We have been spending much of our time in the last month analyzing 13F filings from hedge funds and other notable investors and working on investment strategies using the included information (we have found, for example, that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year). We have also been keeping an eye on insider trading activity, however. While insider selling is often rational in order to realize the benefits of diversification, insider purchases increase company-specific risk and so in theory should generally occur when an insider is particularly confident in the stock price. Studies in fact show that stocks bought by insiders exhibit a small outperformance effect (learn more about studies on insider trading). Here are five stocks that insiders have bought recently:
A Board member purchased 5,000 shares of Express Scripts Holding Company (NASDAQ:ESRX) at an average price of $59.58 per share. Express Scripts had made our list of the most popular healthcare stocks among hedge funds for the fourth quarter of 2012 (find more healthcare stocks hedge funds loved). Revenue and earnings growth rates are temporarily high as the company regains much of the business it lost during its dispute with Walgreen Company (NYSE:WAG). Wall Street analysts estimate $4.27 in earnings per this year, essentially equal to an annualization of Q4 2012 and implying a current-year P/E of 14. We would be interested in taking a closer look at the company.
Simon Property Group, Inc. (NYSE:SPG), a real estate investment trust which is a leader in owning shopping malls and other commercial property, has also been seeing insider buying. Real estate investment trusts must pay out much of their taxable income in order to maintain their tax status, though while Simon’s yield is about 3% this is lower than some of its peers and certainly lower than can be found in other segments of the REIT landscape. Funds from operations have been increasing though we would be a bit concerned as to how dependent the company is on consumer demand.
See three more stocks insiders have been buying, including one Warren Buffett likes: