. Additionally, Navistar is increasing efforts to cut discretionary spending and further reduce its material costs as part of its overall cost reduction program.
The company also announced it has launched a review of all of its non-core businesses with the goal of improving its return on invested capital and driving long-term profitability. As a result of this, along with uncertain industry conditions, the company is not providing fourth quarter earnings guidance until industry volumes solidify and these potential actions are defined.
Stockholder Rights Plan
Navistar announced on June 20 that its Board of Directors had adopted a Stockholder Rights Plan and declared a dividend of one right on each outstanding share of Navistar common stock.
The plan is designed to deter coercive takeover tactics including the accumulation of shares in the open market or through private transactions and to prevent an acquiror from gaining control of the company without offering a fair and adequate price to all of the company's stockholders.
The rights generally will be exercisable only if a person or group acquires beneficial ownership (including through derivatives) of 15% or more of the company's common stock or commences a tender or exchange offer upon consummation of which such person or group would beneficially own 15% or more of the company's common stock.
The rights will expire on June 18, 2013.
The stock has a $18 price target from the Point and Figure chart. There have been 11 insider buy transactions and there has been one insider sell transaction this year. The four largest shareholders control over 50% of the company. According to the rights plan any person or group can't beneficially own 15% or more of the company's common stock. The stock is trading at a P/S ratio of 0.09. I might be interested in buying the stock at $18 level.
2. DaVita (DVA) is a leading provider of kidney care in the United States, delivering dialysis services to patients with chronic kidney failure and end stage renal disease. DaVita strives to improve patients' quality of life by innovating clinical care, and by offering integrated treatment plans, personalized care teams and convenient health-management services. As of June 30, 2012, DaVita operated or provided administrative services at 1,884 outpatient dialysis centers located in the United States serving approximately 149,000 patients. The company also operated 19 outpatient dialysis centers located in four countries outside the United States. DaVita supports numerous programs dedicated to creating positive, sustainable change in communities around the world. The company's leadership development initiatives and social responsibility efforts have been recognized by Fortune, Modern Healthcare, Newsweek and WorldBlu.
Berkshire Hathaway purchased 257,941 shares on October 24-26, 63,928 shares on October 16-17, 217,597 shares on October 10-12, 67,946 shares on October 9 and 282,403 shares on September 26-28. Berkshire Hathaway currently holds 10,804,981 shares of DaVita. DaVita has 94.6 million shares outstanding, which makes Berkshire Hathaway a 11.4% owner of DaVita.
The company reported the second-quarter financial results on August 1, with the following highlights:
|Net income||$95.3 million|
The company's operating income guidance for 2012 is in the range of $1,275 million to $1,325 million. The company expects its operating cash flows for 2012 to be in the range of $950 million to $1,050 million.
DaVita's main competitor is Fresenius Medical Care (FMS). Here is a table comparing these two companies:
|Market cap||$10.5 B||$23 B|
|Revenue||$7.5 B||$13.2 B|
|Net income||$0.5 B||$1.3 B|
The stock has a $141 price target from the Point and Figure chart. Berkshire Hathaway has been the only insider buying the shares this year. There have been 19 insider sell transactions since April 2012. The stock is trading at a P/E ratio of 20.26 and a forward P/E ratio of 16.11. The valuation is in line with its main competitor Fresenius Medical Care. I am cautiously bullish on the stock currently.
3. BlackRock (BLK) is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At September 30, 2012, BlackRock's AUM was $3.673 trillion. BlackRock offers products that span the risk spectrum to meet clients' needs, including active, enhanced and index strategies across markets and asset classes. Products are offered in a variety of structures including separate accounts, mutual funds, iShares (exchange traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions. Headquartered in New York City, as of September 30, 2012, the firm has approximately 10,400 employees in 29 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa.
- James Grosfeld purchased 41,900 shares on October 25, 108,098 shares on October 23-24, 99,998 shares on October 19, 200,002 shares on October 18 and 50,000 shares on May 23. James Grosfeld has been a director of the company since 1999.
- Murry Gerber purchased 3,000 shares on May 23 and 6,000 shares on February 2. Murry Gerber currently holds 37,196 shares of the company. Murry Gerber is a director of the company.
- Kendrick Wilson purchased 11,580 shares on February 29 and currently holds 89,600 shares of the company. Kendrick Wilson serves as Vice Chairman.
The company reported the third-quarter financial results on October 17 with the following highlights:
|Net income||$642 million|
|Book value||$140.48 per share|
The stock has a $206 price target from the Point and Figure chart. There have been eight insider buy transactions and 16 insider sell transactions this year. The stock is trading at a P/E ratio of 14.46 and a forward P/E ratio of 12.48. The 200 day moving average is currently at $181 which could be a good entry point for the stock.
4. 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 third-quarter financial results on October 23 with the following highlights:
|Net income||$157 million|
Carl Eschenbach, chief operating officer, VMware commented on October 23:
Fourth quarter revenues are expected to be in the range of $1.26 and $1.29 billion. Annual 2012 revenues are expected to be in the range of $4.572 and $4.602 billion, an increase of 21.4% to 22.2% from 2011. Annual license revenues are expected to grow between 12.8% and 13.8%.
The stock has a $74 price target from the Point and Figure chart. There have been 16 insider buy transactions and 16 insider sell transactions this year. The stock is currently trading at a P/E ratio of 48.30 and a forward P/E ratio of 26.99. I have a neutral bias for the stock currently.
5. Lexicon (LXRX) is a biopharmaceutical company focused on discovering breakthrough treatments for human disease.
Lexicon currently has four drug programs in mid-stage development for diabetes, carcinoid syndrome, irritable bowel syndrome and rheumatoid arthritis, all of which were discovered by Lexicon's research team.
The company reported the second-quarter financial results on July 31 with the following highlights:
|Net loss||$25.9 million|
Lexicon announced on October 18 the pricing of a public offering of its common stock in which the aggregate net proceeds to Lexicon were approximately $37.2 million. The public offering consisted of 17,500,000 shares of its common stock at a public offering price of $2.25 per share.
The stock has a $8.13 price target from the Point and Figure chart. There has been one insider buy transaction and there have not been any insider sell transactions this year. There are three buy ratings, 0 hold ratings and 0 sell ratings for the stock. The stock is currently resting at its 200 day moving average which could be a good entry point for the stock.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in NAV over the next 72 hours.