We like to track insider trading activity, and insider purchases in particular. Theory tells us that insiders should prefer to diversify their wealth rather than buying additional shares in their company, and studies show that on average stocks bought by insiders tend to outperform the market (read more about studies on insider trading). Here are five stocks that insiders have purchased recently:
During the month of November multiple insiders bought shares of $2.1 billion market cap coal producer Alliance Resource Partners, L.P. (NASDAQ:ARLP); consensus insider buying is a particularly bullish signal on average. The past year has been rough on coal companies- thermal coal producers have seen utilities switch to natural gas while the demand for metallurgical coal has been lower due to reduced steel production. Alliance’s stock, for example, is down 23% in the last year. Increased coal production has helped boost the company’s revenue, but since costs have also been up the company reported a 59% decline in earnings last quarter versus a year earlier. Read more about how Alliance compared to other coal companies. With billionaires like George Soros buying other coal stocks it’s possible that the industry is poised for a turnaround, though we’d hesitate to buy at the moment.
A member of Juniper Networks, Inc. (NYSE:JNPR)’s Board of Directors bought 16,700 shares in late November at an average price of $18 per share. A failure to limit cost growth has reduced Juniper’s earnings significantly despite rising revenue, and it now trades at 51 times trailing earnings. The company is expected to improve in 2013, and so the forward P/E is only 16. However, when we’d looked at the stock (see our analysis of Juniper Networks), we’d concluded that Cisco Systems, Inc. (NASDAQ:CSCO) is still a better buy as that company’s business is already performing well and the stock trades at fairly low P/E multiples.