Are These 3 Stocks With Strong Insider Buying Worth A Buy?

by: Brian Gorban

There are many indicators I use when analyzing a stock. One is unusual option activity. Another indicator I look for are relatively cheap dividend stocks. Finally another strong indicator is insider buying, such as the ones described here and these ones below:

1) Opko Health (NYSEMKT:OPK) continues to experience massive insider buying by Chairman and CEO Phillip Frost. He bought a massive 2,452,222 shares on Oct.4 in what looks to be a private sale, as the price was below the low of the day on Oct. 4 ($3.60). Nonetheless, he now owns approximately 40% of the total shares outstanding and looks to have an insatiable appetite. I've brought this company up before as this insider purchasing by him continues, but I still can't pull the trigger here when I see the company burn an alarming amount of cash, trade at a 29x P/S, a negative return on equity, and 10.5x P/B. For now, I have to stay on the sidelines and put this in the 'too difficult to analyze' category.

2) Chairman of Armour Residential REIT (NYSE:ARR), Daniel Staton, bought 150,000 shares on Oct. 3 at $6.29 and fellow director Thomas Guba bought 50,000 shares the day after at $5.50. The company just recently hit its 52-week low of $5.40 and looks relatively cheap at .8x P/B and an eye-popping 21.2% annualized dividend yield paid monthly. However, this REIT is among the most leveraged at approximately 9:1 and a relatively high payout ratio of 99%. Most REITs are closer to the federally mandated 90% requirement, but this strong vote of confidence by insiders and cheap valuation leads me to believe this is a buy now. Also Annaly (NYSE:NLY) at a 15.2% dividend yield, 6x P/E, and .95x P/B valuation along with Chimera (NYSE:CIM) at a 4.5x P/E, 19.8% dividend yield, and .8x P/B valuations are worth buying as well. American Capital Agency (NASDAQ:AGNC) is also too cheap now at a 4x P/E, 21.3% dividend yield, and 1x P/B valuation along with Hatteras Financial (NYSE:HTS) at a 5.8x P/E, .9x P/B, and 16.8% consistent dividend.

3) R.R. Donnelley (NASDAQ:RRD) board director Thomas Johnson made a big 206,200 share buy on Sept. 27 at $14.49. The stock has good value here trading at just a .25x P/S, .6x EV/S, and 7.6% dividend yield. The dividend is secure through FCF in excess annually of $500M, and I think this is a buy at these depressed levels and strong insider vote of confidence.

Disclosure: I am long NLY, CIM.