Is it Time to Join the Smart Money?
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.
Opko Health (NYSE: OPK) is a diversified medical company run by Chairman, CEO, and major shareholder Dr. Phillip Frost. On Apr. 13, Dr. Frost bought yet another 30,000 shares, bringing his total ownership of OPK to just over 111 million shares or approximately 38% of the total shares outstanding as of the most recently reported quarter. He obviously is very bullish on OPK, however, the company’s fundamentals are still questionable as it lost just under $9 million in net income the past twelve months and is currently sporting negative profit and operating margins of 47%.
I definitely wouldn’t short the stock and may in fact go long eventually since this consistent insider purchasing is very rare, but I personally have no idea on the viability or probability of OPK’s products and see this purely as an investment in Dr. Frost, if one chooses to buys shares. An investment that makes more sense to me is one like Pfizer (NYSE: PFE) with its consistent 4% yield and management further unlocking shareholder value by selling its nutrition unit for approximately $12 billion in cash to Nestle.
Cracker Barrel Old Country Store (NASDAQ: CBRL) had yet again an investor’s menu special with some more notable insider buying on April 16-18 by major shareholder and value investor Sardar Biglari’s investment vehicle, Biglari Holdings (NYSE: BH), gobbling up another 43,788 shares and bringing its total ownership to approximately 3.8 million shares or approximately 17% of the total company.
Unfortunately, recently 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 toward a take-over premium. However, the company still has a respectable 1.8% dividend yield, impressive returns on equity of 28.3% the past twelve months, and an astute investor here putting his money where his mouth is and that’s always nice to see.
As always, respectful comments and questions are welcome below on the message board.
Motley Fool newsletter services recommend Biglari Holdings, and Pfizer. The Motley Fool owns shares of Biglari Holdings. Prohomes 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.