Insider Report, 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 two stocks below caught my eye with their recent heavy insider buying.
ModusLink Global Solutions (NASDAQ: MLNK) provides supply chain business process management solutions worldwide. It is most likely better known by its previous name as one-time dot-com high-flier, CMGI, which did and still does also invest in early-stage technology companies (aka. Venture capital).
The company is a far cry from its reverse split-adjusted high in late 1999 of approximately $1400/share, but major shareholder Handy & Harman bought collectively 128,933 shares collectively on Jan. 9-10 bring their ownership to just under 5 million shares. MLNK has a virtually debt-free balance sheet with over $2.5/share in net cash, trades at just .15x EV/S, .3x P/S, and 1x P/B. Moreover, the company has roughly $2 billion in valuable net-operating-loss tax benefits as well. However, the company lost a sizeable $40 million in net income this past year and burned through approximately $12 million in FCF showing that it has its share of problems. With such a nice balance sheet though and very nice insider buying, I think MLNK is an aggressive value buy.
Cracker Barrel (NASDAQ: CBRL) may sound like your favorite amusement park ride, but it is in fact a national restaurant chain with over 600 company-owned locations in 42 states as of November 2011. Sardar Biglari, Chairman and CEO of Biglari Holdings (NYSE: BH), bought another 55,815 CBRL shares for BH collectively on Jan. 11-12 bringing Biglari Holdings’ ownership to just over 2.9 million shares. CBRL has moved up nicely in recent months looking to close in on its 52-week high, but the company is still reasonably priced at just over a 14.5x trailing P/E, 11x forward P/E, .5x P/S, .7x EV/S, and respectable 1.9% dividend yield. One can look to go into CBRL, or own it indirectly through BH which is trading at a reasonable 14.5x trailing P/E, .7x P/S and EV/S, 1x PEG, and just over 6x EV/EBITDA. Not to mention have Mr. Biglari manage your money being the major shareholder of BH and CEO, which he has shown to be rather good at doing with lucrative investments, such as Friendly’s Ice Cream and Fremont Insurance, in the past.
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