Here’s Where Insiders Are Stocking Up This Holiday Season

Diversification is one of the most important principles of investing- not only for investors themselves, but also for company insiders. Since they have a strong economic connection to their company they are in a way “invested” in it whether or not they actually own shares. So when they do buy shares, it is a signal that they are so confident in the stock that they are willing to ignore the benefits of diversification- which helps explain why insider purchases are bullish signs. Here are some stocks that insiders have been buying recently:

Multiple insiders have been buying into prepaid card company Green Dot Corporation (NYSE:GDOT). When multiple insiders are buying, it’s a particularly bullish signal: studies show particularly high excess returns in these companies. Green Dot is down 75-80% from its IPO in 2010, so these insiders are likely buying in on the belief that the stock has been beaten down by the market farther than it deserves. See which insiders have been buying Green Dot. The company offers prepaid debit cards from brands such as Mastercard Inc (NYSE:MA) and Visa Inc (NYSE:V); it also provides Visa gift cards and other products. It seems as if Wall Street analysts are on the same side as the insiders here: the stock trades at 8 times consensus earnings for 2013, and the five-year PEG ratio is 0.5. This suggests that the stock will prove undervalued if the company can meet, or even fall just short of, these targets. However, it is widely shorted with 20% of the shares outstanding held short as of the most recent data. In addition, no hedge fund in our database of 13F filings reported owning $10 million or more of the stock at the end of September. Find out more of our thoughts on Green Dot.

David Shaw

Multiple insiders also bought shares of The AES Corporation (NYSE:AES). AES is a global electric utility whose stock price has fallen 12% in the last year; our database of insider trading not only shows two different insiders buying in mid to late November but also records two additional insiders buying the stock earlier in 2012 (see a history of insider purchases at AES). A goodwill impairment converted what would have been earnings growth last quarter versus a year earlier into a sharp decline, and the stock is now at a forward P/E of 8. Its dividend yield does look low, however, at 1.6% (larger utilities such as Dominion Resources, Inc. (NYSE:D) and Duke Energy Corp (NYSE:DUK) pay yields in the 4-5% range). Billionaire David Shaw’s D.E. Shaw reported owning almost 5 million shares of the stock in its 13F filing for the end of the third quarter (check out D.E. Shaw’s favorite stocks). While it’s not as good as other utilities on an income basis, it looks like it has some potential in terms of value and with multiple insiders buying it could be worthy of consideration.

Kansas City Southern (NYSE:KSU), an $8.6 billion market cap railroad, had Board member Henry Davis buy more shares of the stock recently as well. Read our analysis of Davis’s purchase. Kansas City Southern trades at 23 times trailing earnings, a substantial premium over larger railroads such as Union Pacific Corporation (NYSE:UNP) and CSX Corporation (NYSE:CSX). The smaller company also experienced a decline in earnings in the third quarter compared to the same period in 2011, though revenue was up. We have to wonder if we should read Davis’s buy as being bullish on Kansas City Southern specifically, or the railroad industry in general. Rail is a relatively cheap, high-volume way to move freight, and Warren Buffett’s Berkshire Hathaway bought large rail operator Burlington Northern Santa Fe in 2010 (suggesting that the legendary investor likes the industry). See Warren Buffett’s favorite stocks. Billionaire Ken Fisher’s Fisher Asset Management owned 1.2 million shares of Kansas City Southern at the end of September. We think that we might prefer to look at one of the larger railroads.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!