Should You Imitate The Insider Purchase At Safeway Inc. (SWY)?

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Safeway Inc. (NYSE:SWY) senior vice president David Bond purchased 5,000 shares of the company’s stock on July 22nd, according to a Form 4 filed with the SEC. The filing now places Bond’s direct holdings of the grocery store at about 31,000 shares in addition to about 5,500 shares in his 401k. In Insider Monkey’s analysis, stocks bought by insiders tend to narrowly outperform the market in the future (read our analysis of studies on insider trading) and this makes sense since insiders should be unlikely to buy shares unless they are confident in the company’s prospects (otherwise they would instead choose to diversify their wealth and reduce company-specific risks).

Safeway Inc. (NYSE:SWY) is off its highs for the year, but is still up about 40% since the beginning of 2014. This has placed its market capitalization at $6.1 billion, or 12 times the company’s trailing earnings. The company recently reported that despite lower sales, it has managed to increase its margins with the result being that income from continuing operations is tracking about 20% higher than a year ago. The current valuation is low enough that even low growth from Safeway Inc. (NYSE:SWY) going forward could make it attractive, though of course the apparent strength of the company’s recent results has come from shedding less lucrative operations and so improved earnings might not be sustainable. Wall Street analysts do expect a small decrease in adjusted earnings per share next year, for a forward P/E of 13, and many market players are bearish ont he company with over 20% of the float held short.

Safeway Inc. (NYSE:SWY)In addition to insider trading activity, Insider Monkey also tracks quarterly 13F filings from hundreds of hedge funds and other notable investors. We’ve found that the information in these filings can be useful in helping develop investment strategies (for example, the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year) and also for tracking interest in individual stocks over time. According to our database, billionaire Ken Griffin’s Citadel Investment Group owned 2.8 million shares of Safeway Inc. (NYSE:SWY) at the end of the first quarter of 2013 (see Griffin's stock picks).

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