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 often 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 last 30 days. These five software and IT services stocks made the list:
|
Security |
Net Number of Buys |
No. of Shares Bought |
Total Value |
Market Cap (in millions) |
|---|---|---|---|---|
|
Unisys |
5 |
23,478 |
$297,000 |
$729 |
|
Constant Contact |
2 |
10,000 |
$179,000 |
$505 |
|
Lender Processing Services |
4 |
171,000 |
$166,000 |
$1,398 |
|
RealD |
8 |
65,372 |
$132,000 |
$646 |
|
Fiserv |
1 |
1,000 |
$53,000 |
$7,536 |
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 Unisys made open-market purchases worth $297,000, while an insider buy at Fiserv was worth a less-head-turning $53,000.
Both are bullish signs, but the purchase of Unisys looks more promising. Last month the stock plunged after Unisys reported its third substantial estimate miss in four quarters. The company's earnings have been unpredictable; the insider buy may signal the next surprise will be a positive one.
Lender Processing Services is the only repeat from when I ran the screen on July 8, when VMware
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:
