When insiders buy shares on the open market, their companies could enjoy bullish times ahead. Corporate insiders often have the inside track on their companies' prospects, and many of them get paid largely in stock options or restricted shares. Besides, insiders probably wouldn't risk plowing too much of their own money into their own company's stock -- reducing their portfolio's diversity, and increasing its risk -- unless they thought the stock might rise.
With that in mind, I screened for companies where at least one insider made an open-market buy in the last 30 days. These five real estate stocks made the list:
|
Security |
Net Number of Buys |
No. of Shares Bought |
Total Value |
Market Cap ($million) |
|---|---|---|---|---|
|
Urstadt Biddle Properties |
1 | 45,877 | $33,200 | $551 |
|
Realty Income |
1 | 1,000 | $3,300 | $4,381 |
|
Investors Real Estate Trust |
13 | 38,447 | $3,000 | $674 |
|
One Liberty Properties |
1 | 500 | $800 | $230 |
|
PICO Holdings |
1 | 62 | $200 | $642 |
Source: Capital IQ, a division of Standard & Poor's, as of July 22, 2011.
When it comes to the number and total value of insider open-market buys, more can be better; I've sorted this table accordingly. An insider at Urstadt Biddle Properties made an open-market purchase worth $33,200; that's more than 10 times the size of the next largest insider buy on the list. Insider buys worth hundreds of dollars, or even several thousand dollars, just don't seem that noteworthy.
Perhaps most telling is the change since I ran the screen a month ago, when 10 stocks made the list instead of five. That could owe at least somewhat to earnings announcements and trading restrictions that companies place on insiders near quarter's end. That said, the insider buys in last month's screen were much larger, ranging from $66,000 at the low end to 16 purchases of Two Harbors Investment
Foolish takeaway
Insider buying signals that someone who should be in the know is betting that the stock will rise. You can use this list of recent insider purchases as a starting point for further research -- or a good reason to make a contrarian play.
Are these insiders right? To help you find out, the Motley Fool recently introduced a free My Watchlist feature. You can get up-to-date news and analysis by adding companies to your Watchlist now:
