Studies show that insider purchases tend to be bullish signs for a stock (read our discussion of studies on insider trading). This is generally accepted to be because insiders would prefer to diversify their investments and only invest in their company’s stock when they are very confident in its future prospects. Because of the signal that these purchases can make, we track insider purchases as well as sales so that investors can review these stocks further and see if any particular one might be a good investment for them as well. Here are five stocks that insiders have been buying recently:
The CEO of Bruker Corporation (NASDAQ:BRKR), Frank Laukien, invested over $1 million of his own money in the company’s stock (read more about the CEO's purchase and the company). Bruker provides scientific instruments and products, principally to life science customers. It trades at a high price-to-earnings ratio of 27, but is expected to grow its business over the next several years: it trades at 16 times forward earnings estimates, a considerably cheaper multiple. While earnings per share were down for the first half of the year versus 2011, this was partly due to increased research and development spending (which in theory should benefit the company in the future).
AGCO Corporation (NYSE:AGCO) saw an investment of 61,000 shares from Tractors and Farm Equipment Limited, which is run by AGCO Board member Mallika Srinivasan. AGCO grew its earnings by 50% last quarter compared to the same period a year ago (although we suspect that some of the company’s improved business came from milder weather in the U.S. that pushed farm equipment sales earlier in the year). AGCO trades at only six times trailing earnings and so would be a bargain if it can continue performing as it has in the past; the five-year PEG ratio is 0.6, indicating that Wall Street analysts believe that the company has good growth prospects as well. See our earlier discussion of AGCO.
Board member William Greehey bought almost $24 million in stock of NuStar Energy L.P. (NYSE:NS), becoming the latest of several insiders to buy stock in the $3.5 billion market cap pipeline company. NuStar could be a good defensive stock as it pays a high dividend yield (8.9%) and its beta is 0.8. On a value basis it isn’t quite as attractive- analyst consensus is for earnings per share of $2.80 next year, which implies a forward P/E multiple of 18. In our analysis of NuStar from earlier this month, we thought that it made for a good buy compared to its peers (read our analysis of NuStar).
Bill Barrett Corporation (NYSE:BBG) Board member Carin Barth purchased 5,000 shares of the company this month at an average price of $26.59. Bill Barrett is an oil and gas exploration and production company with a strong position in the Denver-Julesburg (D-J) Basin. Falling natural gas prices have hurt the company so far this year, with net income down 18% in the first six months compared to the first half of 2011. Bill Barrett still feels good about its acreage: it invested $460 million in capital expenditures in the same period, which is high compared to a market cap of $1.3 billion. Learn more about Bill Barrett.
James Christmas, a Board member at Halcon Resources Corp (NYSE:HK), also thought that his oil and gas exploration and production company was a buy. Christmas bought 100,000 shares at an average price of $7.24. Halcon, like Bill Barrett, operates in the onshore U.S. although it has most of its proved reserves in Texas (it also recently entered the Utica Shale). Sell-side estimates are for 43 cents in EPS next year, and if the company can achieve that figure (which depends on oil and natural gas prices as well as its production) the forward multiple will end up being 17. In this case we actually thought that despite the insider purchase some of Halcon’s peers made for better buys. See which companies we liked instead.