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.
Market Value of Transactions
||Robert Goergen, chairman & CEO||$20.9 million||*|
||John Rolls, director||$132,000||**|
||Harold Simmons, chairman^||$292,000||*|
Source: finviz.com; Motley Fool CAPS.
Although following the lead of insiders can be profitable, we still recommend you do further due diligence to determine whether these stocks are right for your portfolio. This isn't a list of stocks to sell or buy, just the inside track on companies you might want to check out further.
Just stay away
Who knew candles could be so darn popular? But they must be, because home goods seller Blyth has been on a tear this year, nearly doubling since January and up more than 50% in the past 30 days.
Like Amway or Tupperware, Blyth sells most of its wares through home parties where independent salespeople host friends and family to gather round and buy candles, accessories, and seasonal decorations. It also offers weight management products, nutritional supplements, and energy drinks, just as competitor Herbalife
Most CAPS members don't understand the run-up, as only 42% of those rating the company think it can outperform the broad market averages. Please give your own opinion on the Blyth CAPS page and tell us if you think it can hold a candle to future growth.
A transforming event
June might prove to have been a turning point for power plant maker FuelCell Energy, which reported receiving an order from steel producer POSCO for 70 megawatts of fuel cell kits, worth $129 million over two years. And the market researchers at Pike Research recently rated it as the leading developer of fuel cell technology, based on its product portfolio, strategy to go to market, and market share, putting it ahead of United Technologies'
CAPS All-Star jlmjlm77 noted last month that insiders were starting to nibble at FuelCell's stock; that's increased a little more in the latest reports. Analysts are bullish on its prospects, too, with seven of eight Wall Street pros seeing it outperforming the market. They expect the company's net loss to narrow by 41% this year on a 68% jump in sales, follow by a further 43% reduction in losses next year.
A conservative estimate
Valhi Chairman Harold Simmons maintains his voracious appetite, buying another chunk of the waste specialist's stock and adding to his collection of insider buys by way of a complex structure of related companies. He's also chairman of Titanium Metals
This is an overvalued holding company that is having way too much of a rosy picture in terms of future prospects. While I agree that TIE is doing well due to the recent BOEING supply agreement and it's ability to continue to raise prices somewhat in a somewhat constrained supply environment, it just cannot support the valuations going forward.
The waste specialist flies low under Wall Street's radar, but only two-thirds of those rating it on CAPS say it will outperform the broad market indexes. Think you can dig its continued success? Add the stock to your watchlist to find out and don't waste the chance to add your opinion to the Valhi CAPS page.
On the inside track
Following the insiders can be a path to profits, but it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Sign up today for the completely free service, and tell us whether it's worth trading on this inside information.
The Motley Fool owns shares of Tupperware Brands. Motley Fool newsletter services have recommended buying shares of Titanium Metals. 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.