Should You Buy These Stocks?
Ali is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As many investors know, 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 of stocks with strong insider buying.
VMware is a giant in the virtualization and cloud-infrastructure solutions area world-wide with approximately $4 billion in revenue and a market capitalization near $40 billion. The stock has been beaten since its May $118.79 high down, even after the nice 12% surge on July 18, roughly 25%. Nonetheless, major shareholder EMC (NYSE: EMC) seems to see value buying almost 120,000 shares collectively on July 6-9 equating to approximately $10 million worth of stock. While this sizable purchase is encouraging and VM has a nice net cash position of approximately $5 billion, buyers should realize that VMware is geared more for the growth-oriented investor as it trades at some lofty valuations and one should expect stock price volatility. Since I’m more of a dividend-seeking conservative investor, I’d shy away from VMware (it currently doesn’t pay one), but the most recent earnings report came in nicely and the management team seems to have great praise.
Verifone Systems (NYSE: PAY) is focused predominately on services such as electronic payment solutions which allow us “Fools” to use products such as credit cards and debit cards. The stock has plunged approximately 35% since its $55.89 52-week high in late April and is struggling to get back on its feet. However, recently Chief Executive Officer Douglas Bergeron put his money where his mouth is and gobbled up an impressive 155,000 shares at an average $32.50 average price equating to just over $5 million. The stock has become relatively cheap at just a .5x price-to-expected-growth rate and 11x forward price-to-earnings ratio, while having an impressive 28% return on equity. Moreover, Verifone has new growth markets ahead as more and more countries globally are looking towards electronic payments solutions for its added security and efficiency. While Verifone, like VMware and EMC mentioned above, doesn’t pay a dividend and so keeps me hesitant, I think it is worth putting on your radar as the CEO has strong conviction near the current price and the valuations look appealing.
As always, respectful comments and questions are always welcome on the message board below and please know any viewpoints are simply just the opinion of the blogger. I always strongly recommend every investor to do follow-up research and due diligence for the sake of their financial health.
Prohomes has no positions in the stocks mentioned above. The Motley Fool owns shares of EMC and VeriFone Holdings. Motley Fool newsletter services recommend VMware. 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.