Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Time to Go Long These Three Stocks? Insider Buying Metric Suggests So; Valeant Pharmaceuticals Intl Inc. (VRX) Among Them

Page 1 of 2

All major U.S. stock indexes closed sharply higher on Thursday, thanks to the European Central Bank’s hints at more economic stimulus measures at its December meeting and to a handful of fresh earnings reports. The Dow Jones Industrial Average gained 320.55 points or 1.87% yesterday, formally buzzing off the correction territory. The Dow closed at 17,489.16 on Thursday, which also marks its highest close since mid-August. Meanwhile, the S&P 500 advanced by 3.57 points or 1.66%, mainly dragged by the struggling healthcare stocks. Leaving the statistics aside, some corporate insiders have been purchasing more stock lately, which could point to the fact that they expect their companies’ stock to appreciate in the upcoming future. Generally, insider buying is quite straightforward to interpret, as insiders tend to buy shares expecting them to go up in price. Even so, there might be more sophisticated reasons on why insiders buy stock, so one should closely examine each insider’s move prior to jumping onto the market. Having this in mind, the following article will discuss the insider buying activity at three companies, one of which represents a well-known struggling pharma company.

Gilead GILD pharmacist store examing pharmaceutical stocks medical

kurhan /

Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 102% over the ensuing 3 years, outperforming the S&P 500 Index by more than 53 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.

Let’s kick off our discussion by looking into the insider buying activity at pharmaceutical giant Valeant Pharmaceuticals Intl Inc. (NYSE:VRX). Director Ronald H. Farmer purchased 1,500 shares on the Toronto Stock Exchange this Wednesday at prices of CAD$193 (~USD$147.75) and CAD$158.79 (~USD$121.56). Following the transaction, the Director owns 15,532 shares. The shares of the pharma company have lost nearly 50% over the past month, as a result of the serious pressure over drug pricing. Earlier this week, well-known short-seller Citron Research accused Valeant Pharmaceuticals Intl Inc. (NYSE:VRX) of using specialty pharmacies to puff up revenue, which put even more downward pressure on the stock (see details). The company’s management denied the allegations made, but could not put a halt to the massive sell-off of its shares. However, the pharma company has the ability to alleviate all the concerns around the company in a conference call on Monday, which is set to lay out facts regarding the allegations made by Citron Research. Bill Ackman’s Pershing Square was the top shareholder of Valeant Pharmaceuticals Intl Inc. (NYSE:VRX) within our database at the end of the second quarter, holding 19.47 million shares.

Follow Valeant Pharmaceuticals International Inc. (NYSE:VRX)
Trade (NYSE:VRX) Now!

The next page will discuss the insider buying activity at other two companies.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!