2 Stocks with Strong Insider Buying
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There are many reasons why an insider may sell a stock, but they only buy for one reason: to make money. Therefore, looking at recent insider buying is a great screening tool to see if a stock is worth investing in, and these 2 stocks below are exhibiting strong insider buying:
Overstock.com (NASDAQ: OSTK) operates as an online retailer offering discount brand, non-brand, and closeout merchandise in the United States. On January 4, major shareholder Francis Chou bought 56,851 shares, bringing his total ownership to over 3.25 million shares.
OSTK trades at a very cheap .1x prices/sales and enterprise/sales and nice net cash position of just over $40 million. However, the company has negative margins, burned through approximately $4 million in FCF this past year, trades at over 10x price/book, and pays no dividend.
I believe if you’re interested in this retail space, fellow competitors Amazon (NASDAQ: AMZN) and eBay (NASDAQ: EBAY) have better margins and operating history, but I still see those trading at lofty valuations. Wal-mart (NYSE: WMT), trading at just a 12x trailing and forward P/E, .5x price/sales and enterprise value/sales, very strong FCF this past year of approximately $11 billion, and consistently growing 2.5% dividend yield, offers a better investment in the retail space.
Universal Display Corporation (NASDAQ: PANL) engages in the research, development, and commercialization of organic light emitting diode technologies and various other technological applications. On January 4, major shareholder Discovery Capital Management bought a massive 90,000 shares, bringing their total ownership to over 5.7 millions shares.
This buying is encouraging, along with the great debt-free balance sheet and over $7/share in net cash. But with PANL trading at a lofty 25x enterprise value/sales, 30x prices/sales, 45x forward P/E, and almost 400x enterprise value/EBITDA, I can’t recommend this stock at this time.
If interested in technology, I believe Intel (NASDAQ: INTC), trading at just a 10x trailing and forward P/E, 1x PEG, just over 5x enterprise value/EBITDA, and consistently growing 3.3% dividend yield, and Microsoft (NASDAQ: MSFT), trading at similar valuations with a consistently growing 2.8% dividend yield, offer better alternatives.
Motley Fool newsletter services recommend Apple, Amazon.com and eBay. The Motley Fool owns shares of Apple, Amazon.com, Intel, Microsoft and Wal-Mart Stores and has the following options: long JAN 2013 $10.00 calls on Intel. Wiseinvestors 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.