Will you invest your money in a stock if you are convinced it will go down? To most people the answer to that question would be an instantaneous ‘no’. That is the whole logic behind investing on the basis of insider trades, an insider who usually has more information regarding a company than a regular investor, will never put his or her money if the stock is about to go down. Steelcase Inc. (NYSE:SCS) and MVC Capital, Inc. (NYSE:MVC) are two companies that have recently witnessed purchase by insiders. However, to invest on the basis of insider trades one needs o first look at the finer print.
Steelcase Inc. (NYSE:SCS) is a $1.89 billion market cap furniture manufacturer and retailer. On October 9, David R Hoover, a director of Steelcase Inc. (NYSE:SCS), purchased 5,000 shares at an average price of $15.31 per share. Including this purchase, Mr. Hoover now owns 28,782 shares. For the second quarter of 2014, Steelcase Inc. (NYSE:SCS) declared revenue of $786.7 million and adjusted EPS of $0.27, compared to revenue of $757.6 million and adjusted EPS of $0.24 per share in the same quarter last year. The company currently trades at roughly 13.5 times its expected earnings.
Joel Greenblatt’s Gotham Asset Management and Chuck Royce’s Royce & Associates are bullish on the stock, increasing their stakes by 34% to over 1.2 million shares and by 11% to over 787,000 shares respectively during the second quarter of 2014. The street is also bullish on the stock, the consensus rating among analysts being ‘Overweight’ with an average price target of $19.
MVC Capital, Inc. (NYSE:MVC) is a $244 million market cap, externally managed business development company. On October 8 & 9, Robert C Knapp, a director of MVC Capital, Inc. (NYSE:MVC), bought 28,018 shares of the company at an average price of $10.985 per share. With this purchase, Knapp’s total holding in the company’s stock now stands at over 372,000 shares. For the third fiscal quarter ended July 31, 2014, the company reported operating income of $5.016 million and Net Asset Value (NAV) per share of $15.86, compared to net revenue of $7.24 million and NAV per share of $17.36 in the same period, last year. The company is relatively inexpensive to its peers as it trades at 8.73times its earnings, while the industry average P/E is 11.29.
Phillip Goldstein, Andrew Dakos and Steven Samuels’ Bulldog Investors and Roger Keith Long’s Otter Creek Management are two institutional investors that are bullish on the stock. During second quarter, Bulldog Investors raised its stake by 10% to over 1.4 million shares and Otter Creek Management raised its stake by 41% to 350,000 shares. Analysts are generally positive about the stock, with the consensus rating being ‘Buy’ along with an average price target of $15.75.
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