Shld, SRZ: Strong Insider Buying, Should we buy?
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
One of my favorite screening tools is to see stocks with notable insider buying. The reasoning is simple as insiders sell for many reasons (diversify one’s assets, pay for the new house, expensive trip with the family, unfortunate divorce settlement costs, etc.), but they buy only for one reason: to make more money. Therefore, these 2 stocks below caught my eye with their recent heavy insider buying.
Sunrise Senior Living (UNKNOWN: SRZ.DL) provides senior living services throughout the United States, Canada, and the United Kingdom. Essentially, they look to profit as us “fools” get older and need assistance with our daily living habits. On Jan.9-10, major shareholder Carlson Capital collectively bought an impressive 150,000 shares bringing their total ownership to just fewer than 7.6 million shares. However, while this bullish insider activity is encouraging, the company has unfortunately missed consensus estimates the last three quarters and trades at an eye-popping 123x forward P/E. The stock does show some great value though trading at just under .3x P/S and .65x EV/S, so I definitely don’t see it as a great short candidate at these depressed levels, but I’d stay away from SRZ for now.
Sears Holding (NASDAQ: SHLD) is most likely a retailer you’ve heard of, but haven’t shopped at recently as sales continue to move lower. Unfortunately the holiday season wasn’t kind to them as same store sales plummeted over 5% causing the stock to hit a multi-year low. Nonetheless, major shareholder and Chairman Eddie Lampert bought collectively from Jan.9-10 approximately 5 million shares indicating that he strong feels there is value at these depressed levels. I have to agree as SHLD now trades at a tiny .1x P/S, .2x EV/S, .45x P/B, and looks to be closing underperforming stores that should materially help the company in the coming quarters. Moreover, and quite possibly most importantly, the company has very low expectations and clearly at a level now where Lampert might very well take the company private at a healthy premium.
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