Insiders Are Buying These 3 Stocks
Alex is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There may be many reasons for an insider to sell shares, but only one to buy them: When someone puts his hard-earned cash in the line, it is because they expect to make money. Since insiders generally have unique insights into their companies' business, it is smart for investors to keep an eye on their actions. The following three stocks have had recent, significant insider buying:
United Fire & Casualty Company (NASDAQ: UFCS): The company engages in the business of writing property and casualty insurance, writing life insurance, and selling annuities.
- On February 4, 10% owner, Dee Ann McIntyre bought 20,000 at an average share price of $23.64 (a total value of $472,700). Roughly two weeks later, Director Christopher Drahozal exercised an option to buy 2,000 shares at $16.13/share (total value of a little over $32,000). Over the last 6 months, insider ownership of the stock has gone up 21.48%.
- With regards to valuation, the stock trades at a relatively low current P/E of 10.70x. Forward P/E is slightly higher, at 12.89. When factoring in growth, the stock is also moderately attractive, with a PEG of 1.08.
- Analysts are mostly neutral: The stock has an average recommendation of 2.50, and an average price target of just $24.50, which is slightly lower than current stock prices. It must be noted, however, that the most recent analyst rating on the stock was in late 2009, so these ratings might be outdated.
- The company pays a dividend of $0.60/share, which works out to a yield of almost 2.40%, similar to the group's average. The company has paid a dividend to its shareholders since May of 1990.
- Hit by Super Storm Sandy, the company reported a fourth-quarter operating loss of 12 cents per share on Feb 19. However, the company beat most analyst estimates, which had predicted a higher loss. Total assets of the company were $3.7B, up 2.1% year-over-year, and a share buyback program was announced.
Targa Resources Partners (NYSE: NGLS): A Master Limited Partnership, the company is a provider of midstream natural gas and natural gas liquid services in the United States and is engaged in the business of gathering, compressing, treating, processing and selling natural gas and storing, fractionating, treating, transporting, terminaling and selling natural gas liquid, refined petroleum products, and crude oil.
- On February 19, Executive VP & General Counsel Paul W. Chung bought 5,000 units at $41.15 each. One day later, on Feb 20th, Mr. Chung added a further 2,500 units, at a cost of $41.12. One day later, on Feb 21st, Director Ruth Dreessen bought 3,000 units at a price of $40.5/each. All in all, in three days, insiders spent $430,051 of their own money to purchase NGLS units.
- The valuation ratios on this stock are close to the group's average. The stock currently trades at a P/E of 22.78, and has a forward P/E of 22.05. When factoring in growth, the stock trades at a PEG of 1.70.
- Analysts are bullish on the stock: It has an average recommendation of 1.70 (buy/overweight), and an average price target of $46.86, which implies that the stock has a 13% potential upside from current prices. The most recent analyst reports have all been positive, and have assigned the stock a higher price target (Steifel Nicholas- $48, RBC Capital - $50).
- NGLS pays a distribution of $2.72/unit, which works out to a yield of 6.56%; a high yield compared to other stocks, but average among MLPs. Distributions are paid on a quarterly basis, and have been in place since February 2010.
- The company's main business is in Natural Gas Liquids (NGLs), which are substitutes for petroleum products in some types of petrochemical production, so their prices tend to track crude oil rather than Natural Gas. Consequently, expect this stock to be affected by crude oil price movements.
Calamos Asset Management (NASDAQ: CLMS): The Company primarily provides investment advisory services to individuals and institutional investors through a series of investment products that include open-end and closed-end funds, separate accounts, offshore funds and partnerships.
- On Feb 20, the company's Chairman & CEO, Mr. John Calamos, bought 61,334 shares in the open market, at a price of $10.61/share. Just one day later, he bought a further 61,334 (at $10.51/share), and, one day after that, on Feb 22, he bought an extra 53,613 shares (at $10.64 each). All in all, in three days, the company's Chairman and CEO, and therefore the person with the most insight into the company's business, spent $1,866,452 of his hard-earned cash to buy CLMS shares. This is a very significant purchase.
- With regards to valuation, the stock has a P/E of 12.20, a forward P/E of 14.51, and a PEG of 1.22. All ratios are moderately attractive.
- Analysts do not seem to like the stock, however. With an average recommendation of 3.30, most analysts view it as a hold at best. The stock has an average target price of just $9.50 (below current prices). However, these analyst reports are dated (most recent is from 2009), so take this information with a grain of salt.
- While it might be a risky investment, and analysts seem not to like the stock much, Mr. Calamos' almost $2M-share-purhcase is a fantastic sign for the stock, so investors should seriously consider investing on this one after proper due diligence is conducted.
|P/E||Fw P/E||PEG||Avg Rec||Avg PT (% implied upside)||Div Yield|
The three stocks have had significant insider buying, so it is a good idea to add them to your watchlist, or even buy them after careful analysis. In general, valuations are average, and dividend yields are attractive. Analysts have different opinions on them, but in the case of both UFCS and CLMS, the reports are outdated. I would encourage investors to look into these companies' business in details and decide for themselves whether it makes sense to follow the insiders or whether it might be smarter to wait in the sidelines until the time is right.
wheckster has no position in any stocks mentioned. The Motley Fool recommends United Fire & Casualty. 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!