U.S equities closed in the red on Monday, pushing both the NASDAQ and the S&P 500 into negative territory for the month of February. The two indexes registered their third losing months in a row, a streak not seen since a rough five-month streak that ended in September 2011. However, the Dow Jones Industrial Average gained 0.3% in February, after plummeting by 5.5% in January. The S&P 500 has also lost 5.5% year-to-date, after declining by 0.4% in February. The Chicago Board Options Exchange (CBOE) Volatility Index, which is known as the “fear gauge”, jumped above the 20-level on Monday, suggesting that the market is experiencing a great deal of short-term fear and stress. Nonetheless, recent U.S economic data suggests that the nation’s economy continues to be strong, which makes us think that U.S equities will most likely embark on a turnaround in the near future should the economy keep growing. Individual investors are definitely seeking bargains in the market at the moment, and insider buying executed by downtrodden companies’ executives might be the perfect place to begin looking for bargains. The Insider Monkey team analyzed a bunch of Form 4 filings submitted with the SEC this week and identified three companies with noteworthy insider purchases. Two of these stocks in particular seem to represent attractive investment opportunities.
Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that imitating the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012 (read more details here).
Let’s begin our discussion with Ur-Energy Inc. (USA) (NYSEMKT:URG), which recently had one of its insiders purchase a sizable block of shares. Chairman and Chief Executive Officer Jeffrey T. Klenda bought 1.00 million shares on February 17 at a purchase price of $0.50 per share, boosting his overall holding to 2.83 million shares. This block of shares was acquired through a bought deal financing, under which the company sold 12.92 million common shares for $0.50 per common share. The exploration stage mining company will use the net proceeds from the offering to advance its operations and development of the Lost Creek Project, which is an in-situ recovery (ISR) uranium mine, as well as pay ongoing debt service obligations and cover general corporate expenses. Ur-Energy Inc. (USA) (NYSEMKT:URG) sold 925,000 pounds of U3O8 during 2015 at an average price of $45.20 per pound, compared with 517,760 pounds sold during 2014 at an average price of $51.22. The company’s gross profit from uranium sales totaled $12.5 million for 2015, up from $11.5 million reported for 2014. Ur-Energy’s financial performance was impacted by the low spot price environment. Meanwhile, the shares of Ur-Energy have lost 47% over the past 12 months, after declining by 29% year-to-date. The average spot price per pound of U3O8 for the week that ended February 22 reached $33.50, so the company plans to maintain production at levels consistent with its 2016 contractual sales obligations should the low spot price environment stick around. This means that Ur-Energy will sell roughly 662,000 pounds at an average price of $47.61 per pound in 2016. Ken Griffin’s Citadel Advisors acquired a new stake of 208,511 shares in Ur-Energy Inc. (USA) (NYSEMKT:URG) during the December quarter.