Studies show that stocks bought by insiders narrowly outperform the market (read our analysis of studies on insider trading). We think that this is because insiders should tend to buy the stock when they are confident in the company’s prospects- after all, it is their own money they are risking rather than diversifying their wealth among other options. Investors cannot imitate every insider purchase, so we recommend treating these events similarly to a stock screen: as triggers to take a brief look at a company to see if it is worthy of further research. Here are five stocks insiders have reported buying recently:
A Board member at Time Warner Inc (NYSE:TWX) directly purchased 3,000 shares of stock on August 9th. The large media and entertainment company’s revenue was up 10% in the second quarter of 2013 versus a year earlier, with net margins expanding as well. The company also plans to spin out its publishing business, which could provide further upside for shareholders. At 17 times trailing earnings, Time Warner Inc (NYSE:TWX) trades about in line with its peers.
In addition to insider trading activity, Insider Monkey also tracks quarterly 13Fs from hundreds of hedge funds and other notable investors in our database. We’ve used this information to develop investment strategies; for example, the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year (learn more about our small cap strategy) with our own portfolio based on these findings seeing an excess return of 33 percentage points in the last 11 months. We can also use our database to track hedge fund interest in individual stocks, and can see that billionaire Andreas Halvorsen’s Viking Global owned more than $1 billion worth of Time Warner Inc (NYSE:TWX) as of the end of March (see Halvorsen’s stock picks).
A senior vice president at Avon Products, Inc. (NYSE:AVP) bought 12,000 shares of the beauty and personal products company earlier this month. Recent results have been troubling for the company, as North American operations have held back earnings, but Avon Products, Inc. (NYSE:AVP) is seeking to improve by selling its underperforming jewelry business. The forward P/E here is 16 as markets look for earnings growth following the completion of this sale. D.E. Shaw, a large hedge fund managed by billionaire David Shaw, had been buying Avon Products, Inc. (NYSE:AVP) in Q1 2013 (check out more stocks D.E. Shaw was buying).