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 often have significant exposure to the company's stock through options or restricted shares that are part of their compensation. 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 will rise.
With that in mind, I screened for companies where at least one insider made an open-market buy in the past 30 days. These 12 pharmaceutical stocks made the list.
|
Security |
Net Number of Buys |
Number of Shares Bought |
Total Value |
Market Cap (Millions) |
|---|---|---|---|---|
|
Valeant Pharmaceuticals International |
12 | 248,645 | $6,460,000 | $12,622 |
|
ViroPharma |
1 | 249,983 | $4,150,000 | $1,405 |
|
Merck |
2 | 47,800 | $1,520,000 | $99,202 |
|
Mylan |
4 | 25,612 | $290,000 | $8,461 |
|
Optimer Pharmaceuticals |
2 | 30,000 | $262,000 | $398 |
|
Impax Laboratories |
3 | 11,500 | $215,000 | $1,219 |
| Johnson & Johnson | 3 | 3,000 | $191,000 | $176,095 |
| Xenoport | 1 | 8,166 | $49,000 | $268 |
| Sagent Pharmaceuticals | 1 | 2,000 | $40,000 | $574 |
| Pfizer | 1 | 2,000 | $36,000 | $144,261 |
| Salix Pharmaceuticals | 1 | 690 | $21,000 | $1,847 |
|
ISTA Pharmaceuticals |
2 | 4,000 | $17,000 | $214 |
Source: Capital IQ, a division of Standard & Poor's, as of Aug. 17, 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. Insiders at Valeant made 12 open-market purchases worth $6,460,000, while one insider buy at ISTA was worth only $17,000. Both are bullish signs, but the Valeant purchase looks more promising. What's more, it's not the first large insider buy of the stock this year. Shortly after a large June insider buy, the company received FDA approval on a new epilepsy drug.
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:
- Add Valeant Pharmaceuticals International to My Watchlist.
- Add ViroPharma to My Watchlist.
- Add Optimer Pharmaceuticals to My Watchlist.
- Add Mylan to My Watchlist.
- Add Merck to My Watchlist.
- Add ISTA Pharmaceuticals to My Watchlist.
- Add Impax Laboratories to My Watchlist.
