Should we Follow these Insiders and Buy?
Ali is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Insider buying is always a strong indicator that a stock is poised to move higher since they buy for only one reason: to make more money. Moreover, they arguably have the best view of where a stock is headed being a part of the day-to-day operations and/or having a large sum of money at stake. Below are a couple stocks with sizable insider buying.
Och-Ziff Capital Management (NYSE: OZM) is a publicly owned investment manager that has offices worldwide and invests in equities across the globe. The stock has been in the doldrums, down roughly 50% the past year and trading near its $6.56 52-week low. Nonetheless, Founder, CEO, and Chairman Daniel Och bought a massive 500,471 shares collectively from June 1-5, bringing his total ownership to just below 2 millions shares.
While this purchase is very encouraging and may signal better times ahead, exercise caution with the company sporting a negative book value of approximately $2.50/share, while sitting on a sizable debt load of approximately $500 million. To its credit, OZM has met or exceeded consensus analyst estimates in three of the past four quarters, but the company’s current balance sheet looks ominous.
Sonus Networks (NASDAQ: SONS) is a diversified communications company focused primarily on Voice over Internet Protocol (VoIP) solutions . The stock has seen better days and like OZM above sits a breath away from its $1.97 52-week low. However, major shareholder Empire Capital Management sits undeterred, and bought 400,000 shares on June 5, bringing their total ownership to approximately 33 million shares or approximately 12% of the total shares outstanding as of the most recently reported quarter.
While this bullishness is nice to see, the company has had its problems, losing approximately $7 million in net income the past 12 months and showing declining year-over-year revenue growth. The balance sheet is very solid though, showing no debt and approximately $1.15 in net tangible cash as the company has virtually zero with regards to goodwill or intangible assets.
The company has a rock solid balance sheet showing the stock trading at approximately 50% net cash and strong insider buying, plus it looks to have turned things around somewhat as they have either met or exceeded consensus estimates the past three consecutive quarters. Combined, that makes Sonus a reasonable buy.
As always, respectful comments and questions are welcome below on the message board.
Prohomes has no positions in the stocks mentioned above. 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.