We like to keep track of buying and selling by company insiders, particularly when insiders purchase a stock. Because insiders’ income often depends on the company’s prospects, and in other cases they have some of their wealth tied to the company already, the rational thing is to invest elsewhere and diversify- unless the insider is so confident that the expected rise in the stock trumps the benefits of diversification. Insider purchases should therefore serve as a bullish signal, and according to academic research this tends to be the case on a statistical basis (read our analysis of academic studies on insider trading). Here are some stocks that insiders have been buying recently:
Richard Emmett, a Board member at Francesca’s Holdings Corp (NASDAQ:FRAN), bought 5,000 shares of the stock on September 11th at an average price of $29.01. This purchase is particularly interesting because the company’s president, Neill Davis, also bought shares the previous week (read more about the $700,000 purchase and see more analysis of the company). This means that Francesca’s is seeing consensus insider buying. Did you see our analysis of academic studies on insider trading earlier? If not, here’s something you missed: consensus insider buying is a particularly bullish sign.
Board member Kathleen Behrens of Sarepta Therapeutics Inc (NASDAQ:SRPT) purchased 17,500 shares of the roughly $300 million market cap biotech company at an average price of $14.73 per share (it has plenty of liquidity; on average, over a million shares are traded daily). With the stock price currently just above $13, investors can buy at a considerably lower level than she did. The company has a drug, Eteplirsen, in phase 2 clinical trials for the treatment of a particular type of muscular dystrophy; several other drugs are in early stages of development. The stock is up 87% over the last year.
Another Board member- this one Jamba, Inc. (NASDAQ:JMBA)’s David Pace- thought his company was a buy. Pace invested about $100,000 in purchasing 40,000 shares. The shopping mall juice fixture is a small-cap company but like Sarepta has decent volume, averaging nearly a million shares traded per day over the last three months. Jamba is unprofitable on a trailing basis but the sell-side expects 10 cents per share in earnings for 2013, which implies a forward multiple of 25. Jamba has been growing its business recently- revenue rose 12% and earnings rose 17% in its most recent quarter compared to a year ago- but the pricing may still be a bit too high here. Jamba also has a beta of 3.2, indicating a good deal of exposure to the broader market.
CFO Michael Ashby of Calix, Inc. (NYSE:CALX) bought 50,000 shares of the broadband communications company on September 10th at an average price of $5.57 per share. Calix’s stock has fallen 53% since a year ago, and this decline may have been warranted as revenue fell by a double-digit percentage last quarter versus the same period in the previous year. The company is expected to squeak into profitability this year and generate EPS of 36 cents for 2013. Assuming the sell-side is correct in this projection, the company is trading at 17 times forward earnings.
Finally, EnerNOC, Inc. (NASDAQ:ENOC)– a $300 million market cap company (with nearly $3 million in average daily dollar volume over the last three months) which provides energy management services to commercial and industrial customers- saw Board member Arthur Coviello Jr. purchase 25,000 shares of the stock at an average price of $10.40 per share. This transaction more than doubled Coviello’s stake in the company. EnerNOC is expected to lose money this year (and it has done so in both quarters so far) but turn a small profit in 2013. Based on analyst expectations, the forward P/E is 40.