Big Insider Buys In These 3 Companies
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Although the technique is by no means perfect, many successful investors have enriched themselves and their clients by watching under-performing stocks for early signs of insider buying. Since sustained bouts of insider buying often serve as early indications that a company is about to report a blockbuster earnings year or pull its stock out of a long-term down trend, it is only natural for market-watchers to jump on these signals.
Of course, insiders buy shares of their own companies all the time. These days, most executives receive massive tranches of options as part of their non-monetary compensation packages. When they need money to make a down payment on a house, boat or plane, they often exercise these options and purchase their employer's stock at a discount. However, plenty of other executives and senior managers appear willing to pull the trigger on their own companies' stocks in the absence of such discounts. This is why recent spates of insider buying at Allscripts Healthcare Solutions (NASDAQ: MDRX), Allied Nevada Gold Corporation (NYSEMKT: ANV), and Akamai Technologies (NASDAQ: AKAM) are noteworthy.
About Allscripts, Allied Nevada and Akamai Technologies
Chicago-based Allscripts is a moderately sized health IT company that offers a wide range of products and services to its clients in the medical industry. It works primarily with medical clinics, hospitals, individual care providers and patients to offer responsive, high-tech solutions to the problems of modern healthcare delivery. Its signature product is an electronic health record system that integrates various aspects of individual patients' care regimens and creates synergies between healthcare workers to foster better outcomes. The company employs over 7,000 people and lost about $1 million on gross 2012 revenues of $1.5 billion.
Reno, Nevada-based Allied Nevada is a gold and silver mining and exploration outfit. The company's signature property is northern Nevada's Hycroft Mine. It also operates six other producing mines and 90 other sites that are in various stages of exploration and development. Allied Nevada employs about 470 people and earned $47.7 million on $214.6 million in gross 2012 revenues.
Cambridge, Massachusetts-based Akamai Technologies is a cloud-based provider of various technology and Internet Protocol services to businesses and consumers. The company's signature products include the Terra and Terra Alta lines of employee-interface programs that enable employees to connect securely with their employers and clients in remote locations. Akamai also develops website accelerators like Dynamic Site Accelerator and Aqua Ion. The company is a major player in the fast-growing mobile space and has developed a suite of products for that specific platform. Akamai employs over 3,000 people and earned $204 million on $1.4 billion in gross 2012 revenues.
Investors were shocked by the revelation that five separate insiders purchased nearly 120,000 shares of Allscripts during the second week of March. At a face value of about $5 million, this adds over 4 percent to the company's previous insider holdings. To make matters even more interesting, these insiders bought at an interim high: Allscripts has gained more than 50 percent since hitting a low near $9 in late December of 2012. The fact that insiders are purchasing at such high levels supports the case that Allscripts's bulls have been making for years.
Allied Nevada's Situation
Allied Nevada's insider buys are not quite as impressive: In March, three separate parties purchased 43,000 shares worth nearly $800,000 in the aggregate and exercised options worth about $250,000. Relative to the company's current insider share float of 6.7 million shares, these are not enormous transactions. However, the falling price of gold has subjected Allied Nevada to tremendous downward price pressure over the past several months. In fact, the company has lost more than half its value since the fourth quarter of 2012. Many Allied Nevada longs are hoping that these fresh insider buys signal the approach of a long-term stock-price bottom.
Finally, Akamai's CEO recently purchased 30,000 shares of his own company. Like the Allied Nevada purchases, this is not a huge investment relative to the 5.3 million shares that Akamai insiders currently hold. However, Akamai has been locked in a tight trading range of late and looks poised to break out. With a strong balance sheet and several solid quarters under its belt, it seems clear that the company's CEO is ahead of the curve.
Broader Outlook and Probable Next Moves
Of the three stocks mentioned above, Akamai Technologies seems to offer the most traditionally bullish signals. The company has a strong balance sheet and is showing strong technical movement near the top of a long-term range. By contrast, Allied Nevada has endured a harrowing six-month stretch that has seen its market capitalization slashed in half. Meanwhile, Allscripts looks like a toss-up: Whereas its insider buys were larger than those that lifted Allied and Akamai, it has already gained more than 50 percent in the space of a quarter and may be out of gas.
Looking more closely, it appears that all three of these companies have something to offer. Traders who wish to bet on a short-term resurgence in the price of gold would do well to add to their Allied positions at these levels. Those who believe in the power of the cloud should buy and hold Akamai here. For investors who wish to make a medium-term bet on the widespread adoption of electronic medical records, Allscripts is a foregone conclusion.
While managers and executives are not perfect, they are often privy to operational cues and information that regular investors do not get to see. As such, they often make informed investing decisions about their own companies. Investors who fail to look more closely at Allscripts, Akamai and Allied Nevada may well be shortchanging themselves.
Mike Thiessen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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!