In previous posts, I discussed my research into insider transactions, and how, over time, I found it to be an extremely profitable analysis method. This week, I want to present an actionable example.
Strong signal - Landec Corp
Landec Corp. (LNDC), from Santa Clara, CA, develops and commercializes products that advance health and wellness. The company focuses on products for the natural foods and CDMO markets, managing a portfolio of six brands under their “Curation Foods” natural foods business, and “Lifecore Biomedical” as its CDMO business.
Over the last year LNDC has been trading well, adding upwards of 20% to its value, however, last December has not been kind to the company which lost about 30% of its value in one month, mostly due to difficulties to meet their guidance and a Q3 loss.
Only one analyst covers the stock, and made a semi-bold prediction of $17, up 44% from its current price. Other than that the company gets very little coverage from analysts and bloggers alike, and this is exactly where the insider activity analysis shines.
Following a long period of insider sales, between the 9th and 14th of January 2018 the insider sentiment has changed. No less than 5 insiders made stock purchases, all individuals, at a total of close to $750,000. This is not a huge number yet it is considerable when looking at the relevant salaries. Bottom line is that it makes a point – at a stock price of $11-$12, four directors and the CFO are willing to put their own money on the company. I recommend you to seriously consider it too.
Potential signal – The Hartford Financial Service Group, Inc
The Hartford Financial Service Group (HIG), known as “The Hartford”, is a Fortune 500 investment and insurance company. While I usually avoid large caps when looking at insider transactions, the signal here is interesting – the company has been losing altitude for a year, and up until November 2018 insiders were selling it like it has gone out of style, however, in the last month the CEO and a Director took interest in the stock again and purchased about $700,000 worth of stock between them. Not a lot of money for a CEO that makes $13mil a year, and yet, for those of you who mainly invest in large caps this can be interesting to follow.
When purchasing a stock based on insider activity I normally hold it for up to 6 months or 30% increase, whichever comes first. During that time the potential should unfold, and if not, it probably wouldn’t, at least at this round (unless there is additional significant insider activity). I’m purchasing LNDC at $11.77 and hope to see a nice return in the coming months. I’ll be back every week to highlight opportunities, revisit previous recommendations, and share more details on my analysis methodology.