Four Insider Buys That Might Indicate a Change in Direction

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The behavior of insiders is one of the more important trends to watch. When an insider buys or sells stock some investors downplay its meaning, and others weigh it heavily on their investment decisions. With that being said I am looking at four significant insider buys in the month of November that might indicate a spark in the fundamentals of the companies that are discussed below.

<table> <tbody> <tr> <td> <p>Company</p> </td> <td> <p>Ticker</p> </td> <td> <p># Insiders Who Bought</p> </td> <td> <p># Shares Purchased</p> </td> <td> <p>One-Month Return</p> </td> </tr> <tr> <td> <p>Molycorp</p> </td> <td> <p><span class="ticker" data-id="224343">(NYSE: <a href="http://caps.fool.com/Ticker/MCP.aspx">MCP</a>)</span></p> </td> <td> <p>5</p> </td> <td> <p>130,305</p> </td> <td> <p>(10%)</p> </td> </tr> </tbody> </table>

Molycorp as a stock has lost nearly 75% of its value in the last year. The stock has seen a consistently sharp downward trend. However, in November five insiders of the company must have determined there was value in the stock, as they aggressively bought shares. Yet despite these purchases the month of November results in a fairly large decline of 10% in shares of Molycorp. However, the stock did see gains in the second half of the month of 45%. The company has not announced any organizational changes or key developments to suggest future fundamental gains. Therefore, the gains were most likely attributed to the five different insiders who acquired shares, suggesting that better days might be ahead.

<table> <tbody> <tr> <td> <p>Company</p> </td> <td> <p>Ticker</p> </td> <td> <p># Insiders Who Bought</p> </td> <td> <p># Shares Purchased</p> </td> <td> <p>One-Month Return</p> </td> </tr> <tr> <td> <p>Western Union</p> </td> <td> <p><span class="ticker" data-id="209535">(NYSE: <a href="http://caps.fool.com/Ticker/WU.aspx">WU</a>)</span></p> </td> <td> <p>5</p> </td> <td> <p>53,660</p> </td> <td> <p>6%</p> </td> </tr> </tbody> </table>

After posting a horrendous quarterly loss and lowering its guidance, Western Union executives have been aggressively buying back shares of the company. Right now Western Union is trading with a near 30% loss since the end of October thanks to the loss following earnings. As a result, I suppose insiders believe the stock is undervalued. Or perhaps insiders know of an upcoming catalyst that will bring large gains. Either way, they are buying shares in a company that many of Wall Street’s best analysts have written off.  I suppose that in the next year we will see who is right, the insiders or the analysts.

<table> <tbody> <tr> <td> <p>Company</p> </td> <td> <p>Ticker</p> </td> <td> <p># Insiders Who Bought</p> </td> <td> <p># Shares Purchased</p> </td> <td> <p>One-Month Return</p> </td> </tr> <tr> <td> <p>AK Steel</p> </td> <td> <p><span class="ticker" data-id="202773">(NYSE: <a href="http://caps.fool.com/Ticker/AKS.aspx">AKS</a>)</span></p> </td> <td> <p>5</p> </td> <td> <p>129,000</p> </td> <td> <p>23.5%</p> </td> </tr> </tbody> </table>

Much like Western Union, insiders at AK Steel began to buy shares following news that took its stock lower. During the first half of November the stock saw a significant decline. This decline was caused by both conservative guidance and bond sales that include boosting the amount of stock outstanding by more than 20%. Yet despite these factors, insiders must believe shares are attractive, because following this news they began to buy.

<table> <tbody> <tr> <td> <p>Company</p> </td> <td> <p>Ticker</p> </td> <td> <p># Insiders Who Bought</p> </td> <td> <p># Shares Purchased</p> </td> <td> <p>One-Month Return</p> </td> </tr> <tr> <td> <p>Inphi Corporation</p> </td> <td> <p><span class="ticker" data-id="224668">(NYSE: <a href="http://caps.fool.com/Ticker/IPHI.aspx">IPHI</a>)</span></p> </td> <td> <p>3</p> </td> <td> <p>50,000</p> </td> <td> <p>11%</p> </td> </tr> </tbody> </table>

The 50,000 shares purchased by insiders were far less significant than the investments made by the other insiders on this list. However, it has sparked a recent rally of 21% during the last week. The company had seen a rough period over the last year. But with insiders buying some believe that a turnaround may be in effect.

Regardless of how you utilize the information above there is one fact you can’t deny: These insiders have knowledge of operational changes and or strength before it’s known to the public. Each of these companies has seen significant challenges over the last year, and insiders have not always been willing to buy. Therefore, investors must ask themselves why now? Most executives are selling shares before the fiscal cliff, but these insiders are willing to buy. Of course this information alone is not enough to initiate a long position, but it’s a good start, and should be part of your due diligence as we wait to see the future performance of these beaten down, but recently acquired stocks. 


BrianNichols has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Western Union. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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