Tracking insider purchases is a fundamental task for any good investor, as it can provide great investment ideas that go beyond usual options. Let’s, thus, take a look at two companies that saw their insiders buy their stock this week.
First off is Sun Bancorp, Inc. /NJ (NASDAQ:SNBC), a $335 million market cap holding for Sun National Bank. On April 28, Frank Clay Creasey Jr., a Board Director, started a position in the company with 300 shares, for which he paid $3.78 apiece. Another Director, Keith Stock, had initiated a position in the stock earlier this year: on Jan. 30, he purchased 1,000 shares of the company. In addition to these insiders, there are other bulls on Sun Bancorp. The largest hedge fund shareholder, Wilbur Ross (Invesco Private Capital), holds 21.28 million shares of the company. Kevin Michael Ulrich’s Anchorage Advisors, for its part, owns 8.46 million shares, and Matthew Lindenbaum’s Basswood Capital, 1.03 million shares. Other prominent investors holding long stakes in the company are Chuck Royce, Jim Simons, and Ken Griffin.
In order to comprehend this bullishness, one must look beyond the company’s weak fundamentals (negative margins and returns). Decent EPS growth prospects (8% in average, for the next five years) coupled with a cheap valuation, at 1.4 times the company’s book-values, make of this stock an attractive option.
The second company on this list is Famous Dave’s of America, Inc. (NASDAQ:DAVE), a $179 million market cap restaurant owner and operator in the United States. Once again, despite weak fundamentals, one large shareholder (more than 10% owner), Pleasant Lake Partners Llc, seems to feel confident about its future. Between April 24 and April 25, the group acquired 36,451 shares of Common Stock, having paid $24.39 per share for 26,451 of them, and $24.98 per share, for the remaining 10,000 shares. Pleasant Lake had already made four acquisitions earlier this year, one in March and three in February, adding a total of 92,200 shares to its holding. Following these transactions, the group owns 876,861 shares of the company, worth roughly $22.14 million.
I would interpret these purchases as more of a bet on long-term growth. Analysts expect the company to deliver average annual EPS growth rates around 18% over the next five years. Moreover, several major hedge funds are also long in this stock. The largest hedge fund investor is Jim Simons, who last reported having increased his stakes at the company by 6%, to 336,600 shares. Once more, Chuck Royce can be also found amongst Famous Dave’s’ bulls, same as Mario Gabelli.
Disclosure: Javier Hasse holds no position in any stocks mentioned