Studies show that stocks bought by insiders narrowly outperform the market (read our analysis of studies on insider trading) with our explanation for this finding being that company insiders have to be more confident than usual to buy the stock rather than diversify their wealth. Because the effect is not enormously large, as well as because of the fact that there are too many insider purchases for an investor to imitate them all, we think it’s best to treat insider purchases similarly to a stock screen: a good way to identify interesting names for further research. Here are five stocks which insiders have bought recently:
An insider at Boston Scientific Corporation (NYSE:BSX), an $11 billion market cap medical device company, directly acquired 30,000 shares of stock on May 6th. At its current valuation Boston Scientific trades at 18 times forward earnings estimates; revenue fell 6% last quarter compared to the fourth quarter of 2012. We track quarterly 13F filings from hedge funds and other notable investors as part of our work researching investing strategies (we have found, for example, that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year), and can also use our database to see that billionaire Leon Cooperman’s Omega Advisors owned about 15 million shares of Boston Scientific Corporation (NYSE:BSX) at the end of December (see Cooperman’s stock picks).
A Board member at United States Steel Corporation (NYSE:X) disclosed a purchase of nearly 13,000 shares at an average price of $18.50 per share. Demand for steel has been low in the past couple years, and United States Steel Corporation (NYSE:X)’s earnings and stock price have suffered accordingly- in fact, it was unprofitable in the first quarter of 2013. We had noted in an earlier insider summary that there had been quite a bit of insider purchasing activity at Walter Energy, which is also tied to steel through its production of metallurgical coal. While we would not call the steel industry a value play at this time, it’s interesting that insiders at multiple companies related to the industry are bullish.
One of the members of BB&T Corporation (NYSE:BBT)’s Board of Directors roughly doubled her IRA’s holdings of the stock by purchasing over 3,800 shares of the $22 billion market cap bank. BB&T Corporation (NYSE:BBT) pays a dividend yield of 3% at current prices and dividend levels. The stock’s earnings multiples are also somewhat low, with trailing and forward P/Es of 13 and 10 respectively, though that isn’t out of the ordinary for bank stocks in the current market environment. We’d note that earnings came in over 40% lower in Q1 2013 versus a year earlier.