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 buy for only one: They think the price is going up!
Today, I've highlighted two insiders who have made big purchases of their own companies' 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 and buying shares at market prices. I then paired that information with insights from the members of Motley Fool CAPS to see whether they think the stock has the same prospects the insiders do.
Market Value of Transactions
CAPS Rating (out of 5)
|Overseas Shipholding Group (NYSE: OSG )||Diane Recanati, 10% owner||$1.5 million||**|
|Sunrise Senior Living (NYSE: SRZ )||Carlson Capital, 10% owner||$1.7 million||***|
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.
You can bank on it
As part owners of Overseas Shipholding Group , the Recanatis' finances are tightly entwined in the shipper. Diane Recanati, the mother of Oudi Recanati, a company director who's also heavily bought more shares of the shipper, purchased shares last week from the trust of another son, Michael.
More telling, perhaps, is the purchases being made by Charles Fribourg, a director who has been buying shares right along with the Recanatis. In November alone he bought more than $2 million worth of stock.
Shares of Overseas are nearly two-thirds lower than their 52-week high of last August, but that was still well below where they traded at the beginning of 2011. In fact, a glut of tankers has swamped shippers Frontline (NYSE: FRO ) , which reported a third-quarter loss of $136 million and needs a cash infusion to stay afloat, and Teekay Tankers (NYSE: TNK ) , which is down almost 68% last year as investors begin to question the sustainability of its dividend. It's also brought Overseas close to the brink.
CAPS member popeye1250 thinks market conditions don't look good for shippers in general or Overseas in particular.
It's all about supply and demand in oil and in ships. Gas prices (and demand) are headed down again and it looks like we'll be having (another? or the same one?) recession for the next two to five years. And China isn't looking good either. The time to buy will be when a lot of the shippers have gone out of business. Then you'll be able to make a lot of money.
While 89% of the All-Stars rating the tanker specialist believe it will beat the market indexes, the two-star rating the investor community assigned it suggests they think there are better places for your money. Let us know in the comments section below or on the Overseas Shipholding Group CAPS page whether you think it will ride out the storm, and then add it to your watchlist to see how it plays out.
All in the family
Nursing-home operator Sunrise Senior Living was the beneficiary of possible takeover chatter last week, which was then fueled by the purchases made by Carson Capital. As its balance sheet has improved, it's also seen an increase in occupancy rates and operating profits. Occupancy at its senior-living communities rose modestly to just under 88% last quarter, while revenue per occupied unit was up 5% from the year-ago period.
While the situation may be stabilizing, it appears Marriott (NYSE: MAR ) didn't want to be on the hook any further for its obligations related to 10 of 14 communities Sunrise leased from Senior Housing Properties Trust. Marriott guarantees the obligations Sunrise has under the leases and apparently forced the senior-living operator to notify the trust it wanted to sever the lease when it expires.
And the situation hasn't improved so much that the trust was willing to let Sunrise take on the obligations itself. When Sunrise offered to do so, Senior Housing Properties declined unless significant changes were made to the terms. As a result, the two will part ways with those communities.
That hasn't stopped almost 90% of the CAPS All-Stars who've rated Sunrise from believing it will still outperform the broad market averages. Add Sunrise Senior Living to your watchlist, and let us know in the comments section below whether you think it's only a matter of time before the sun sets on Sunrise.
On the inside track
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