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 frequently have significant exposure to the company's stock through options or restricted shares that are part of their compensation. 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 will rise.
With that in mind, I screened for companies where at least one insider made an open-market buy in the past 30 days. These five energy equipment and services stocks made the list:
|
Security |
Net Number of Buys |
No. of Shares Bought |
Total Value |
Market Cap (Millions) |
|---|---|---|---|---|
|
Exterran Holdings |
2 | 15,000 | $172,000 | $709 |
|
Hercules Offshore |
1 | 50,000 | $165,000 | $477 |
|
ION Geophysical |
1 | 30,000 | $165,000 | $864 |
|
Gulf Island Fabrication |
1 | 1,000 | $28,000 | $371 |
|
Vantage Drilling |
2 | 20,000 | $22,000 | $346 |
Source: Capital IQ, a division of Standard & Poor's, as of Aug. 10, 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 Exterran Holdings made two open-market purchases worth $172,000, while two insider buys at Vantage Drilling were worth a less head-turning $22,000. Both are bullish signs, but the purchase of Exterran Holdings looks more promising.
Exterran's finished-goods inventory has been on the rise, which might be a bad sign. On the other hand, maybe an insider has reason to anticipate a pick-up in demand. Exterran is the only stock on this list that also passed the screen on July 5.
Foolish takeaway
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:
