Insider Buys Reported in these Stocks
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Recent insider buying has been reported in the following stocks. Would it be wise to copy the insiders and buy some shares?
Newcastle Investment (NYSE: NCT)
This REIT invests in and actively manages a portfolio of real estate securities, loans, excess mortgage servicing rights (MSRs) and other real estate related assets.
Insiders have been adding shares of NCT this year. Two gentlemen in particular -- Director Wesley Edens and Secretary Randal Nardone -- have bought more than $2 million worth of NCT shares, each. On Jan. 11, when the stock was trading at $9.35/share, they both bought 106,950 shares, and on Feb. 15, each of them bought 95,500 shares more, at a price of $10.48. Such consistent, aggressive insider buying is definitely significant, and could be a sign of positive surprises for the stock.
With regards to valuation, the stock has a current P/E of 4.13, a forward P/E of 8.75, and a PEG of 0.77. All three ratios are extremely attractive, however, it must be noted that P/E ratios are not always useful when assessing REITs, as real estate does not usually depreciate, and Funds from Operations (FFO) is usually a better indicator than earnings.
Analysts are bullish on the stock: It has an average analyst recommendation of 1.70. With regards to price target, it has an average of $11, which is close to current prices.
Powell Industries (NASDAQ: POWL)
Powell industries manufactures a line of isolation relay, totalizer and meter recorders for the electric utility industry; as well as the system that collects and manages the data.
On Feb. 11 Director Bonnie Hancock sold 1,800 shares of the company at $55.23/share, only to later buy 1,800 shares again, at a higher price of $55.30. The dollar value of the purchase was a little under $100,000.
The stock has a P/E of 18.15, which is about average in the industry. Forward P/E is slightly more attractive, standing at 17.82. PEG, however, is a bit too high, at 2.27.
Analysts are moderately bullish to neutral on the stock, with the average recommendation being 2.20. With regards to price target, the stock has an average of $51.50, which is about 13% lower than current prices. It currently pays no dividend, and has no history of ever doing so.
The stock has experienced a phenomenal rise since earnings were reported on Feb. 6 and the company raised its low-end guidance. In just a little more than a week, the stock has risen almost 30%.
The stock clearly has positive momentum, and Mr. Hancock's purchase might signal that there are more good surprises to come. Even though the stock has risen very significantly in a very short period of time, the fact that the company's director is willing to invest his own money and buy shares in the open market when the stock is at its 52-week high, is definitely a good sign for Powell shareholders.
Corning (NYSE: GLW)
Founded in 1851, Corning is a tech glass company that operates in five segments: Display Technologies, Telecommunications, Environmental Technologies, Specialty Materials and Life Sciences; but it is most famous for having developed "lotus glass," a technological breakthrough with countless applications.
On Feb. 13, Director Robert Cummings bought 30,000 shares of the company, at a price of $12.61/share (very similar to Friday's closing price). The dollar value of the purchase stood at $378,300.
Valuation-wise, the stock does not appear to be excessively expensive, especially considering its strong growth opportunities. Trading at only 11.12x earnings, the ratios also look attractive when factoring in future earnings estimates and growth (it has a forward P/E of 9.99, and a PEG of 0.93).
Analysts are mostly neutral on the stock: Average recommendation is 2.30. The stock has an average price target of $14.05, which implies a potential upside of +9.85% from current stock prices. Both analyst reports this year, however, have downgraded the stock, from overweight/outperform to equal weight/sector perform.
Corning pays a dividend of $0.36/share, which works out to a yield of 2.81%. The company has paid a dividend to its shareholders from 1987 to 2001, and then from 2007 to today. It has recently raised its dividend.
Even though the stock is far from historical highs, Corning has reported record earnings, and seems poised to continue the trend. With current valuations, the stock looks cheap. Recent insider buying could be a sign that this might be the time to add some shares of the stock.
Insider buying has long been considered by many to be an important indicator of a company's expected performance, so it could be a good time to buy shares in any of these three stocks. NCT seems to stand out -- the insider buying is very significant, it pays a very attractive dividend, is viewed very favorably by analysts, and is in a recovering sector. But Corning also looks like a great value-growth stock, and Powell could be a good momentum play. At any rate, all three stocks should be considered by investors looking at these sectors.
Motley Fool Blogger Alex Bastardas is long on NCT. The Motley Fool recommends Corning. The Motley Fool owns shares of Corning. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!