Famed money manager Peter Lynch gave us the inside scoop on how to look at insider transactions. Executives can sell their stock for any reason, he said, but they only buy for one: They think the price is going to go up!
Today, I've highlighted a handful of insiders who have made big purchases of their own company's stock in the past week. These aren't executives getting big chunks of shares from option grants. Rather, they're insiders putting their own money on the line, buying shares at market prices. I then paired that information with insights from the members of Motley Fool CAPS to see if they think the stock has the same prospects the insiders do.
|
Stock
|
Insider, Position
|
Market Value of Transactions
|
CAPS Rating (out of 5)
|
| Apache (NYSE: APA ) |
Chansoo Jung, director |
$0.5 million |
**** |
| Coldwater Creek (Nasdaq: CWTR ) |
Dennis Pence, chairman and CEO |
$7.0 million |
** |
| Valhi (NYSE: VHI ) |
Harold Simmon, chairman |
$0.3 million |
**** |
Source: FinViz.com.
Although following the lead of insiders can be profitable, we still recommend you do further due diligence to determine whether these stocks ought to be sold from your own portfolio -- or would make a good addition! So this isn't a list of stocks to sell or buy, but just the inside track on companies you might want to check out further.
Eat up!
While Apache director Chansoo Jung might have purchased the largest tranche, he wasn't the only one buying stock. Together, three insiders including the company's executive VP and a second director bought over $1 million worth of stock this month on the open market.
Shares of the independent oil and gas producer started October on the outs, down more than 40% from their 52-week high. But as the cool, crisp fall weather set in, the mercury on the driller's shares began to heat up, and they've since risen 27% in the ensuing weeks.
Oil prices are rising again as U.S. supplies look tight and China's manufacturing sector looks like it rode out the rough waters in fine condition. China's PMI index crossed over into expansion territory again, giving world markets a huge sigh of relief that the engine propping up financial markets everywhere isn't about to collapse. At least not yet.
Fool contributor Abantika Chatterjee notes that China, Asia, and the Middle East are expected to account for almost 95% of the net growth in the oil sector, making Apache's Australian oil fields, where it shares space with Chevron (NYSE: CVX ) and Royal Dutch Shell (NYSE: RDS-A ) , all the more important. No wonder its depressed stock price looked attractive to insiders.
CAPS member GrizWin is impressed:
Diversified all over the globe. Decent yield. Way too cheap when compared to [its] peers.
Let us know in the comments section below or on the Apache CAPS page if you think insiders will continue to gorge themselves on the stock. Also add it to your watchlist to be notified of the latest developments.
A dose of cold water
Women's apparel retailer Coldwater Creek hasn't negotiated the shoals of the recession very well, and its stock has reflected that misery, dropping 73% from its recent highs. It certainly doesn't look like it's getting better, as it just provided third-quarter guidance that points to wider-than-expected losses as weak traffic in its stores takes its toll. Losses are expected to be as much as $0.36 a share, three times greater than they were a year ago.
Compare that with another women's retailer, Ann, whose stock has bounced 40% off its lows and has overwhelming support of Wall Street analysts. I'm not sure its move into home goods is a smart one, but it has been working on reconnecting with its target shopper, and a new accessories line should help. Coach (NYSE: COH ) has led the way in showing how accessories make a successful, profitable business.
CAPS member nibs61 looks at the level of insider buying at Coldwater and is convinced that it wouldn't be throwing good money after bad.
Insider buying is a great sign. I work at a business and I know when we are doing well and we are not. I believe they would not be wasting their money if they did not KNOW that their business is going to be successful.
Add Coldwater to your watchlist, and let us know in the comments section below if you think it is dressed for success.
Rising fortunes
Harold Simmons is back once again, buying shares of waste-management specialist Valhi. We saw him here about a month ago scooping up $6 million worth of stock through his TIMET Finance Group. He's bought another $2 million worth since then.
His family of businesses have struggled lately, with Kronos Worldwide, a maker of titanium dioxide, falling more than 30% over the past three months. Pigment price increases, though, helped Dow Chemical (NYSE: DOW ) , the world's largest Ti02 producer, double profits last quarter, so Kronos might see some benefit as well when it reports earnings next week.
CAPS member davidm9999 remains unconvinced that Valhi will perform so well: "VHI's P/E is reminiscent of other bubble companies (like NFLX, RIMM, and GMCR). Look to see it fall hard in the coming year."
That could explain why a third of the CAPS members rating Valhi also think it won't beat the Street, but add the waste specialist to the Fool's free portfolio tracker and tell us on the Valhi CAPS page if you think this is a good place to sink more money.
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