Should We Join the Insiders and Buy These Stocks 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.
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.
Sirius XM Radio (NASDAQ: SIRI) dominates the satellite radio services market by having approximately 22 million subscribers as of the year ending 2011. The stock has performed very well the last twenty four months and currently sits right near a multi-year high at $2.55 per share. However, while many may feel the valuations are getting a little overstretched, major shareholder Liberty Media (NASDAQ: STRZA) seems to see more upside ahead. Collectively from August 10-14, the firm bought an impressive 89,970,000 shares at an average price of $2.48 per share equating to just under $250 million worth of stock. This is a great vote of confidence by a major shareholder which is always encouraging and the relatively low 4.7x trailing price to earnings ratio along with returns of equity exceeding 151% the past twelve months further validates their bullish position. The main drawback with Sirius is the sizable net debt position of approximately $2 billion, but the company has been generating a healthy amount of free cash flow and been slowly paying the debt off while watching the cash position increase as well. I think Sirius is worth a look for the more aggressive growth investor.
Dole Food Company (NYSE: DOLE) operates predominately in the growing and distributing of fresh fruit and vegetables world-wide. The company has soared approximately 40% over the last month alone and now sits closely to its $13.56 52-week high. Nonetheless, Chairman and major shareholder David Murdock sees even more upside ahead buying collectively, from August 6-8, a sizable 789,500 shares at an average price of $12.41 equating to just under $9.8 million worth of stock. The company has some encouraging valuations at a relatively cheap 8.5x forward price to earnings ratio and just .4x enterprise value to revenue. However, it should be noted that the company has a $1.6 billion debt load and relatively small cash position, while paying no dividend. I think the company is worth keeping on the radar, but if looking to get into the food/packaged goods business, I’d rather go towards a stable dividend payer like General Mills (NYSE: GIS). While General Mills has a large debt load like Dole, the company has a far greater revenue base allowing it to benefit from economies of scale along with a diversified revenue stream. Add in the fact that it has a consistently growing 3.4% dividend yield, considerably greater than the average 2.0% S&P 500 stock, and I think General Mills makes for a quality long term income investment.
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 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.