Insider Alert: Companies with Recent Large Insider Purchases
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Insider buying has always been viewed as a strong bullish signal since these are the people with the best view of the company. If they are putting their money into buying more shares, there's a possibility they are optimistic about the stock. Of course, if it were that simply then every “fool” would blindly follow insiders and unfortunately this case is no exception. However, here are a few stocks with notable insider buying and follow-up analysis to see if retail investors should follow the insiders.
One-time high-flying stock TASER (NASDAQ: TASR) is widely known for their stun guns and popularized in films such as Meet the Fockers (one of this Fool’s favorite films). Board director Hadi Partovi filed an SEC Form 4 showing his large purchase on February 28 of 50,000 shares bringing his total ownership to 89,300 shares. The stock isn’t far off its $3.55 52-week low and has a clean balance sheet with no debt and approximately $.50/share in net cash. However, I don’t consider TASR a buy as well at this time with the company experiencing negative revenue and earnings growth, greatly missing analysts estimates the past two of three quarters, still trading at a lofty 25x forward P/E, 42x EV/EBITDA, and awful return of equity at negative 7%. Moreover, the initial euphoria the company had in the beginning of 2003 through the end of 2004 that led the stock higher approximately 10,000% has definitely waned as the company has been experiencing declining revenue growth.
Asset management company giant, BlackRock (NYSE: BLK), had a sizeable purchase on February 29 by its Vice Chairman, Kendrick Wilson, of 11,580 shares (equating to $2.3 million) bringing his total ownership to 89,600 shares. BLK is simply a fantastically run firm headed by the well-respected Larry Fink and miraculously only about 20% off its all-time high (how many financial firms can say that?). The stock still looks attractively priced at a 16x trailing and 13x forward P/E, very nice 3% dividend yield, and comparatively strong 26% and 37% profit and operating margins respectively. I’d be a buyer here.
Builders FirstSource (NASDAQ: BLDR) is a home improvement retailer (think Home Depot and Lowe’s) based in Dallas, TX. From February 28-March 1, board director and representative of equity firm Warburg Pincus, David Barr, bought collectively 100,106 shares upping their already massive ownership stake to 24.55 million shares. The strong vote of confidence by Warburg Pincus is very encouraging, but I can’t say this is a buy with the company trading at 3x Price/Book, losing a massive $65 million in net income over the past twelve months, and sporting an ugly return on equity of -50%. Moreover, construction still looks depressed for the foreseeable future which is a further headwind for BLDR.
Motley Fool newsletter services recommend BlackRock. The Motley Fool has no positions in the stocks mentioned above. 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.