You're Not the Only One Buying Here

Editor's note: Due to an error in the original Form 4 filing, the data in our article regarding Mattson Technology was incorrect. An amended Form 4 clarified that Richard Dyck only purchased 5,000 shares for a total value of $12,350. We have updated the article.

Famed money manager Peter Lynch gave us the inside scoop on how to look at insider transactions. Executives can sell their stock for any reason, he said, but they only buy for one: They think the price is going to go up!

Below we highlight a handful of insiders who are making big purchases of their own company's stock in the last week. These aren't executives getting big chunks of shares from option grants. Rather, they're insiders putting their own money on the line buying shares at market prices. We'll then pair that information with insights from the members of Motley Fool CAPS to see if they think the stock has the same prospects the insiders do.

Stock

Insider, Position

Market Value of Transactions

CAPS Rating (out of 5)

Airgas (NYSE: ARG  )

Ted Miller, director

$0.6 million

***

Lorillard (NYSE: LO  )

Murray Kessler, CEO

$1.0 million

***

Source: wsj.com; Motley Fool CAPS.

Although following the lead of insiders can be profitable, we still recommend you do further due diligence to determine whether these stocks make a good addition to your own portfolio. So this isn't a list of stocks to buy, but just the inside track on companies you might want to check out further.

Who asked you?
That's what Airgas management must have been thinking when Air Products (NYSE: APD  ) made an unsolicited bid for the specialty gas company last February. Airgas wouldn't consider a bid below $78 a share and initiated a poison pill proposal to dilute Air Products holdings if it attempted the takeover. While raising its bid to $70 in December, Air Products said the poison pill was impeding the right of shareholders to vote on the offer and asked a Delaware court to void the plan.

Poison pills are not uncommon, but they aren't shareholder friendly plans. Airgas also has a staggered board of directors, another "unfriendly" practice that limits the ability of owners to get management out.

The Delaware court, however, upheld Airgas's defense, and Air Products promptly withdrew its offer. CAPS member MOVIE52 says at least the long pursuit of Airgas shows that some companies believe there is value to be found in the specialty gas maker, and there are still ways to profit from it:

So maybe [Air Products] buys them and maybe they don't. Either way it's nice to know you are wanted.

Let us know on the Airgas CAPS page whether you agree management made the right move.

A bun in the oven
The government's latest weapon in the fight against tobacco is the argument that menthol-flavored cigarettes are a backdoor means for tobacco companies to sell to kids. Lorillard, as the maker of the top-selling menthol-flavored cigarette Newport, has the most to lose if the FDA bans menthol smokes, as it is now considering. But Lorillard and Reynolds American (NYSE: RAI  ) have filed a lawsuit to stop the ban.

Altria (NYSE: MO  ) may be best positioned to come out ahead if the ban goes through, but Lorillard is preparing for the worst with a non-menthol Newport brand too. Despite some positive attributes, CAPS member oldmanandthesea ultimately sees the tide rising too fast against the cigarette maker:

Eventually, [Lorillard] will sort of "run out of options" so to speak in terms of what it can do to grow share price and will sell; it is only a small player among giants but has an incredibly valuable brand that others would love to add to their portfolios-premium brand menthols, very high profits margins, minority consumers, etc.

Smoke out the competing thoughts on the Lorillard CAPS page, and add it to your watchlist to have all the Foolish news and analysis aggregated for you.

On the inside track
Following the insiders can be a path to profits, but it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Sign up today for the completely free service, and tell us whether its worth trading on this inside information.

The Fool owns shares of Altria. 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. 

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 1449882, ~/Articles/ArticleHandler.aspx, 4/23/2014 5:51:17 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement