Smart Money: Low-Debt Growth Stocks Boosted by Insiders and Big Money Managers

Another historic moment to mark on the calendar: The U.S. national debt has eclipsed the entire U.S. economy.

The amount of money the federal government owes to its creditors, including the money owed to itself, such as IOUs to government retirement, social security and other programs, has hit $15.23 trillion.

The total money owed is equivalent to the estimated value of all goods and services the U.S. economy produces in a year, an amount valued at $15.17 trillion as of September. This comes across as a troubling sign.

"Long-term projections suggest the debt will continue to grow faster than the economy, which would have to expand by at least 6% a year to keep pace," reports USA TODAY.

The U.S. joins five other advanced nations with debt greater than their economies: Greece, Iceland, Italy, Japan, and Portugal.

Perceptions of debt
National debt can be a difficult thing to understand. The government owes approximately $4.7 trillion of the debt to itself, and that payment is less of an immediate issue.

By discounting the U.S. government to U.S. government debt, the debt is roughly $10.5 trillion, about 70% of the national economy. This is still very high.

The size of the debt also minimizes the importance of Congress' August agreement to cut $1 trillion from federal agencies over 10 years. An additional $1.2 trillion in automatic spending cuts will begin next year if Congress cannot agree to better ways to curb more spending.

Business section: Investing ideas
Bearish investors are worried that debt growth will outpace economic growth. With this in mind, we wanted to take a closer look at low-debt companies that are expected to grow rapidly over the next five years.

As a start, we collected data on institutional money flows, and identified low-debt, high-growth stocks that have seen significant buying from big money managers over the last three months.

To further refine the quality of the list, we collected data on insider transactions and identified a list of stocks that have seen significant insider buying over the last six months.

Theoretically, insiders know more about their companies than anyone else. So if they're using their own cash to buy the shares of their employers, you'd better pay close attention.

Insider executives and big money managers, aka "smart money investors," are optimistic about the outlook of these companies -- do you agree? (Click here to access free, interactive tools to analyze these ideas.)

1. NeoPhotonics (Nasdaq: NPTN  ) : Engages in the design and manufacture of photonic integrated circuit (PIC) based modules and subsystems for bandwidth-intensive, high-speed communications networks. Earnings-per-share growth projected at 52% over the next 5 years. The company's LongTermDebt/Equity ratio stands at 0%, while the TotalDebt/Equity ratio stands at 7%. Net institutional purchases in the current quarter at 821.4K shares, which represents about 5.1% of the company's float of 16.10M shares. Over the last six months, insiders were net buyers of 6,000 shares, which represents about 0.04% of the company's 16.10M share float.

2. Carbonite: Provides online backup solutions for consumers and small and medium sized businesses. Earnings-per-share growth projected at 27.50% over the next 5 years. The company's LongTermDebt/Equity ratio stands at 0%, while the TotalDebt/Equity ratio stands at 0%. Net institutional purchases in the current quarter at 6.5M shares, which represents about 71.04% of the company's float of 9.15M shares. Over the last six months, insiders were net buyers of 2,066,920 shares, which represents about 22.59% of the company's 9.15M share float.

3. 8x8 (Nasdaq: EGHT  ) : Develops and markets telecommunications services for Internet protocol (IP), telephony, and video applications, as well as provides Web-based conferencing and unified communications services. Earnings-per-share growth projected at 26.25% over the next 5 years. The company's LongTermDebt/Equity ratio stands at 0%, while the TotalDebt/Equity ratio stands at 0%. Net institutional purchases in the current quarter at 2.8M shares, which represents about 5.01% of the company's float of 55.92M shares. Over the last six months, insiders were net buyers of 12,395 shares, which represents about 0.02% of the company's 55.92M share float.

4. Aruba Networks (Nasdaq: ARUN  ) : Provides distributed enterprise networks that securely connect local and remote users to corporate information technology resources worldwide. Earnings-per-share growth projected at 24.66% over the next 5 years. The company's LongTermDebt/Equity ratio stands at 0%, while the TotalDebt/Equity ratio stands at 0%. Net institutional purchases in the current quarter at 10.2M shares, which represents about 10.16% of the company's float of 100.39M shares. Over the last six months, insiders were net buyers of 444,930 shares, which represents about 0.44% of the company's 100.39M share float.

5. Universal Display (Nasdaq: PANL  ) : Engages in the research, development, and commercialization of organic light emitting diode (OLED) technologies and materials for use in flat panel display, solid-state lighting, and other product applications. Earnings-per-share growth projected at 24.50% over the next 5 years. The company's LongTermDebt/Equity ratio stands at 0%, while the TotalDebt/Equity ratio stands at 0%. Net institutional purchases in the current quarter at 5.3M shares, which represents about 16.94% of the company's float of 31.29M shares. Over the last six months, insiders were net buyers of 406,907 shares, which represents about 1.3% of the company's 31.29M share float.

6. Lannett Company: Develops, manufactures, packages, markets, and distributes generic pharmaceutical products sold under generic chemical names in the United States. Earnings-per-share growth projected at 22.50% over the next 5 years. The company's LongTermDebt/Equity ratio stands at 7%, while the TotalDebt/Equity ratio stands at 9%. Net institutional purchases in the current quarter at 1.0M shares, which represents about 6.84% of the company's float of 14.61M shares. Over the last six months, insiders were net buyers of 29,267 shares, which represents about 0.2% of the company's 14.61M share float.

7. American Public Education (Nasdaq: APEI  ) : Provides online higher education focused primarily on serving the military and public service communities. Earnings-per-share growth projected at 21.89% over the next 5 years. The company's LongTermDebt/Equity ratio stands at 0%, while the TotalDebt/Equity ratio stands at 0%. Net institutional purchases in the current quarter at 795.3K shares, which represents about 4.74% of the company's float of 16.78M shares. Over the last six months, insiders were net buyers of 283,600 shares, which represents about 1.69% of the company's 16.78M share float.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


 

List compiled by Eben Esterhuizen, CFA. Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above. Institutional data sourced from Fidelity, insider data sourced from Yahoo! Finance, accounting data sourced from Google Finance.

The Motley Fool owns shares of American Public Education. Motley Fool newsletter services have recommended buying shares of American Public Education and Universal Display. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On January 10, 2012, at 3:29 PM, beavercreeked wrote:

    I have been long in PANL for 5 years, but a word of caution, the PPS is manipulated by blogs with half truths and statements ignoring the facts. If you by below $40 I expect you will de well in a year, but be prepared for big drops if the climate is ripe for a short attack. Pay attention to real news not unsubstantiated blogs.

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