One of my weekly rituals as an investor is to review recent insider activity through the Securities and Exchange Commission’s Form 4 filings. Corporate executives and board members (“insiders”) are required to fully disclose their stock purchases pursuant to the Securities Exchange Act of 1934 and the Investment Company Act of 1940.
Barron's magazine makes an effort to highlight the most noteworthy insider purchases and organizes them in its weekly publication. This courtesy by Barron's liberates the small investor from having to dig through the SEC's website or sign up for a premium service in order to track recent insider activity.
Individual investors can benefit greatly from studying the actions of corporate executives. Whether you are taking a sector view or considering investment in an individual company, learning to read the SEC filings (or taking a Barron's shortcut) can be a powerful resource and strengthen your overall investment thesis.
Here are three large insider purchases that caught my eye (and Barron's) in recent days:
Bank of America Corp (NYSE:BAC)
Board member David Yost purchased 20,000 shares of Bank of America Corp (NYSE:BAC) on the open market for approximately $11.51 per share. The total transaction value amounted to $230,282 when the stock was bought on April 18.
Yost, age 65, is the former CEO of AmerisourceBergen Corp. (NYSE:ABC), a pharmaceutical services company that recently signed a 10-year agreement with Walgreen Company (NYSE:WAG). Yost has served on Bank of America Corp (NYSE:BAC)’s board as an independent director since being appointed on Aug. 23, 2012.
Previous to the April 18 purchase, Yost bought 20,000 shares of BAC at a similar price in January and 10,000 shares around $9.50 per share in November.
The timing of the insider buying comes following Bank of America Corp (NYSE:BAC)’s first quarter results, released the previous day on April 17. Management reported in-line results of $0.20 EPS on $23.5 billion in revenue, however positive takeaways from the quarter include a $1 billion year-over-year decline in noninterest expense.
Book value per share increased to $20.30, and Bank of America Corp (NYSE:BAC) reiterated its plan to buyback $5 billion in stock over the next four quarters. My calculations indicate the share repurchase plan will allow management to buyback 3.7% of outstanding shares, which will be accretive to earnings growth.
Bank of America Corp (NYSE:BAC) and Citigroup Inc (NYSE:C) remain my two favorite picks within the financial sector, as both stocks trade at less than book value. Analysts at Morgan Stanley also viewed Q1 results positively, upgrading BAC with a new “outperform” rating and $16 price target.
Huntington Bancshares Incorporated (NASDAQ:HBAN)
CEO Stephen D. Steinour and board member David L Porteous collectively purchased 12,340 shares of Huntington Bancshares Incorporated (NASDAQ:HBAN) for approximately $86,000 on April 19 and 22.
Steinour has served as chairman, president, and CEO of Huntington Bancshares Incorporated (NASDAQ:HBAN) since January 2009, replacing the previous chief executive in the midst of the financial crisis. Steinour began his banking career with stints at the U.S. Treasury and FDIC before holding various positions at Citizens Bank, ultimately serving as president and CEO from 2006 to 2008. In addition to his active roles at Huntington Bancshares Incorporated (NASDAQ:HBAN), Steinour serves as a board member at Exelon Corporation (NYSE:EXC), the publicly traded utility company.
According to his insider filing, Steinour purchased 7,600 shares of HBAN on April 19 at around $6.94 per share. Board member David Porteous similarly bought 4,740 shares on April 22 at the same price. Porteous is a partner at a Michigan-based law firm and has served on Huntington’s board of directors since 2003.
The Columbus, Ohio-headquartered Huntington Bancshares Incorporated (NASDAQ:HBAN) reported Q1 earnings on April 17. The regional lender reported an in-line quarter but announced a 25% increase in HBAN’s quarterly dividend to $0.05 from a previous $0.04. This gives the stock a 2.8% yield based on recent market prices, with the first dividend payable on July 1.
Loan growth continued at Huntington Bancshares Incorporated (NASDAQ:HBAN), with modest acceleration in residential mortgages and home equity loans during the January - March period. Net interest margin, commonly referred to as NIM, should not fall below 3.3% during the full year 2013. NIM is a key component of bank profitability, equal to the difference between interest paid by lenders and interest owed to depositors.
Huntington Bancshares Incorporated (NASDAQ:HBAN) also proudly announced in March that it exceeded its $4 billion lending commitment to small businesses, originally announced following the recession in 2010. According to the company, more than 24,000 small businesses in six states obtained loans during the three-year program.
Walgreen Company (NYSE:WAG)
Billionaire and board member Stefano Pessina purchased 83,299 shares of Walgreen Company (NYSE:WAG) in a single transaction for $48.62 per share. The total transaction value amounted to a whopping $4.05 million when the stock was bought on April 19.
Pessina is ranked #189 on Forbes list of billionaires and is ranked #6 within his home country. The 71-year old Italian amassed his fortune via the growth of his pharmaceutical wholesale and drugstore business in Europe. Pessina became unified with Walgreen Company (NYSE:WAG) during summer 2012 when WAG announced the purchase of Alliance Boots, a multinational drugstore chain in which Pessina served as chairman since 2007.
On March 19, Walgreen Company (NYSE:WAG) announced a 10-year partnership with AmerisourceBernstein, a pharmaceutical supply chain company that should reaffirm Walgreen’s leadership position in the drugstore industry. Both firms are expected to achieve cost synergies from the deal.
Wall Street immediately viewed the announcement favorably. Analysts at JPMorgan upgraded Walgreen to “overweight” with a $55 price target on March 20. Similarly, Citigroup Inc (NYSE:C) took Walgreen Company (NYSE:WAG) to “buy” from a previous “sell” rating, reversing course and applying a $51 price target.
Walgreen Company (NYSE:WAG) CFO Wade Miquelon told reporters in April that he “feels good” about the announced AmerisourceBergen Corp. (NYSE:ABC) deal, noting that his company is already ahead of its benchmarks with the Alliance Boots integration.
Foolish Bottom Line
While there are numerous reasons for corporate executives to sell, insider buying takes place for only one reason. Furthermore, Bank of America Corp (NYSE:BAC), Huntington Bancshares Incorporated (NASDAQ:HBAN), and Walgreen Company (NYSE:WAG) have a strong fundamental case for investment even with the broader market at 52-week highs.
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The article 3 Must-Own Stocks from Barron's Insider Buying List originally appeared on Fool.com.
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