Investors may analyze financial statements and scan recent news as part of their research process. But at the end of the day, for lack of a better term, many may be left to make an educated guess about whether a given company's stock has upside. Company insiders, however, seem to have somewhat of an advantage.
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While insiders are not allowed to trade on inside information, and I wouldn't be surprised if sometimes they are left guessing, they should generally have a better feel for the company's longer-term prospects than the average investor. In short, it often makes sense to pay attention to companies with recent insider buying.
Five Companies With Recent Insider Buying
With that in mind, below is a list of companies with recent insider buying, according to data on Zacks intraday April 16:
| Company |
# Of Insider Buys (in past 12 weeks) |
Market Cap |
| American Express (NYSE:AXP) |
3 |
24 B |
| Ann Taylor Stores (NYSE:ANN) |
3 |
388 M |
| Harley-Davidson (NYSE:HOG) |
2 |
4.2 B |
| Herbalife (NYSE:HLF) |
2 |
1.1 B |
| Monster Worldwide (NYSE:MWW) |
2 |
1.4 B |
| Source: Zacks screen |
Harley-Davidson
Shares of Harley-Davidson are well off their 52-week highs; however, some signs indicate that now might be the time to hop on.
At least one insider seems convinced that the stock is a good value. A look at the activity on Yahoo! Finance reveals that a director, George Conrades, bought 50,000 shares February 26 and 27. There's no telling whether Conrades will ultimately book a profit on those purchases. But so far, the shares have moved up nicely since his buys. The data indicate he bought for an average price of $10.27 per share. As of April 17, the shares were trading above $19.
First-Quarter Results
Interestingly, on April 16 Harley-Davidson released its first-quarter results. In the period ended March 29, the Wisconsin-based company generated $1.29 billion in revenue, which was a decline from the $1.31 billion it turned in during the comparable period last year. Meanwhile, it reported earnings per share (EPS) of 50 cents, whereas in the comparable period last year it generated 79 cents a share. (Use these key attributes to uncover top-level investments; read Find Investment Quality In The Income Statement.)
But the big news was its comments regarding shipments. More specifically, in the release was the following comment: "The company today reaffirmed its plans to ship between 264,000 and 273,000 Harley-Davidson motorcycles to dealers worldwide in 2009, a 10 percent to 13 percent reduction from 2008." Note the word "reaffirmed". In other words, its comments appear consistent with those it made back in January in conjunction with its Q4 results. Frankly, I think this consistency will be viewed as a positive by the investment community.
Harley-Davidson stock currently trades with a forward P/E of about 12 times the current year estimate of $1.48, according to Thomson Financial Networks. In 2010 the company is expected to earn $1.83, which implies an expected EPS growth rate of about 23.6%.
The Dividend
Earlier this year, Harley-Davidson cut its dividend from 33 cents to 10 cents. However, the forward yield is still better than 2%, which in this environment is attractive. For the record Polaris (NYSE:PII), which makes off-road vehicles, released its Q1 earnings April 16. It beat estimates, and in the release it said: "Full year 2009 net income is expected to be in the range of $2.50 to $3 per diluted share, unchanged from previously issued guidance." Note that in January, Polaris' board approved a bump up in its dividend.
Speaking of companies that make cool vehicles, one company I'm not too keen on right now is Arctic Cat (Nasdaq: ACAT). The Minnesota-based maker of ATVs is expected to ooze red ink this year. (Sometimes, positive anouncements can mean bad news for a stock. Find out why in Can Good News Be A Signal To Sell?)
Bottom Line
Insiders aren't always right, but often they have a better feel for what is going on than the average investor. This is why I like to pay attention to stocks with recent insider buying.