At Insider Monkey, we track both insider purchases and filings from hedge funds and other notable investors as part of our work developing investment strategies; we have found, for example, that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy). Our analysis of studies on insider trading have also shown that stocks bought by multiple insiders tend to beat the market on average. Given the sheer number of insider purchases, however, we think that it’s best to treat consensus insider purchases similarly to a stock screen: review individual names meeting the criteria and decide whether or not they are worthy of further research. Here are five stocks which multiple insiders bought between late February and early April:
Our database shows consensus insider purchases of Apache Corporation (NYSE:APA) during the month of March, with the earliest buy during this period coming when the stock was valued just above $73. Since that time, the oil and gas company is up only slightly and it is still down 25% from its levels a year ago. The forward P/E is low, at 7, although oil and gas companies in general are trading cheaply and in Apache Corporation (NYSE:APA)’s case analysts are assuming considerable improvements in earnings. Citadel Investment Group, managed by billionaire Ken Griffin, was buying Apache during Q4 and closed December with 2.6 million shares in its portfolio (see Griffin’s stock picks).
Two Board members at The Cheesecake Factory Incorporated (NASDAQ:CAKE) bought the stock in late February at prices between $34 and $35 per share; the restaurant is now getting close to $40. Revenue was up 6% in the fiscal quarter ending April 2nd, which is the first quarter of Cheesecake Factory’s fiscal year, and the company experienced higher net margins as well with the result being a 22% rise in net income. The rise in the stock price may have carried the business outside of value territory, however: it is currently valued at over 20 times its trailing earnings, high for a table-service restaurant in this environment.
Multiple insiders have reported purchases at Diebold Incorporated (NYSE:DBD), with the earliest of these coming at prices of about $28.25 (about $1 below the current share price). The $1.9 billion market cap self-service kiosk and security services company stands out for a good dividend yield: 3.8% at current prices and dividend levels. Diebold is also looking at bit pricy with a trailing P/E of 24, but Wall Street analysts expect earnings to grow considerably over the next couple of years. Billionaire Mario Gabelli’s GAMCO Investors reported owning 3.5 million shares of Diebold at the end of December (find Gabelli’s favorite stocks).
Several insiders have added shares of high-yield telecom company Windstream Corporation (NYSE:WIN). At $8.45 as of this writing, the stock price is currently about even with where the first insiders started buying in early March. Windstream has been making quarterly dividend payments of 25 cents per share since 2006, which at current prices gives it a yield of over 10%, but financial performance has not been particularly strong. As a result the trailing P/E looks high and a number of market players are bearish judging by the fact that 13% of the float is held short. Income investors might consider Windstream but should be cautious in our view.
Disclosure: I own no shares of any stocks mentioned in this article.
