Studies show that on average stocks bought by company insiders tend to beat the market (read more about studies on insider trading). In theory, this is because in order for an insider to forgo the benefits of diversification he or she must be confident that the stock will do well. While investing in stocks seeing insider purchases doesn’t always pay off, and it’s impossible to buy every single stock that insiders are buying, looking at this set of stocks can serve as a worthwhile screen for companies that are worth researching further. Here are five stocks which, according to our database of filings, have recently been bought by at least one company insider:
Fastenal Company (NASDAQ:FAST)’s CFO purchased 2,600 shares at an average price of $41.50. This was particularly interesting because another insider had bought shares in late November; while that buy had been small, consensus insider buying is particularly bullish. SAC Capital Advisors, which is managed by billionaire Steve Cohen, bought 1 million shares of Fastenal between July and September (find more stock picks from Steve Cohen). Fastenal reported double-digit growth rates in revenue and earnings in its most recent quarter compared to the same period in the previous year, but at a trailing P/E multiple of 30 we think that it’s too expensive for us.
A Board member at Occidental Petroleum Corporation (NYSE:OXY) bought 5,000 shares at an average price of $73.43 per share. The $61 billion market cap oil major had made our list of the most popular energy stocks among hedge funds for the third quarter of 2012 (see the full rankings) and carries trailing and forward P/E multiples of 10. Unfavorable price trends in natural gas have caused Occidental’s net income to decline over the last year, though the same is the case for many other large oil and gas companies which trade at low multiples as well. We’d consider Exxon Mobil Corporation (NYSE:XOM) or BP plc (NYSE:BP) to be better buys. Learn more about Occidental compared to its peers.