Corporate insiders have material non-public information, and they sometimes trade based on such information. Other times they have an edge because they know their companies and industries better than virtually all other investors. We believe that by imitating the stock picks of the insiders, investors are more likely to beat the market in the long term.
Below we compiled a list of oversold stocks insiders are bullish about. All stocks have market cap over $2 billion, lost at least 20% over the past three months, and most of them were purchased by multiple insiders over the past three months.
Molycorp, Inc. (MCP): Molycorp is a rare earth oxide producer in the Western hemisphere and owns a rare earth project outside of China. MCP was purchased by one insider and lost 30.20% over the past three months. Mark Smith bought 4,200 shares at $59.02 on August 15. MCP is now trading below $40 per share. It has a market cap of $3.3B and a P/E ratio of 155.72. D. E. Shaw had $30 million in MCP. (see our 2010 article about insider trading in Molycorp)
Alpha Natural Resources, Inc. (ANR): Alpha is a coal supplier in the United States. ANR was purchased by two insiders and lost 28.01% over the past three months. Michael Peelish, EVP and CAO at the company, purchased 1,700 shares at about $33 on August 15. Four days earlier, Michael Quillen, director at Alpha Natural Resources, also purchased 70,000 shares at about $30. Now ANR is trading at $23.93. It has a market cap of $5.4B and a P/E ratio of 58.37. Glenn Russell Dubin had over $300 million invested in ANR. John Paulson and D. E. Shaw also both had over $100 million of ANR shares.
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