We track insider purchases and sales in our database of insider trading filings. While insider sales often aren’t necessarily bearish signals, since it makes sense for insiders to diversify their investments away from the company which employs them, a purchase should signify that the insider believes particularly strongly that the stock will do well. Of course, insiders aren’t always correct but studies do show that stocks bought by insiders outperform broader market indices (read our analysis of studies on insider trading). Investors can therefore treat insider purchases similarly to a stock screen and do more research on any companies which seem like good values. Here are five stocks that insiders have bought recently:
A Board member at Apache Corporation (NYSE:APA) bought 10,000 shares on March 26th at an average price of $74.48 per share. Earlier in March another Apache Corporation (NYSE:APA) insider had been buying the stock; these consensus insider purchases, according to studies, are particularly bullish signals. In the fourth quarter of 2012 Apache Corporation (NYSE:APA) experienced a significant decrease in earnings versus a year earlier. Wall Street analysts are expecting net income to improve considerably over the next couple years: the current market capitalization of $29 billion represents a trailing P/E of 15 but is only 7 times forward earnings estimates.
Kohl’s Corporation (NYSE:KSS) was another stock seeing insider buying as a Board member directly purchased 2,500 shares of stock for $45.38 per share. The department store’s same store sales growth was essentially flat in 2012 compared to 2011, and earnings dropped 16%. As a result while the earnings multiples are low- specifically, Kohl’s Corporation (NYSE:KSS) trades at 11 times trailing earnings- we would hesitate to consider it a good value and think that investors should look at its peers instead. Anthony Bozza’s Lakewood Capital Management, a hedge fund with about $1 billion in AUM, owned 770,000 shares at the end of December (find Lakewood’s favorite stocks).
A vice president at Ultra Petroleum Corp. (NYSE:UPL) who had previously bought shares in early March bought an additional 3,000 shares on April 1st. Over 80% of Ultra’s revenue comes from natural gas- as opposed to Apache Corporation (NYSE:APA), which derives about that share of its revenue from oil sales- and so the company has been hit hard by low natural gas prices. Ultra Petroleum Corp. (NYSE:UPL) was barely profitable in 2012 even after adding back impairment charges, and revenue was down 24%. Marathon Asset Management reported a position of 2.5 million shares at the end of the fourth quarter of 2012 (see Marathon’s stock picks).
$4.9 billion market cap telecom company Windstream Corporation (NYSE:WIN) had several company officers buying shares in the last month. Windstream Corporation (NYSE:WIN) currently pays a quarterly dividend of 25 cents per share, which at current prices makes for a dividend yield of over 12%. The stock price is down by a larger amount than that in the last year, and the dividend itself is not as solid as one would find at larger telecom companies such as AT&T (NYSE:T), but it is certainly high enough that income investors may be willing to take on the risk. Cash flow from operations was $1.8 billion in 2012, though most of this cash was used on capital expenditures.
CEO James Hooke of Macquarie Infrastructure Company LLC (NYSE:MIC) purchased over 13,000 shares of stock on March 28th for a little over $51 per share. Macquarie Infrastructure Company LLC (NYSE:MIC) is another stock which should get some attention from income investors, with a dividend yield of 5.1%. However, records show that the company ceased paying dividends for some time during the financial crisis, and even after they resumed it took some additional time for them to rise back to 2008 levels. So as with Windstream investors in search of yield should be cautious- it might be worth looking for lower-yield investments in more reliable companies.
Disclosure: I own no shares of any stocks mentioned in this article.