Our database of insider trading filings allows us to pick out companies that have seen recent insider purchases- studies show that on average stocks bought by insiders tend to beat the market– and take a brief look at the company to see if it might be worth investigating further. It’s impossible to buy every stock that insiders are buying, but it’s certainly possible to use insider buying as a screen to identify potential stock picks. Here are five stocks that insiders have been buying recently:
The former CEO of Dean Foods Company (NYSE:DF), who currently manages spinout WhiteWave but still sits on Dean’s Board of Directors, bought 10,000 shares of Dean at an average price of $17.25. The spinout makes comparisons to a year ago difficult, but Wall Street analysts apparently expect improvement at the business in 2013 as their forward earnings estimates- which imply a P/E of only 13- depend on a better bottom line than the company reported last quarter. Renaissance Technologies, whose success since inception has made founder Jim Simons a multi-billionaire, reported a position of 2.6 million shares at the end of the third quarter (see more stock picks from Renaissance Technologies). We’re not sure that Dean is a better buy than other packaged food companies.
Frank Laukien, the CEO of Bruker Corporation (NASDAQ:BRKR), increased his holdings of the company by buying 50,000 shares on December 7th at about $14 per share. Bruker provides scientific and technical instruments. Revenue and earnings were up in the third quarter of 2012 compared to the same period in 2011, after having been down in the first six months of the year. Value investor Joel Greenblatt initiated a position in Bruker between July and September (check out Greenblatt’s favorite stocks). Bruker trades at 24 times trailing earnings, and even though last quarter was a strong improvement we think that it’s probably best to watch the stock for now and wait for continued improvements before buying.
A Board member at NuStar GP Holdings, LLC (NYSE:NSH), which serves as the general partner for pipeline operator NuStar Energy L.P., bought 28,600 shares of the LLC’s stock at about $27 per share. The Board member, William Greehey, has purchased over 200,000 shares since the beginning of November. The GP- which has a market capitalization of $1.3 billion- pays a high dividend yield, and has a good record of increasing dividend payments. It might be a better income buy than many other pipeline companies, though of course it’s important to check that there won’t be significant dividend cuts. The stock has come down in price this year.
$890 million market cap biotechnology company Exelixis, Inc. (NASDAQ:EXEL) had the Chief Medical Officer buy 25,000 shares of stock at an average price of $4.39. The development-stage Exelixis is unprofitable on a trailing basis and is not expected to have positive profits next year either. While the insider purchase would normally be a good sign, the stock is widely shorted (the most recent data shows that 44% of the outstanding shares are held short) and we’d have to think that a number of investors have concluded that the stock is overvalued. We would avoid it.
Celsion Corporation (NASDAQ:CLSN), a $310 million market cap drug developer (on average, over a million shares have been traded per day over the last three months, so there should be plenty of dollar volume), was another stock seeing insider buying. Max Link, a Board member, bought 14,000 shares on December 10th at an average price of $7.60 per share. It’s another development stage company, and also has a number of shorts, but the stock price has risen over 300% in the last year. Investors who are more familiar with healthcare might want to look at it, but again we’d be too wary of recommending a negative-earnings stock that many other market players are shorting.