While some stocks such as Apple Inc. (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB) have rallied recently as their results have impressed the market, other industries such as basic materials and even homebuilders (which are generally down so far this year after an excellent 2012) have done less well. In our coverage of insider trading activity, we’ve noticed a number of recent insider purchases at stocks in certain out of favor industries.
Studies show that stocks bought by insiders slightly outperform the S&P 500 on average (read our analysis of studies on insider trading). We think that this is because insiders would normally prefer to diversify their wealth; when they instead choose to increase their company-specific risk by buying more shares, chances are that this should be because they are particularly confident in the stock. Because of the small level of outperformance, investors can treat insider purchases similarly to a stock screen and perform further research on any names which seem interesting after a brief look at the company. Read on for our quick take on four stocks that insiders have reported buying recently.
Two limited partnerships connected to a member of the Board of Directors at Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), a natural resources company which also produces oil and gas following two recent acquisitions, purchased over 500,000 shares of the company’s stock. With copper and gold prices not doing that well year to date, Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX)’s earnings fell over 30% in the second quarter of 2013 versus a year earlier. Between poor market conditions and poor investor sentiment regarding the company’s acquisitions, the stock is down 16% year to date against a rising market. This has brought its valuation down to trailing and forward earnings multiples of 10 and 9, respectively, though of course future profits are dependent on commodity prices and on integrating its recent acquisitions. George Soros and Leon Cooperman are among FCX investors.
In addition to insider trading activity, Insider Monkey tracks quarterly 13F filings from hundreds of hedge funds and other notable investors as part of our work researching investment strategies (for example, we have found that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year). According to our database, billionaire John Paulson’s Paulson & Co. owned 9 million shares of Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) as of the end of March.