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 last 30 days. These three food, beverage, and tobacco stocks made the list:
|
Security |
Net Number of Buys |
No. of Shares Bought |
Total Value |
Market Cap (in millions) |
|---|---|---|---|---|
|
Brown-Forman |
1 |
3,240 |
$224,000 |
$8,955 |
|
Molson Coors Brewing |
2 |
4,000 |
$170,000 |
$7,698 |
|
Lorillard |
2 |
900 |
$51,000 |
$13,810 |
Source: Capital IQ, a division of Standard & Poor's, as of August 10, 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 Brown-Forman made an open-market purchase worth $224,000, while two insider buys at Lorillard were worth a less head-turning $51,000.
Both are bullish signs, but the purchase of Brown Forman -- which has a far better five-year net income CAGR than competitors Fortune Brands
None of these stocks are repeats from when I ran the screen on July 5, and Smithfield Foods
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:
