Insider Siren: Should We Follow Them?
Ali is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Investors are typically always on the hunt to find stocks that outperform the general market. In these turbulent times, that is much easier said than done. However, one screening tool that has proven to be effective in determining whether a stock is moving higher is insider buying due to one simple reason: they buy stocks, just like us, to make more money. In addition, they arguably have the best view of the company being a part of the day-to-day operations and/or have a large investment of their own which they like to see increase in value. Below are a couple stocks with notable insider buying.
Unfortunately every “Fool” gets older and a lot of us may move to a nursing home as a means to best enjoy our twilight years. This is where Sunrise Senior Living (UNKNOWN: SRZ.DL) comes into play operating 316 senior living communities as of June 30, 2011 (274 in the United States, 27 in the United Kingdom, and the remaining 15 in Canada “eh” (my apologies for trying to be funny J). While one would think this company has great prospects with the aging baby-boomers, the stock has performed less than beautifully recently falling over 80% the past five years and approximately 40% in the last year alone. Ouch! However, major shareholder Carlson Capital is exhibiting bullishness in SRZ by upping it’s already sizeable ownership stake and buying collectively from Apr.9-11 163,736 shares and now owns approximately 8.1 million shares equating to 14% of the total firm. I see the company had a big ten cent earnings beat in their most recently reported quarter and trading comparatively cheap at just over one-half times sales which may have offered some reasons for Carlson’s strong conviction. However, the company still missed the previous three quarters earnings estimates before that and one quarter in my book doesn’t start a trend. I think investors interested in this space would be better served for now investing in Assisted Living Concepts (NYSE: ALC) which has a more consistent profit history, far smaller debt load, and attractive 2.4% dividend yield.
Nationwide restaurant operator Cracker Barrel Old Country Store (NASDAQ: CBRL) also had some notable insider buying on Apr. 10 by major shareholder and value investor Sardar Biglari’s investment vehicle, Biglari Holdings (NYSE: BH) Biglari gobbled up 73,100 shares and brought its total ownership to over 3.5 million shares, or approximately 16% of the total company. Unfortunately, CBRL management just initiated a poison pill to prevent any shareholders from accumulating more than a 20% stake, so at least for the moment, shareholders should put less of a chance towards a take-over premium. However, the company still has a respectable 1.8% dividend yield, impressive returns on equity of 28.3% over the past twelve months, and a very intelligent investor here putting his money where his mouth is and that’s always nice to see.
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