Why Not Follow The Smart Money Into These Stocks?
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Every investor is always searching for stocks that outperform the general market and alternative investment classes. Of course, during these unstable times that is rather difficult, making people uncertain as to what is an effective strategy or criteria to use. One strategy that has proven to be effective over time in determining whether a stock is moving higher is insider accumulation, due to one simple reason: insiders buy shares, just like us, to make more money. Furthermore, they have an enviable vantage point of the day-to-day operations of the company and/or have a large investment of their own, which they would like to see increase in value. The following are stocks that have recently had notable insider buying and serve as a nice stating point in your investment research.
Mobile games developer Glu Mobile (NASDAQ: GLUU) has a diversified array of games, and licenses intellectual property of well-known brands such as Guitar Hero, Call of Duty, and The Price is Right. The stock's performance of late has been nothing to write home about, as it has gotten hammered more than 30% in just the last month alone. However, board director Nada Hany sees brighter days ahead, as according to an SEC Form 4 filed on Oct. 11, the director bought an impressive 3,243,218 shares in the company at an average price of $3.05, amounting to almost $10 million worth of stock, or approximately 4.5% of the total shares outstanding.
Glu has performed well, greatly exceeding consensus estimates the past four quarters, while maintaining a debt free balance sheet and strong $24 million net cash position. Moreover, while the company has some ugly margins and returns on equity, it just became free-cash-flow positive this past quarter, and if that trend continues this speculative stock should be poised to continue to move higher. Nonetheless, that is a big “if,” so I’d keep Glu in mind as a speculative buy.
For the more conservative investor looking to invest in the gaming space, well-established and dividend-paying company Activision Blizzard (NASDAQ: ATVI) is a nice option. The company is also debt free, with a very strong net cash position at about 25%. Activision has also exceeded consensus analyst estimates the past quarters. Moreover, the company has a nice 1.6% dividend yield that has been raised the past two years, and with just a current 26% payout ratio, it's likely to be raised again.
Office products and supplies retailer Office Depot (NYSE: ODP) sells everything from paperclips to paper copiers, and has a strong revenue base exceeding $11 billion over the last twelve months. However, the company is still very depressed, as it has yet to fully rebound back to the all-time high it reached at over $35 per share in 2008. Nonetheless, major shareholder Starboard Value bought from almost 4.1 million shares in October, equating to over $9.4 million worth of stock.
I like to see this strong accumulation, and while one should note the risk investing in this declining industry as online retailing continues to gain market share, the company is trading at some cheap valuations at just 1x price to book and 3x enterprise value/EBITDA.
If looking to wisely diversify into a higher quality and more stable retailer, why not look into the ubiquitous Wal-Mart (NYSE: WMT). The company is still exceeding competitors with 5% year over year revenue growth, while continuing to show strong margins as it approaches half a trillion in yearly sales. Perhaps most importantly, the retailer pays a nice 2.1% dividend that should be raised in the coming quarters, as its 32% payout ratio allows for that to take place.
I’d like to also say I appreciate you reading my thoughts and reiterate that these are just the views of the blogger and should not serve as a substitute for any professional financial advice or counsel in general. Respectful comments and questions are always welcome below on the comment board.
Wiseinvestors has no positions in the stocks mentioned above. The Motley Fool owns shares of Activision Blizzard. Motley Fool newsletter services recommend Activision Blizzard and Wal-Mart Stores. 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.If you have questions about this post or the Fool’s blog network, click here for information.