China has taken aim at U.S President Donald Trump’s supporters with its list of 106 imported products from the U.S that will be hit with tariffs amounting to an additional 25% as a trade war escalates between the two countries. Among the affected products are soybeans, corn, beef, cigarettes, and automobiles, which has put varying amounts of pressure on U.S stocks related to those products.
Among the stocks that could be affected by a trade war are LCI Industries (NYSE:LCII) and American Woodmark Corporation (NASDAQ:AMWD), both of which received votes of confidence from insiders last week. Another stock getting the thumbs-up from insiders was Colony NorthStar Inc (NYSE:CLNS). We’ll look at those insider purchases in this article.
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LCI Industries (NYSE:LCII)
Who Bought Shares: Director James Gero
How Many Shares Were Bought: 10,000 @ $102.09 per share
Date of the Transaction(s): March 26
The director now owns 252,049 shares of LCI Industries (NYSE:LCII), which have been battered to the tune of 22% declines in 2018. The RV parts manufacturer grew revenue by 38% to $2.15 billion in 2017, but saw only modest growth in earnings of 3%. However, the latter figure was negatively impacted by a $13.2 million ($0.52 per share) tax charge.
Some of that revenue growth has been fueled by acquisitions, which LCI has continued to make in 2018, welcoming Taylor Made Group (the marine parts manufacturer, not the golf company) and the business assets of Hehr International into the fold this year. The acquisition of Taylor Made Group should provide some synergies for LCI, as well as giving it exposure to the marine industry.
Is LCI Industries (NYSE:LCII) Overvalued?: Northcoast initiated coverage of the stock back in January, giving it a $94 price target and a ‘Sell’ rating, citing the company’s premium valuation compared to its peers and the potential for wholesale demand of RVs to slide. LCI Industries currently trades at a P/E ratio of 19.3x, far higher than the industry average of 14x. However, LCI Industries (NYSE:LCII) is also delivering far more ROE than its industry rivals and doing so without taking on mounds of debt. Nonetheless, Northcoast analyst Seth Woolf advised clients to look to RV retailer Camping World Holdings Inc (NYSE:CWH) instead, stating that it should benefit from an “inventory glut” in the RV space.
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On the next page we’ll look at two other stocks that are undervalued according to company insiders.
American Woodmark Corporation (NASDAQ:AMWD)
Who Bought Shares: Director Vance Tang
How Many Shares Were Bought: 2,000 @ $97.55 per share
Date of the Transaction(s): March 28
Shares of American Woodmark Corporation (NASDAQ:AMWD) have been on a steep decline since February 22, falling by 29% to less than $100 per share. That prompted Director Vance Tang to make the first insider purchase of the company’s shares in over six years, lifting his position to 13,170 shares of the stock.
The manufacturer of bath and kitchen cabinetry and other related products widely missed estimates for its fiscal third-quarter EPS in early-March, with its adjusted EPS of $0.84 falling $0.13 short of the consensus. Revenue did come in higher than expectations at $293 million, topping estimates by $12.6 million.
American Woodmark Corporation (NASDAQ:AMWD) Falls to Pre-RSI Levels: The recent freefall has dragged shares back down to their November 2017 levels, just before American Woodmark Corporation (NASDAQ:AMWD) surged by 28% on December 1 after announcing that it would acquire private cabinet maker RSI Home Products in a deal valued at $1.08 billion.
The deal was likely seen even more positively than the 28% figure indicates, as American Woodmark released its fiscal second-quarter earnings on the same day, which missed estimates. Given RSI’s impressive $123 million in adjusted EBITDA in 2017, the acquisition was lauded by investors, with American Woodmark anticipating that its EBITDA margin would rise to 16% from just 12.3% as of the time of the deal.
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Colony NorthStar Inc (NYSE:CLNS)
Who Bought Shares: Director John Somers
How Many Shares Were Bought: 2,000 @ $5.66 per share
Date of the Transaction(s): March 29
Lastly is Colony NorthStar Inc (NYSE:CLNS), in which Director John Somers purchased 2,000 shares on March 29, lifting his stake in the REIT to 45,960 shares. The purchase comes less than a month after four other insiders made purchases in early-March following the stock’s latest implosion on March 1. Colony NorthStar Inc (NYSE:CLNS) shares have been crushed in 2018, shedding nearly half of their value.
Why Colony NorthStar Inc (NYSE:CLNS)’s Dividend Cut Was the Right Move: The mass exodus from the stock has been sparked by disappointing 2017 results and a massively slashed quarterly dividend, which the company cut to $0.11 per share from $0.27 per share. However, given shares’ recent freefall, the stock’s dividend yield is not far off where it began the year, and the savings could allow Colony NorthStar to instead buy back shares on the cheap, which could ultimately prove to be a far more effective use of that capital.
That’s exactly what the company plans to do, with the intent being to further deleverage and buy back shares in 2018, with those goals being further augmented by the sale of several non-core assets. President and CEO Richard Saltzman declared in a press release that the company expects to grow its dividend again in the future.
Disclosure: None
