This morning’s article was going to be about how Mirant Corp (MIR) is supremely undervalued, and how energy firms like GMX Resources (GMXR) deserve another look. However, news that Mirant would merge with Reliant Energy (RRI) has already buoyed the stock up almost 20% today.
So instead let’s take a look at another stock with significant insider buying. Last week it was Fidelity Southern Corp (NASDAQ:LION), and investors who picked up a few shares under $5.75 are sitting on almost 40% in 8 days. Today we turn our attention to Methode Electronics.
Specifically, the transaction that caught our eye was a new position purchase by Timothy Glandon of 17,641 shares valued at $185,000.
After pulling back from a spike in February up to $14 a share, the stock currently sits at $10.66, well below the average analyst price estimates of $12. With Glandon’s transaction we believe that the stock has some room to run into the $15 or $16 range.
So what exactly does Methode Electronics do? Well, they do a number of things. Among them, designing and producing wireless, electronic and optical devices used in a number of industries and military applications.
Most interesting is their exposure to power products division, which allows devices to conduct electricity at lower resistances and higher density. In short, it allows electronics to use more of the power supplied to them instead of losing it to resistance.
Think of electrical resistance like taxes. Their products allow electricity to pass through to equipment with minimal taxes. We all understand the benefits of minimizing taxes, and electrical resistance is a constant tax on electricity supplies. Reducing it is an easy way to increase efficiency, and it’s the reason why their products are very popular.
We’d recommend picking up a few shares under $10.70 before the markets realize how undervalued this stock is.
Since this article was written Monday morning, the stock has jumped just over 8%. Even with this bump, we’re still positive on this for another 15-30%.
Disclosure: Author is long GMXR