5 Profitable Companies With Strong Insider Ownership

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Includes: BEN, DELL, FSLR, K, ORCL
by: Efsinvestment

Insider activities have been one of the best indicators throughout market history. Investors tend to invest their money in stocks with heavy insider ownership, believing that when management invests its money in the stock, it will be more motivated to generate shareholder value. However, investing in a stock with an insider ownership rate of 50% or more is like swimming in an ocean full of sharks. You can never know whether insiders are waiting for the proper time to sell their holdings all out, or not. A ratio between 10% and 30% seems like the appropriate interval for insider ownership. Here, is a list of five large-cap companies with insider ownership rates between 10% and 30%.

Franklin Resources (NYSE:BEN): Franklin will yield $0.083 per share on July 29. As of the July 22 close, the investment manager owns a market cap of $29.62 billion. P/E ratio is 17.34, and forward P/E ratio is 13.74. Analysts expect the company to have an 11.33% annualized EPS growth for the next five years, which is reasonable given the 9.26% EPS growth in the last 5 years. Franklin Resources pays a 0.75% dividend, while its profit margin is 26.43%.

Insiders own 30.86% of the stock. Franklin had an EPS growth of 64.42% this year, and 44.61% this quarter. SMA50 is 5.02%, whereas SMA200 is 10.08%. Debt-to assets ratio is around 10%. Franklin returned 39.7% in a year, while its O-Metrix score is 3.88. Target price is $148.41, implying an 11.1% increase potential. Yields are consistent. Franklin Resources is a trustworthy stock for the long run. Recent dividend history is as follows:

Jun 28, 2011

$0.25

Mar 29, 2011

$0.25

Dec 29, 2010

$0.25

Sep 28, 2010

$0.22

Kellogg Company (NYSE:K): Kellogg announced a 6% increase for its quarterly dividend yield, which will be payable on Sep,15. The company has a market capitalization of $20.29 billion, as of July 22. It shows a trailing P/E ratio of 17.75, and a forward P/E ratio of 14.71. Estimated annual EPS growth for the next five years is 8.04%. With a profit margin of 9.46%, Kellogg offers a 2.90% dividend yield.

SMA200 is 6.64%, while target price indicates a 5.5% upside potential. Insider ownership is at 22.35%. ROE is 50.34%. Although debts are unstable, assets keep increasing for the last three years. Its O-Metrix score is 3.37. Kellog has been doing well since Mar, 2009. $1000 invested in that time is about $1534 now. Yields seem all right. Insiders have been both selling stocks and exercising options for a while. This might be the time to enjoy profits. Here are the recent dividend payments of Keyllogg Co. per share:

May 27, 2011

$0.405

Feb 25, 2011

$0.405

Nov 29, 2010

$0.405

Aug 30, 2010

$0.405

Oracle Corp. (NYSE:ORCL): Oracle just bought Ksplice Inc., the MIT $100K winner of 2009. The California-based company, as of the Friday close, has a market cap of $8.55 billion, a P/E ratio of 19.61, and a forward P/E ratio of 12.24. Analysts estimate a 13.89% annualized EPS growth for the next five years. With a 23.99% net profit margin, Oracle offers a 0.74% dividend yield.

Earnings increased by 33.80% this quarter, and 37.82% this year. Operating margin is 33.78%, while gross margin is 76.42%. Target price is $37.92, which implies an about 16.4% upside movement potential. Although debts are increasing sharply, assets outrun them. Insiders own 21.91% of the stock. Oracle started paying dividends in Apr, 2009, and it has had a strong momentum since then. I believe this momentum will continue for a while. O-Metrix score of Oracle is 4.59. Out of 12 analysts covering the company, 5 of them has a buy, 5 has outperform, and the other two has overweight ratings for the stock. Here is the recent dividend history of Oracle:

Jul 11, 2011

$0.06

Apr 11, 2011

$0.06

Jan 14, 2011

$0.05

Oct 4, 2010

$0.05

First Solar (NASDAQ:FSLR): FSLR will announce its second quarter earnings on July 26. As of July 22, the technology company has a $10.69 billion market cap. P/E ratio is 17.71, and forward P/E ratio is 11.37. Analysts expect the company to have a 19.77% annual EPS growth in the next five years, which is quite conservative given the 112.22% EPS growth of last five years. First Solar has a profit margin of 23.72% with no dividend policy.

Operating margin is 26.81%, and gross margin is 44.2%. Insiders own 19.25% of the stock. ROA is 15.37%, while target price indicates a 23.8% upside movement potential. Although debts are unstable, assets are increasing sharply. The stock is trading 29.26% lower than its 52-week high. I believe the stock is underpriced, and current price is an opportune entry point.

Dell Inc. (DELL): Dell is planning to use Google+ to give customer support for Dell customers. The company has a market cap of $32.14 billion, as of the Friday close. Dell has an impressive P/E ratio of 10.20, and a forward P/E ratio of 8.88. Estimated annualized EPS growth for the next 5 years is 6.86%, whereas the company had a -1.73% EPS growth in the last five years. Profit margin in 2010 was 5.25%.

Dell had an EPS growth of 184.34% this quarter, and 84.54% this year. ROE is 45.5%, quite higher than the industry average of 36.8%. Insiders own 13.06% of the stock. Target price is $18.55, implying an about 8.8% increase potential. SMA50 is 4.71%, while SMA200 is 14.74%. $1000 invested in Dell one year ago is about $1261 now. Although debts keep increasing, assets easily outrun them. Dell has a slow but solid momentum. Analysts give a 2.30 recommendation for the company (1=Buy, 5=Sell).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.