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When insiders buy shares on the open market, their companies could enjoy bullish times ahead. Corporate insiders often have the inside track on their companies' prospects, and many of them get paid largely in stock options or restricted shares. Besides, insiders probably wouldn't risk plowing too much of their own money into their own company's stock -- reducing their portfolio's diversity, and increasing its risk -- unless they thought the stock might rise.
With that in mind, I screened for companies where at least one insider made an open-market buy in the last 30 days. These four Industrial stocks made the list:
Net Number of Buys
No. of Shares Bought
|Navistar International (NYSE: NAV )||2||16,000||$865,000||$3,967|
|Esterline Technologies (NYSE: ESL )||1||1,235||$100,000||$2,460|
|Fastenal (Nasdaq: FAST )||1||2,000||$69,000||$10,108|
|CBIZ (NYSE: CBZ )||2||237||$2,000||$371|
Source: Capital IQ, a division of Standard & Poor's, as of July 22, 2011.
When it comes to the number and total value of insider open-market buys, more can be better; I've sorted this table accordingly. Insiders at Navistar made open-market purchases worth about $865,000, while CBIZ insiders spent a mere $2,000 on open-market buys. Both are bullish signs, but the Navistar purchases look more promising.
Navistar's stock has declined about 13% since it badly missed the consensus EPS estimate when reporting earnings June 7, but analysts are forecasting improvements in the second half. The insiders seem to be viewing the lower price as a buying opportunity.
Fastenal also made the list when I ran the screen a month ago. The company has beat earnings expectations in five of the last six quarters, and my Foolish colleague Dan Dzombak believes Fastenal's management is creating value. The insider buy suggests he's onto something.
Insider buying signals that someone who should be in the know is betting that the stock will rise. You can use this list of recent insider purchases as a starting point for further research -- or a good reason to make a contrarian play.
Are these insiders right? To help you find out, The Motley Fool recently introduced a free My Watchlist feature. You can get up-to-date news and analysis by adding companies to your watchlist now: