7 Notable Stocks With Abnormally High Insider Buying

by: Brian Gorban

Here are some stocks that have been experiencing abnormally high insider buying. This can be a great screening tool as insiders generally have a great view into the company's operations and when they buy it's generally for only one reason: they believe their stock is going higher. Moreover, they tend to buy right before a big catalyst, meaning it can lead to out-sized gains in a short period of time. Let's analyze these stocks below experiencing notable insider buying, as we've seen others proven to be successful, and see if these are promising as well.

Chesapeake Energy (NYSE:CHK) engages in the acquisition, development, exploration, and production of natural gas and oil properties in the United States. On Nov. 8, board director Louis Simpson bought a big 100,000 shares. CHK is a high quality energy name that has some compelling value at 11x trailing P/E, 9x forward P/E, .8x PEG, 1.1x P/B, and decent 1.4% dividend yield. I'd follow Mr. Simpson here and buy CHK as the stock has some attractive valuations.

Pacific Ethanol (NASDAQ:PEIX) produces and markets low carbon renewable fuels in the western United States. We just brought up last week the heavy insider buying here and it looks as though the Founder and Chairman, William Jones, has followed suit buying 200,000 shares on Nov. 10. The stock has since continued to move higher, but still has attractive valuations at .1x P/S, .2x EV/S, and just wisely paid down their $35M in senior convertible notes. This is a nice very speculative buy as it looks to be turning operations around.

OPKO Health (NYSEMKT:OPK), a pharmaceutical and diagnostics company, engages in the discovery, development, and commercialization of novel and proprietary technologies. On Nov. 10, Chairman and CEO Phillip Frost bought another 25,000 shares, which is in addition to many recent purchases he's made as I described here. I'll continue to say this is a nice speculative buy as the financials aren't pretty with the stock trading at 36x EV/S, 14x P/B, and approximately negative $20M in FCF this past year, but I do agree it has great potential and an excellent management team. Moreover, Dr. Frost's track record is excellent.

NorthStar Realty Finance (NRF) operates as a REIT in the United States. It invests in real estate debt business, which acquires, originates, and structures debt investments secured primarily by income-producing real estate properties. On Nov. 9, board director Preston Butcher made a notable 50,000 share buy. The company has some enticing valuations at .5x P/B, a paltry 3x forward P/E, 1.2x P/S, and consistent 11.9% dividend that actually got raised 25% this past quarter. I think with these attractive valuations, fantastic yield, and strong insider buying, NRF is a solid buy.

Radian Group (NYSE:RDN), through its subsidiaries, provides credit-related insurance coverage and financial services in the United States and internationally. On Nov. 14, CEO Sanford Ibrahim bought 25,000 shares. This has been a victim of the mortgage mess and even though has some compelling valuations at .1x PEG, .2x P/S and P/B, it looks to be highly speculative as they lost a massive $700M in net income this past year and burned through $860M in FCF. However, if the mortgage mess turns around soon, RDN would be a big beneficiary and this insider buy is encouraging. Definitely only worth it as a very speculative buy.

The Cheesecake Factory (NASDAQ:CAKE) operates upscale, casual, and full-service dining restaurants in the United States. On Nov. 15, board director Herbert Simon bought 25,000 shares. This well-run restaurant has decent valuations at a trailing 18x P/E, 14x forward P/E, 1.1x PEG, .9x P/S and EV/S, and great FCF this past year of approximately $120M. I think this is a solid buy here near its lows and the insider buy is encouraging.

Frontier Communications (NYSE:FTR) provides regulated and unregulated voice, data, and video services to residential, business, and wholesale customers in the United States. I wrote recently here the great value this company has and nice to see on Nov. 21 Chairman & CEO Mary Wilderotter bought 48,000 shares. FTR has enticing valuations at 1x P/S and P/B, just over 5x EV/EBITDA, and enticing 13.6% dividend yield. I liked FTR before and even more now with this large insider buy.

Sources: SEC filings, analyst reports, Guru Focus, and Yahoo

Disclosure: I am long FTR.