Insider Siren: Is Now The Time To Buy These Stocks?

Includes: F, FCX, HL, TSLA, VALE
by: Brian Gorban

Below are companies that have recently had large insider buying in excess of $30 million worth of stock. As a caveat, please only consider this as a starting point in your investment research as these are only the opinions of this blogger. If looking for other recent stocks with sizable insider buying, look at these articles linked here and here:

Freeport-McMoran (NYSE:FCX) is a massive commodities company with approximately $18 billion in annual revenues and a market capitalization at approximately $30 billion. The company's stock has not performed well though the past year, woefully underperforming the major indices and currently sitting just about 10% from its $27.24 52-week low. Nevertheless, Vice Chairman James Flores sees better times ahead. On June 3, Mr. Flores bought a massive 1.1 million shares equating to over $34.2 million worth of stock. This is a bullish sign and looking deeper into the company, we see that it has operationally performed well exceeding consensus estimates in three of the last four quarters. In addition, the 10x trailing and 7.5x forward P/E are certainly attractive and rather inexpensive compared with its peers. Lastly, the very nice and consistent 4.0% dividend yield is nothing to sneeze at in this low interest rate environment. Moreover, at just a 41% payout ratio, investors can reasonably expect that to be safe and perhaps even be raised in the near future. Freeport is worth considering and if wisely looking to diversify, Hecla Mining (NYSE:HL) and Vale (NYSE:VALE) look to fit the billing.

Hecla Mining is another mining company that just a few weeks prior had a massive insider purchase shown here. The company has moved up slightly since then, but it is trading at reasonable valuations and a far cry from its $6.94 52-week high. Moreover, the recent increase in price is largely due to the well-received and potentially very lucrative Aurizon Mines acquisition as it will boost its gold holdings considerably. Trading at a still relatively cheap .95x price-to-book ratio and 9.5x forward price-to-earnings valuation makes Hecla enticing. In addition, while it pays a paltry .3% dividend, management has shown a willingness in the past to pay a significantly higher dividend and if operations continue to improve, investors may be in for a welcome surprise.

Vale is a diversified commodities and industrial metals company based in Brazil. The stock has not been inspiring the past year, down approximately 20% and sitting just above its $14.21 52-week low. However, the company looks to have considerable value at these lower prices. Operationally, the company beat consensus estimates in the most recent quarter after whiffing the previously three, which can reward shareholders nicely if that starts a new trend. Trading at just 1.0x price-to-book ratio and 6x forward price-to-earnings valuation makes Vale even more attractive. In addition, a .5x price-to-expected-growth ratio, while the company is showing operating margins in excess of 29% is encouraging. Lastly, this allows somebody to have a well-established international mining stock for diversification purposes making it perhaps more attractive.

Tesla Motors (NASDAQ:TSLA) develops, manufactures, and sells electronic vehicles and related components. The stock performance has been simply astounding the past year up approximately 300% as investors cheer its first ever profitable quarter among other positive developments. With such a big rise, one would think that insiders would be selling, but CEO Elon Musk thinks otherwise. On May 30, Mr. Musk purchased an impressive 1,084,129 shares equating to just over $100 million worth of stock. This is quite bullish and the new Tesla Model S automobile is continuing to show strong sales. However, from a valuation standpoint, I don't see how one can justify buying with a forward price-to-earnings valuation in excess of 90x and 65x price-to-book valuation. In addition, the company is still showing on a trailing 12 months basis a negative 183% return on equity and negative 20% return on assets. I strongly agree with the company's core mission to reduce greenhouse gas emissions and help make the world more sustainable, but from an investor's perspective, fellow competitor Ford Motor (NYSE:F) makes more sense to me.

Ford Motor is one of the more well-known American brands being in existence since 1903 and having such well-known cars as the Mustang , Fusion and Focus. The company is growing nowhere nearly as fast as Tesla (consensus estimates call for Tesla to grow 32.9% per annum over the next five years and for Ford to grow 11.9% over the same time period), but is showing much more reasonable valuations. At a 10x trailing and 9x forward price-to-earnings ratio, Ford is certainly not expensive from that standpoint. Moreover, with just a .9x price to expected growth ratio, while the company is showing returns on equity of 34%, that further in my mind adds to Ford's bullish case. Add in the respectable 2.6% dividend at just a 17% payout ratio and I think Ford is worth a look.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in FCX, VALE, F, HL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.