Strong Insider Buying Could Give Us A Reason To Invest In These Stocks

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. Ladenburg Thalmann Financial Services (NYSEMKT:LTS) through its subsidiaries, provides a range of financial services primarily to corporate and institutional clients, and high net-worth individuals in the United States. On Oct. 6, both Chairman and largest shareholder Phillip Frost and board director Jacqueline Simkin bought 50,000 shares at $1.52. As I wrote before here, LTS has been having strong insider buying by Dr. Frost predominately, but I still can't find the value when it's trading at 1.3x P/S, 5.7x P/B, and had almost negative $6M in FCF this past year. I see more value in other financial names such as Chimera Investment (NYSE:CIM), Annaly Capital (NYSE:NLY), and even Goldman Sachs (NYSE:GS). CIM trades at 4.5x P/E, .8x P/B, had over 6.5% return on assets and almost 18% return on equity, and a 20% dividend yield. NLY trades at 5.8x P/E, .95x P/B, had almost 2.5% return on assets and over 17% return on equity, and a 15.5% dividend yield. GS now has really taken a hit these past few months and is trading at 9.2x P/E, .7x P/B, had almost 11% return on equity, and 1.5% dividend yield. I currently own NLY and CIM and may look to start a position with GS as those three are showing more value to me.
  2. VMware (NYSE:VMW) provides virtualization and virtualization-based cloud infrastructure solutions primarily in the United States. On Oct. 4, major shareholder EMC bought 241,333 shares at $79.45. As I mentioned here before, EMC has been buying share in VMW, but I don't see the value with it trading at 70x P/E, 10.4x EV/S, and 45x EV/EBITDA. EMC to me offers a more compelling valuation trading at 24x P/E, 2.4x EV/S, and 10.6x EV/EBITDA or better yet Microsoft (NASDAQ:MSFT), Intel (NASDAQ:INTC), and Apple (NASDAQ:AAPL). MSFT trades at a paltry 8.5x P/E, 2.6x EV/S, 6x EV/EBITDA, while having a 3.1% dividend yield. INTC trades at a 10.3x P/E, 2.2x EV/S, 5x EV/EBITDA, and very nice 3.8% dividend yield. While AAPL has no dividend, the stock still looks attractive at 14.7x P/E, 3.2x EV/S, 10x EV/EBITDA, and absolutely no debt with over $30/share in net cash. Those offer better value to me than VMW.

Disclosure: I am long NLY, CIM.