END, WBMD: Heavy Insider Accumulation
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 ways to screen for the right stock. Many use valuation metrics, while others look at technical analysis among a plethora of other methods and strategies. One of the best indicators I’ve seen is large buying in companies by people who have an existing large ownership stake, as it is always nice when people who have arguably the best view of the future of the company put their own money at risk along us investors. The following are two stocks I recently found with impressive buying.
Endeavour International (NYSE: END) is an oil and gas company operating predominately in the United States and the United Kingdom. Major shareholder GMT Capital further increased their stake 102,400 shares collectively between Jan.17-18 and now holds approximately 4.2 million shares. This is always very encouraging when a major shareholder further increases their ownership stake and I can see why as the company trades at a paltry 5x forward P/E and comparatively reasonable 1.7x P/B.
However, the company has woefully missed consensus estimates the past three quarters bringing doubt to their forward P/E. It trades at a rather lofty 5.6x P/S, 10.3x EV/S, 27.5x EV/EBITDA and lost over $5 million in net income the past 12 months. I have to say the insider purchasing is very encouraging, but I’d rather buy this other energy name I recently brought up here for now.
WebMD (NASDAQ: WBMD) provides various health information services to people nationwide. The stock has been volatile lately as the company said it is no longer for sale and cut earnings guidance for the year. As we reported the strong insider buying earlier here, major shareholder and billionaire Carl Icahn has accumulated another nearly 68,000 shares on Jan. 19. He is advocating for management to use the approximately $1B cash hoard that WBMD has to buy back shares after this big drop in price.
I don’t see WBMD as a quality holding for the time being, because management already pre-announced lower revenue and earnings this year and it already trades at a rather lofty 58x forward P/E, 2.3x P/B, 2.6xP/S, 8.1x EV/EBITDA, and pays no dividend. I'd like to be a spectator for now as I don't see a need to gamble with so many other enticing opportunities.
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