Insider buying in the open market is generally considered a bullish indicator. Corporate insiders often have the inside track on the company's prospects. What's more, their income is typically closely tied to their company's stock. Often a big chunk of that income is in the form of stock options or restricted stock. What's more, diversification argues for minimizing exposure to any one company rather than adding to it with insider buys.
While insider selling may indicate nothing more than a college tuition bill coming due, a home remodeling, or a high-end vacation, buying is typically a sign the insider expects the stock to rise. Buying in the open market could be considered more bullish than exercising stock options because the insider found some other way to fund the purchase.
With that in mind, I ran a screen to find companies that have had at least one insider make an open-market buy in the last 30 days. These eight diversified financial stocks made the list:
Net Number of Buys
No. of Shares Bought
|Interactive Brokers Group (Nasdaq: IBKR )||2||25,000||$379,000||$639|
|BlackRock International Growth and Income Trust (NYSE: BGY )||1||14,500||$149,000||$1,072|
|Pioneer Floating Rate Trust (NYSE: PHD )||2||10,000||$140,000||$315|
|Pioneer Municipal High Income Trust (NYSE: MHI )||2||9,215||$132,000||$307|
|BlackRock Global Opportunities Equity Trust (NYSE: BOE )||1||8,200||$151,000||$1,219|
|BlackRock Energy and Resources Trust (NYSE: BGR )||1||5,100||$150,000||$875|
|Kayne Anderson Energy Development (NYSE: KED )||1||1,250||$25,000||$211|
|PICO Holdings (Nasdaq: PICO )||2||106||$3,000||$619|
Source: Capital IQ, a division of Standard & Poor's, as of 7/28/11.
When it comes to the number and total value of insider open-market buys, more could be considered better. The table is sorted accordingly. For example, there were two open-market purchases of Interactive Brokers Group worth $379,000, compared with two open-market purchases of PICO Holdings totaling $3,000. Both are bullish signs, but the Interactive Brokers Group sign is more likely to be marking an on-ramp you want to take. That said, PICO Holdings is the only repeat from when I ran the screen a month ago.
Interactive Brokers Group's earnings have been a series of beats and misses over the past year. The stock is well-liked in the Fool community -- it has five out of five CAPS stars -- but it has lagged both the S&P 500 index and the SPDR Financial Sector Select ETF this year. But last month it reported EPS of $0.22, up from $0.09 in the year-ago quarter on revenue growth of 31%. It's likely the insiders who were buying had reason to anticipate the strong results.
Insider buying is a sign that someone who should be in the know is betting that the stock is going to rise. You can use this list of open-market insider purchases in the past 30 days to generate research ideas and/or reinforce a contrarian view.
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:
- Add Interactive Brokers to My Watchlist.
- Add Blackrock International Growth and Income Trust to My Watchlist.
- Add Pioneer Floating Rate Trust to My Watchlist.
- Add Pioneer Municipal High Income Trust to My Watchlist.
- Add BlackRock Global Opportunities Equity Trust to My Watchlist.
- Add BlackRock Energy and Resources Trust to My Watchlist.
- Add Kayne Anderson Energy Development to My Watchlist.
- Add PICO Holdings to My Watchlist.