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 two 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 options 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.
Market Value of Transaction
(out of 5)
|CVS Caremark (NYSE: CVS )
||Per Lofberg, EVP & President, Caremark
|NYSE Euronext (NYSE: NYX )
||Marshall Carter, Director
Although following the lead of insiders can be profitable, we still recommend you do further due diligence to determine whether these stocks fit your portfolio. 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.
With pharmacy giant CVS Caremark trading just under its 52-week high -- indeed, at some of its highest levels ever -- a $2 million investment in the company's stock by the president of its Caremark division is certainly a vote of confidence that it can go higher still.
No doubt it's predicated on CVS' being able to steal a lot of customers who are fleeing Walgreen (NYSE: WAG ) after the nasty split from pharmacy benefits manager Express Scripts. While Walgreen is confident it can keep some 97% of its customers, there may be some concern showing, as it is heavily investing in a network that will better coordinate prescription refills from participating pharmacies. Importantly, it doesn't include CVS or Rite-Aid.
At least one analyst has suggested that CVS might increase its bargaining power against the proposed Express Scripts-Medco Health Services merger by acquiring Walgreen. The Fool's Austin Smith thinks the growing opposition and antitrust concerns over the Medco-Express union could put an end to that proposed deal, but one would suspect with Walgreen and CVS being the top two pharmacies in many markets where they do business, there would also be grave antitrust concerns to a CVS-Walgreen hookup.
With additional stock buybacks and dividend increases on tap for 2012, CAPS member MHenage finds CVS a place where investors can see attention to increasing shareholder value at work:
CVS has been generating an average of $1 billion in free cash flow for the last 4 quarters. The company will benefit from Walgreens not accepting Express Scripts customers. The company is buying back shares and can afford to continue to increase their dividend.
Add the pharmacy to your watchlist and let us know on the CVS Caremark CAPS page if you think it has the prescription for growth.
Following the failure of its attempted takeover of Deutsche Boerse because of regulatory concerns, NYSE Euronext has suggested it's going to go for growth through initiatives targeting information and technology. That segment has provide strong performance with rising revenue, even though it accounts for only a small portion of the exchange's total sales.
Yet NYSE isn't abandoning the M&A field of play. It's making an active bid for the London Metal Exchange, the world's largest futures exchange, which offers futures and options contracts on base and other metals, but it's facing off against CME Group (NYSE: CME ) -- which would like to add the LME to its Comex -- and IntercontinentalExchange.
With the dozen Wall Street analysts who follow it unanimously in agreement that NYSE Euronext will outperform the market averages, and with 97% of the CAPS community who have weighed in on the stock also seeing it being able to beat the Street, it seems apparent they believe it will build on the gains it has already made this year.
Add NYSE Euronext to the Fool's free portfolio tracker so you'll be able to receive regular updates on how it's doing.
On the inside track
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