Recent insider buying activity has been reported in these three stocks. Would it be wise to follow the insiders?
Kaman Corporation (NYSE:KAMN) : The company engages in the international, commercial and military areospace business, as well as in industrial distribution.
On Mar. 1, Kaman Corporation (NYSE:KAMN) Chairman, President & CEO Mr. Neal Keating bought 2,000 shares of Kaman Corporation (NYSE:KAMN) at $34.90 each for a total purchase of $69,808.
The stock currently has a P/E of 18.23, slightly higher than the S&P 500 average of 17. However, when taking earnings estimates into account, the stock becomes more attractive, as the forward P/E is 13.62. The PEG is 1.22, which, although above 1, is still the lowest of the three stocks we’ll examine.
Analysts are slightly bullish on the stock: Kaman Corporation (NYSE:KAMN) has an average recommendation of 2.30 (overweight-hold), and an average price target of $40, which implies that the stock has a potential upside of 14.29% from current prices.
Kaman Corporation (NYSE:KAMN) pays a dividend of $0.64/share, which works out to a yield of 1.83%. The company has paid a dividend to its shareholders since 2012.
The stock is currently 9.37% off its 52-week high of $38.62. YTD, the stock price has gone down almost 5%. The price is currently 27% above the 52-week low of $27.57.
My take: The company’s business might suffer from reduced defense spending and sluggish industrial demand, but the company has beat earnings estimates, is well-managed and decently valued, and should perform well as fears from reduced military spending subside and industrial markets continue to recover. This could be a good long-term play, and investors could buy some shares at a discount if the price keeps falling in the short-term.
The Valspar Corporation (NYSE:VAL): The company manufactures and distributes a range of coatings, paints and related products.
On Feb. 25, director John Ballbach bought 1,246 shares at a price of $60 each for a total of $74,760.
With regards to valuation, the stock has a P/E of 19.63, which is above the market average, but below that of its main competitors. Forward P/E is 14.08, and the PEG is 1.47.
Analysts are slightly bullish: the mean recomendation is 2.30 (overweight-hold), and the average price target on the stock is $68.50, which implies that the stock price has an upside potential of 11.82% from current levels. Two analyst reports published in February (by Barclays and by Deutsche Bank), give the stock an equal weight/hold rating, and a price target of $67 and $68 respectively.
The Valspar Corporation (NYSE:VAL) pays a dividend of $0.92/share, which works out to a yield of 1.50%. The company has been paying a dividend to its shareholders since 1992.
The stock is 10% below its 52-week high of $68.17. 2013 started well for the stock, but, in mid-February, when earnings reports missed analyst estimates, the stock started going down, to the point where it has actually lost 1.83% YTD. The fact that insiders are buying now could suggest that the price drop has been an overreaction, and that the stock could actually outperform in the mid-term.
My take: While valuations, financials, and ratings are average, the insider buying could suggest that the stock has dropped too much, and that it is now time to buy on dips. As a stock closely linked to industrial production, it should follow industrial recovery quite closely. Hence, as the economy recovers, this stock should follow suit.
Apache Corporation (NYSE:APA) : The company explores, develops, and produces natural gas, crude oil, and NGLs, in North America, Europe, Egypt, Australia and Argentina.
On Feb 26th, Director Charles Pitman bought 350 shares at $73.60 each (total purchase value: $25,760). Four more insiders (including the president, the CEO, the EVP, and the SVP) exercised their options to buy more shares of the company during February.
Apache Corporation (NYSE:APA) has a P/E of 15.14, which is slightly below the market average. The forward P/E, however, looks much more attractive, at just 6.99. When factoring in growth, the PEG looks a bit too high: 2.29.