Why Are These Insiders Buying?
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In these unnerving times (for that matter all the time), finding ways to outperform the market 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 strong insider buying.
Mattress and home furnishing maker Tempur Pedic (NYSE: TPX) has some great products to help people get a better night’s sleep, which investors unfortunately need as the stock has lost a heart-wrenching 75% in the past two months. Undeterred though, Chairman Andrews McLane bought an impressive 112,000 shares equating to approximately $2.8 million worth of stock. This is even more noteworthy as it marks the biggest purchase by an insider since 2004, indicating that the big drop in TPX has created some value at least in the eyes of this insider. I think TPX is worth keeping on the radar as the company has been badly beaten and still has a great product that many people use. While I’d like for it to pay a dividend, it’s worth noting that it trades at a relatively cheap .65x price-to-expected growth rate and 7x trailing and forward price-to-earnings.
Cracker Barrel Old Country Store is a major restaurant operator with over 600 company-owned locations in 42 states. The company had some sizeable insider buying from June 7-11 by major shareholder Sardar Biglari’s investment vehicle, Biglari Holdings (NYSE: BH), accumulating collectively 46,800 shares equating to just under $2.8 million worth of stock. This is a strong vote of confidence by Biglari, however, 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 towards a take-over premium. However, the company still has a very nice 2.7% dividend yield, impressive returns on equity nearing 29% the past twelve months, and an outstanding activist investor clearly seeing value in the shares. I think CBRL is worth a look or investors can indirectly benefit by putting money into BH.
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Prohomes has no positions in the stocks mentioned above. The Motley Fool owns shares of Biglari Holdings and Tempur-Pedic International. Motley Fool newsletter services recommend Biglari Holdings. 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.