Is Now the Time to Buy These 2 Stocks as Well?
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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.
Navistar International (NYSE: NAV), manufactures and sells commercial and military trucks, along with buses, diesel engines and various other related equipment. The stock over the past year has been ugly down approximately 50% from its $50.07 52-week high as it continues to have issues with the Environment Protection Agency regarding its new nitrogen-oxide, heavy-duty engine and large $4.5 billion debt load. Nonetheless, major shareholder and billionaire Carl Icahn sees the stock moving higher by accumulating a considerable 285,901 shares collectively from July 25-26 at an average price of $22.96 equating to over $6.5 million worth of stock. With such a steep drop in price over the last year, one would think that Navistar has become a quality value play, but I don’t see that to be the case with the company having a negative book value nearing $7, woefully missing analyst estimates in three of the last four quarters, and paying no dividend. On the flip side, I definitely wouldn’t short the stock as Mr. Icahn definitely has proven to have a great eye for value and engineering some profitable value extractions and/or lucrative acquisitions for shareholders, but that isn’t enough of a reason for me to buy the stock at this time. I'd instead look towards competitor and mega truck maker PACCAR (NASDAQ: PCAR) as a safer alternative. The stock yields a respectable 2.0% and with just a 42% payout ratio, investors should expect that to continue being raised in the near future. Add in the fact that management has churned a very nice 6.4% return on assets and 21.2% return on equity over the last twelve months and investors looks to have a quality company at a reasonable price for the long-term.
Newcastle Investment (NYSE: NCT) is a real estate investment trust (“REIT”) that invests in a diversified portfolio of real securities including commercial mortgage backed securities, agency residential mortgage backed securities, and senior unsecured debt. The stock over the last year has performed rather well up approximately 20% and sitting right near its $7.45 52-week high. Nevertheless, the company recently had a sizable 22 million secondary stock offering at $6.70, which was well-received and included even Chairman Wesley Edens buying a sizable 300,000 shares at the $6.70 price equating to an investment just over $2 million. What stands out most about the company is the $.80 annual dividend translating into an 11.4% dividend yield at current prices, and not uncommon with REITs at this time as the Federal Reserve continues to keep ultra low interest rates and provide a very profitable spread. I think with the company's great management team delivering a respectable 5.8% return on assets over the last twelve months, along with greatly surpassing consensus analyst estimates in three of the last four quarters are positive indicators. Furthermore, I believe that the dividend will continue in the foreseeable future. I’d put Newcastle on my radar and look to have it as a quality dividend holding as long as interest rates remain low, which according to the Federal Reserve is the case at least until 2014.
Moreover, fellow REIT giant Annaly Capital Management (NYSE: NLY) is worth a look as it has one of the longest track records and most respected management teams in the industry. In addition, with the company essentially trading at book value while having a nice yield at approximately 13%, investors should have market-beating returns with the stock as long as the Federal Reserve continues to maintain very low interest rates.
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 owns shares of Annaly Capital Management. The Motley Fool owns shares of Annaly Capital Management. Motley Fool newsletter services recommend PACCAR Inc. 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.