Black Friday Special: Are These the Stocks We Should Acquire?
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As any investor will tell you, being able to consistently outperform the market is no easy feat whatsoever. One strategy that has proven to be effective over time in determining if 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 may have a large investment of their own that they like to see increase in value. The following are a few stocks with notable insider purchases, and can serve as a nice stating point in your investment research.
UnitedHealth Group (NYSE: UNH) is simply a behemoth in the health plan and services industry, with over $107 billion in revenue and $5.5 billion in net income the past twelve months. This Dow Industrials company’s stock has been range bound the past year, and recently has trended lower from its $60.75 52-week high, possibly creating a nice buying opportunity. Board director Edson Bueno seems to think so; an SEC Form 4 filed on Nov. 6 shows that he bought a staggering 8,416,905 shares at $55.84 equating to approximately $470 million worth of stock, on Nov. 2. This is a very strong vote of confidence, and since that time UnitedHealth has become even cheaper selling at approximately $53.50 per share.
Looking deeper into the fundamentals, the pessimism regarding the reelection of President Obama and his policies that investors expect will hamper profit margins seems overblown. The stock trades at an attractive 10x trailing and forward P/E, and just half its revenue. Moreover, the company pays a respectable and consistently growing 1.6% dividend yield, and at just a 14% payout ratio investors should feel confident that will continue. If looking to diversify your position, Aetna (NYSE: AET) is worth considering. The company trades at an even cheaper 8x trailing and forward P/E, and .4x Price/Sales. Moreover, Aetna also has a respectable 1.7% dividend yield with an equally small 13% payout ratio.
Travelzoo (NASDAQ: TZOO) is an internet media company focused on providing travel and entertainment deals worldwide. It has not been a good year for the stock, as it has been trending lower and sits right near its $16.56 52-week low. Nonetheless, Chairman Holger Bartel seems to think the stock will move higher, as on Nov. 6 he filed a Form 4 showing that he bought 200,000 shares at $18.39, equating to approximately $3.7 million worth of stock. This is encouraging, and since that time the stock has fallen approximately another 5%, sitting at $17.30.
Looking deeper, the company has met or exceeded consensus analyst estimates the past four quarters, which is bullish, and has over $3.5 per share in net cash and no debt. Moreover, add in the fact that the company trades at a relatively cheap 13.5x trailing and forward P/E while sporting very nice returns on equity at approximately 55%, and I think Travelzoo makes for a quality buy.
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 has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Travelzoo and UnitedHealth Group. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!