Insiders Are Buying, Should We?
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 find 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 caught my eye with their recent heavy insider buying.
Biotechnology firm Incyte (NASDAQ: INCY) focuses on a variety of different diseases and has collaborative research and license agreements with major companies including Novartis, Eli Lilly and Pfizer. Between Jan. 12-13, major shareholder Baker Brothers Life Sciences Capital added a massive 543,239 shares, bringing their total ownership to well over 12 million shares.
The stock has scorched higher approximately 50% over the last two months and -- as is typical with biotechnology stocks -- has little if any book value and/or earnings as it looks for approval on the next blockbuster drug. This company, like most biotechs, is more for the aggressive investor, and the great recent insider buying by a major shareholder is always encouraging.
Mega-retailer Sears Holding (NASDAQ: SHLD) has been struggling of late as the holidays were unkind to them, and the company responded by planning to close 100-120 stores. However, it looks as though major shareholder and Chairman Eddie Lampert added 105,650 more shares on Jan. 12, denoting that he sees great value.
The stock has quickly moved up more than 20% since his buy at $31.2, but is still only at .1x P/S, .2x EV/S, and .5x P/B. The company definitely has a great deal of work to do, but expectations are very low and insiders keep accumulating at a healthy rate. I’d be a buyer of SHLD here.
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