Economic theory suggests that it is rational to diversify one’s wealth, and one application of this theory is that company insiders should not buy stock unless the expected gains from the stock are high enough and high confidence enough to offset this incentive. Studies do in fact show a small amount of outperformance by stocks bought by insiders (read our analysis of studies on insider trading). We provide brief coverage of insider purchases so that investors can decide whether or not a particular stock is worth further research. Here are five stocks which insiders have bought recently:
An insider at The Boeing Company (NYSE:BA) purchased 1,500 shares at an average price of $91.59 per share. The Boeing Company (NYSE:BA)’s revenue and operating income were slightly down in the first quarter of 2013 versus a year earlier, with earnings only rising on a lower effective tax rate. We track quarterly 13F filings from hedge funds and other notable investors as part of our work developing investing strategies (we have found, for example, that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year) and can see that billionaire Ken Griffin’s Citadel Investment Group built a large position in Q4 2012 (see Griffin’s stock picks). We’d warn potential investors that there has also been a high volume of insider selling recently at The Boeing Company (NYSE:BA), though there is the diversification incentive to keep in mind; the stock is also up about 20% year to date.
A Board member at Philip Morris International Inc. (NYSE:PM) disclosed a purchase of 1,000 shares on April 26th. This same insider has been a fairly prolific buyer of Philip Morris, with purchases in February of this year and November and August of 2012. Check out our database of insider purchases at Philip Morris. The cigarette company pays a dividend yield of 3.6%, which is high although it is a lower yield than can be found at some industry peers. Recent financial reports indicate that business is essentially flat, even though in theory a more international focus should give Philip Morris more growth potential than some other cigarette companies.
Gold miner Newmont Mining Corp (NYSE:NEM) had a trust related to the company’s new CEO (and former COO) buy 3,000 shares at prices close to $33. Gold miners in general are off to a bad start this year; Newmont Mining Corp (NYSE:NEM) saw a 41% decline in its net income last quarter compared to the first quarter of 2012. With gold prices falling even lower in the past couple months, it as well as the rest of the industry have seen their stock prices fall considerably year to date. First Eagle Investment Management reported a position of 6.3 million shares in Newmont Mining Corp (NYSE:NEM) at the end of December (research more stocks First Eagle owns).