One of my weekly rituals is to study insider activity through the SEC’s Form 4 filings.
Corporate executives and board members (“insiders”) are required to fully disclose their stock purchases pursuant to the Securities Exchange Act of 1934 and the Investment Company Act of 1940.
Whether you are taking a sector view or considering investment in a single company, learning to read the SEC filings can be a powerful resource and strengthen your overall investment thesis.
Here are three large insider purchases ($2 million in total) that caught my eye in recent days:
Lennar Corporation (NYSE:LEN) builds affordable, move-up, and retirement homes in Florida and throughout the United States. Shares of the Miami, FL, based company have fallen 12% year-to-date as the high valuations within the homebuilding sector have undergone a healthy correction.
Back on June 25, Lennar Corporation (NYSE:LEN) reported second-quarter earnings of $0.61 per share, nearly double the $0.33 expected by investors. Author’s Note: The $0.61 figure includes a one-time $0.18 profit from a deferred tax asset valuation; exclude this and the company earned a more reasonable $0.43 per share.
On a fundamental basis, revenue of $1.43 billion exceeded the $1.33 billion consensus. Home deliveries rose 39% year-over-year, with 4,464 homes delivered during the March 1-May 31 period. The company maintains an impressive backlog of 6,163 homes, a backlog dollar value of $1.9 billion for long-term investors.
Following the Q2 earnings report, board member Jeffrey Sonnenfeld purchased 3,345 shares of Lennar Corporation (NYSE:LEN)for $37.41 per share. The transaction value exceeded $125,000 when the stock was bought on June 27. Sonnenfeld is a senior dean and professor at the Yale School of Management in New Haven, CT. He previously served as a full tenured professor at Emory University and Harvard University for two decades.
While the homebuilding sector is expensive overall, Lennar Corporation (NYSE:LEN) trades at a reasonable 18x price-to-earnings. Furthermore, the company’s gross margin should expand in the second half of 2013 based on a strong backlog and increased efficiency. I recommend Lennar Corporation (NYSE:LEN) with a $48 price target in twelve months.
Management consulting firm
The $50 billion Accenture Plc (NYSE:ACN) staged an impressive rally in 2013 before the company mis-stepped at the end of June. Shares advanced 20.6% through June 27, handily outpacing the S&P 500’s return of 13.1% during the same time period.
Management reported Q3 earnings on June 27 after the market closed and provided a disappointing outlook. Accenture Plc (NYSE:ACN) reduced its full-year earnings view to $4.18-$4.22 from a previous $4.24-$4.32. In particular, Q4 revenue guidance has been cut to $6.7 billion to $7 billion from Wall Street’s $7.36 billion estimate.
Shares of Accenture Plc (NYSE:ACN) fell a massive $10 on the news, causing the stock to lose 12.5% of its market value in a single trading session. Accenture Plc (NYSE:ACN) CEO Stephen Rohleder stepped in following the brutal sell-off, buying 20,000 shares of his company’s stock for $71.99 per share.