5 Stocks with Bullish Insider Sentiment
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Being informed of what insiders are doing with their company’s stock—whether it be buying or selling—can be predictive of how a company might perform in the future. Insiders generally have the most knowledge about a company and it is usually a bullish sign when an insider forgoes diversification to invest more money into the company he/she works for. Academic research has show that insider purchases are to be bullish signs for stocks. Given this, and our studies on insider trading, we track insider trading to help inform investors on key insider buys and sales, in hopes of identifying companies that might be poised for over- (or under-) performance in the future. Here are some of the stocks insiders have been purchasing of late.
Dr. Phillip Frost, CEO of Opko Health Inc. (NYSE: OPK), is back at it, adding almost 1 million shares since September 1. This increases his already large position in Opko— he now owns almost 40% of the company. Over the past week alone, Dr. Frost has purchased shares as high as $4.40, while the stock currently trades around $4.10—check out our other thoughts on Opko. The stock has underperformed year to date, down around 14%. The company also faces poor EPS estimates, expected to come in at negative $0.13 for 2012 and negative $0.11 for 2013. Although Dr. Frost has been snatching up Opko at these levels, the company appears to be getting ahead of itself, still trading at a P/S of 44, versus peers Alnylan Pharmaceuticals and Regeneron Pharmaceuticals, trading at 12x and 18x, respectively.
Starboard Value added over 740,000 shares of Wausau Paper Corp. (NYSE: WPP) over the past week. This puts Starboard’s Wausau ownership at over 11%. Starboard Value became Wausau’s largest shareholder in May 2011 in an effort to refocus the company. Since May 2011 the company is up 23%, versus only 8% for the S&P 500. Earlier this year, Wausau took part of Starboard’s recommendations to heart, selling off its premium and color paper division. As a result, profits are expected to be up in 2012 with the absence of the printing papers, which hurt EPS by $0.10 in 2011. Billionaire fund manager Steven Cohen is also a Wausau investor, owning a more modest stake of around 450,000 shares.
Abrams Capital Management, LLC recently increased its stake in Engility Holdings, Inc. (NYSE: EGL) to around 12.8%. Abrams now owns 2.1 million shares, with the recent purchases over the last few days being in the range of $17.59-$18.31. Abrams announced a 9.7% stake in Engility at the end of July, and since August 1 Abrams has increased its share ownership by 22%; over this same time period Engility is up 26%. The company recently announced a realignment of organizational structure, and thus next year revenues are expected to be down 12%.
Red Mountain Capital Partners, LLC bought over 200,000 shares of Nature’s Sunshine Prod. (NASDAQ: NATR), worth over $3.2 million, putting Red Mountain’s total ownership at over 1 million shares, over 7% owner of the company. Red Mountain also has two fund managers we track as fellow investors, both owning over 1 million shares and having over 6% of their 2Q 13F portfolio invested in Nature’s Sunshine—check them out here. Nature’s Sunshine sells its personal care and wellness products worldwide. For 2Q, the company reported $0.46 EPS versus $0.36 a year ago and consensus of $0.40. The company is expected to grow its EPS 7% this year, but trades at a trailing P/E of 13, compared to a forward P/E of 9.
Janus Capital Group Inc. (NYSE: JNS) announced a deal with Dai-ichi Life back in August that will allow Japan’s largest life insurer, to buy up to 20% of the company. Dai-ichi continued making good on this deal, adding 1.5 million shares this week, putting the Japanese life insurer’s stake in Janus up to 9.8 million and representing an over 5% stake in the company. Janus is up around 25% over a three-month period on the Dai-ichi news. The target range for Dai-ichi is at least 15% of Janus’ outstanding shares, but not over 20%. Janus has faced a slew of redemption requests, due to a lackluster performance. AUM for Janus fell 10% to $152 billion as of June 2012, down from $170 billion a year earlier. Other notable large shareholders are John Rogers of Ariel Investments, with 20.1 million shares, and Ken Fisher, with over 3 million shares—see all funds owning Janus.
All of the recent insider purchases we found came from insiders who have been bullish on their companies for sometime, with the exception of Janus. Dai-ichi’s interest is new and is expected to continue in the interim. Abrams’ interest in Engility is relatively new—since July—but the company may see more share price pressure until reorganization is fully in place in January 2013. Starboard appears to be taking a renewed interest in Wausau—seeing more value beyond what the company has tapped thus far. Opko has seen a run up in its shares of late, but the company’s CEO still thinks it’s a buy, while Red Mountain still sees value in Nature’s Sunshine, with its share price underperforming compared to its fundamentals. For a longer look at insider trading activity, check out Insider Monkey‘s comprehensive database.
This article is written by Marshall Hargrave and edited by Jake Mann. They don't own shares in any of the stocks mentioned in this article. The Motley Fool has no positions in the stocks mentioned above. 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.If you have questions about this post or the Fool’s blog network, click here for information.