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 past 30 days. These 12 biotech stocks made the list.
Net Number of Buys
Number of Shares Bought
Market Cap (Millions)
|Ligand Pharmaceuticals (Nasdaq: LGND )||8||786,442||$8,640,000||$244|
|Halozyme Therapeutics (Nasdaq: HALO )||3||1,014,000||$6,030,000||$683|
|ZIOPHARM Oncology (Nasdaq: ZIOP )||2||851,522||$4,070,000||$342|
|Opko Health (AMEX: OPK )||11||628,000||$2,480,000||$1,123|
|Human Genome Sciences||5||53,371||$366,000||$2,957|
|BioSante Pharmaceuticals (Nasdaq: BPAX )||4||107,000||$241,000||$290|
|Keryx Biopharmaceuticals (Nasdaq: KERX )||4||37,500||$116,000||$273|
|GTX (Nasdaq: GTXI )||1||30,000||$110,000||$222|
Source: Capital IQ, a division of Standard & Poor's, as of Aug. 17, 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 Ligand Pharmaceuticals, which develops and acquires royalty generating assets, made eight open-market purchases worth a total of $8,640,000. In contrast, one SciClone Pharmaceuticals insider spent $10,000 on open-market buys. Both are bullish signs, but the Ligand purchases look more promising. The stock doesn't get much attention from Foolish investors; perhaps it deserves more.
Notably, Opko Health and GTX also made the list when I ran the screen on June 16, and Opko made the list when I ran the screen on July 18. Opko stock plunged in March after the company announced plans to raise $100 million of capital through a secondary stock offering.
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: