Are these Stocks Worth Buying as Well?
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 always on the hunt to find stocks that outperform the general market. In these turbulent times, that is much easier said than done. 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 to make more money. In addition, they arguably have the best view of the company being a part of the day-to-day operations, plus they likely have a large investment of their own that they'd like to see increase in value. Below are a couple stocks with notable insider buying.
Imax (NYSE: IMAX) is well-known for its entertaining 3-D movie studios worldwide and as of March 31 operates 643 theaters in 52 countries. The stock has been range-bound the past 52 weeks in the mid $20s not offering much direction to investors. However, major shareholder Kevin Douglas seems to find compelling value as he bought a sizablee 300,000 shares collectively on August 7-8 at an average price of $21.79, equating to just over $6.5 million worth of stock.
The stock has since fallen to under $21, but the valuations still look a bit stretched with the stock trading at a 49x trailing price to earnings ratio, 20x forward price to earnings ratio, approximately 6.3x price to book ratio, and paying no dividend. On the flip side, the company has some nice growth drivers as it continues to expand in China, the current Dark Knight Rises film has been doing great at the box office, and Goldman Sachs on July 23 initiated a buy rating with a $30 price target due to expected continued strong revenue growth.
I’d recommend Imax for the more aggressive growth investor as it has managed to find a niche market where it has a strong market position. For the more conservative investor in this industry, take a look at Regal Entertainment Group (NYSE: RGC). The company trades at a more reasonable 19x trailing price to earnings ratio, 15x forward price to earnings ratio, under 1x price to sales, and perhaps most appealing a 6.1% dividend yield that looks secure with its strong free cash flow. It must be noted the rather large $1.9 billion debt is worrisome to me, but management has done well thus far in servicing the debt and looks committed to continue rewarding shareholders through nice dividend payouts.
Opko Health (NYSE: OPK) is a pharmaceutical and medical appliances company looking to help treat a variety of cancers, disease, and ailments with operations primarily in the United States, Chile, and Mexico. The stock has done poorly the last month down roughly 10%, but Chairman, CEO, and major shareholder Dr. Phillip Frost sees more upside ahead. On Aug. 7, he bought 50,000 shares in the open market and followed that up on Aug. 9 with a 70,000 share purchase.
While the stock has become cheaper the past month and the insider purchases are encouraging, Opko isn’t for the faint of heart as the company trades at some lofty valuations and pays no dividend. If looking to get into the pharmaceutical/medical field, I believe a consistent dividend-paying stock like Merck (NYSE: MRK) trading at reasonable valuations will serve the long-term investor better. Merck pays a very nice 3.8% dividend yield while trading at a reasonable 20x trailing price to earnings ratio and 12x forward price to earnings ratio.
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 Imax. Motley Fool newsletter services recommend Imax. 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.