We track corporate insiders because we believe that they have an edge over ordinary investors. Our past studies have shown that insiders on average outperformed the market, especially when it comes to purchasing stocks. Even small purchases are marginally profitable. The reason is simple. Insiders usually have a large exposure to their company’s performance. It does not make sense for them to increase their exposure unless they believe that their purchases are very likely to be profitable. Therefore, we believe that by imitating insiders, investors will be more likely to beat the market in the long term.
Below we compiled a list of US services stocks that insiders are buying. All companies have at least $2 billion market cap and were bought by at least one insider during the past three months. The market data is sourced from Finviz.
|BBY||Best Buy Co. Inc.||1|
|HTZ||Hertz Global Holdings, Inc.||1|
|SHLD||Sears Holdings Corporation||1|
|CKH||Seacor Holdings Inc.||1|
|DIS||Walt Disney Co.||1|
|DLTR||Dollar Tree, Inc.||1|
|EDMC||Education Management Corporation||1|
|JEC||Jacobs Engineering Group Inc.||1|
|MHP||The McGraw-Hill Companies, Inc.||1|
|RCL||Royal Caribbean Cruises Ltd.||1|
|TFM||The Fresh Market, Inc.||1|
|TWC||Time Warner Cable Inc.||1|
|UAL||United Continental Holdings, Inc.||1|
|WPO||The Washington Post Company||1|
|GCI||Gannett Co., Inc.||2|
|CCO||Clear Channel Outdoor Holdings Inc.||2|
Among these 18 stocks, Best Buy Co Inc (BBY), Hertz Global Holdings Inc (HTZ), Sears Holdings Corporation (SHLD) and Gannett Co Inc (GCI) were purchased by insiders during the past month. For instance, Lisa Caputo bought 402 shares of BBY at $23.66 on January 3. Caputo also purchased 347 shares of BBY at $26.91 at the beginning of December and another 358 shares at $25.4 at the beginning of November. BBY is now trading at $25.23 per share. It has a market cap of $8.9B and a low P/E ratio of only 8.9. Best Buy reported total revenues of $12.1 billion for the 13 weeks ending November 26, 2011, up from $11.9 billion for the same period of 2010. As of September 30, 2011, there are 21 hedge funds with BBY positions. For example, David Einhorn’s Greenlight Capital had $163 million invested in BBY. Bill Miller and Ken Griffin are also bullish about BBY.
Gannett Co Inc (GCI) was also purchased by one insider during the past month. Gannett is an international media company. On January 17, a director at Gannett, Jeffry John Louis, bought 2000 shares at $14.86 per share. Earlier in November, another director Susan Ness also purchased 1000 shares at $11.22 per share. GCI is now trading at $15.22 per share. It has a market cap of $3.7B and a low P/E ratio of 7.27. There are 21 hedge funds reported to own GCI in their 13F portfolios at the end of September last year. John W. Rogers is the most bullish hedge funds manager about GCI. His Ariel Investments had $123 million invested in this position. Warren Buffett’s Berkshire Hathaway and Ray Dalio’s Bridgewater Associates also both had more than $10 million invested in GCI at the end of the third quarter.
One large-cap services stock that insiders are bullish about is Walt Disney Co (DIS). During the past three months, there was one insider who bought Disney shares. John Pepper, director at Disney, bought 1000 shares at $35 per share on November 18 and another 1000 shares at $36 on November 14. Pepper also bought 3000 shares at $31.83 earlier in August last year. DIS is now trading at $39.3 per share. It has a market cap of $71B and a P/E ratio of 15.58. As of September 30, 2011, there are 34 hedge funds disclosed owning DIS in their 13F portfolios. For instance, billionaire Jim Simons’ Renaissance Technologies had $100+ million invested in this position at the end of September.
Other large-cap services stocks insiders love include Dollar Tree Inc (DLTR), The McGraw-Hill Company (MHP), and Time Warner Cable Inc (TWC). Academic research has shown that insider purchases on average outperform the market in the following 12-month period. We encourage investors to focus on the stocks that insiders bought and do some deep research on these stocks.