2 Beaten Down Stocks Under $5 That Have Attracted Recent Insider Buying

Includes: FOE, NES
by: Bret Jensen

Although all the indexes are still up for the year, there has been a long of damage in some industry sectors, especially those that deal with the commodity complex. Falling commodity prices and slowing worldwide growth have significantly impacted the stocks in this area. However, investors with a long term time horizon can find numerous bargains in this currently unloved space. Here are two stocks that seem cheap, have picked up recent insider buying and look like they are starting to bottom from a technical perspective.

"Ferro Corporation (NYSE:FOE) engages in the production and sale of specialty materials and chemicals in the Untied States and internationally." (Business description from Yahoo Finance)

Four reasons FOE will reward patient investors at just over $4 a share:

  • An officer made a new buy of 40,000 shares in May.
  • The stock is selling at the bottom of its five year valuation range based on P/B, P/S and P/CF.
  • FOE is cheap at just over 6 times forward earnings, 65% of book value and 18% of annual revenues.
  • Credit Suisse has an "outperform" rating and an $8 price target on FOE. The stock also appears to be going through a long bottoming process here (see chart).

"Heckmann Corporation (HEK) operates as a services-based company focused on total water and wastewater solutions for shale or unconventional oil and gas exploration and production." (Business description from Yahoo Finance)

Four reasons HEK is a bargain at $3 a share:

  • Several insiders purchased over 130,000 shares in May.
  • The company is selling at the bottom of its historical valuation range based on P/S, and P/B. Analysts also expect the company to increase revenues by more than 100% in FY2012 and over 20% in FY2013.
  • The seven analysts that cover the stock have a median price target of $5.25 a share on HEK. Credit Suisse has an "outperform" rating and a $5 price target on the stock.
  • The stock looks like it is finally trying to bottom at these levels (see chart).

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in HEK over the next 72 hours.