In light of the uncertaineconomy , a wide range of insiders have
sought to sell company stock, fearing we may eventually have a
repeat performance of 2008 when the
and the stock market headed south. Yet a few bullish insiders are
undaunted and have sought toload up on their company stock while
others remain skittish. Here are three companies with significant
insider buying that recently caught my eye.
1. Titanium Metals (
In a push to make cars, planes, golf clubs, medical devices and
many other items stronger and lighter, industrial designers are
increasingly turning to titanium. The lustrous metal has the
highest strength-to-weight ratio of any element. This may explain
is using a hefty amount of titanium in its new 787 Dreamliner
Boeing's biggest titanium supplier: Titanium Metals. The Dallas,
TX-based firm has been around for 6o years, but really only found
its footing in the last decade as demand surged. Sales rose from
around $400 million in 2003 to $1.2 billion in 2006. Yet the tough
economy eventually took its toll, and demand for this high-priced
metal started to slump. Titanium Metals' sales fell below $800
million by 2008 and are only now rebuilding a head of steam.
Analysts think sales can top $1 billion this year, and perhaps hit
a record $1.25 billion in 2012.
Annual sales growth of 20% is impressive at a time when the broader
global economy is barley moving forward. Even more impressive, this
is a company with a great deal ofoperating leverage : profits are
expected to grow twice as fast -- at least 40% in 2011 and 2012.
This bullish outlook explains why company Chairman Harold Simmons
has been loading up on
. Since May 20, he's picked up 3 million shares at an average price
As Jonathan Moreland at
points out, Simmons has a solid track record. He purchased a major
block of stock in early 2005, and the stock zoomed ahead 70% that
2. Audiovoxx (Nasdaq: VOXX)
Investors that regularly track the moves of insiders may have
missed a seemingly modest stock purchase. Fred Farrar, a director
at this consumer electronics vendor, acquired roughly $75,000 worth
of stock on the open market in mid-July, right after fiscal first
quarter results were released.
Audiovoxx's quarter was decent enough, with growth in sales and
profits coming from a late 2010
of audio speaker manufacturer Klipsch. The $166 million purchase
forced Audiovoxx to part with a considerable amount of cash -- at
one point in 2010, the company's cash balance was higher than its
. Despite the cash drain, this is still very much a
play, which is perhaps the main reason why Farrar snapped-up
Here's the math... Audiovoxx is currently valued at around $180
million. Yet the company is owed $119 million from customers,
carries another $139 million ininventory and has $40 million in
. This adds up to $218 million in
net liquid assets
--more than the whole value of the company. Lastly, Audiovoxx is
generating about $9 million to $10 million in adjusted
before interest, taxes, debt and
) every quarter, which should only serve to strengthen the balance
sheet as time passes. If shares moved up just to reflect those
balance sheet factors, then you'd be looking at a 20% upward move.
If shares moved up to six times projected EBITDA (valuing the
company at $240 million), then you'd be looking at a 33% gain.
3. Rentrak (Nasdaq: RENT)
I highlighted this media analysis firm
late last month
as a potential second-half rebounder. Just a few days later,
insiders took up the cause, collectively purchasing more than
20,000 shares at an average purchase price of around $18. Shares
still hold great appeal from where I sit.
Action to Take -->
Now thatearnings season is underway, expect insider action to
build. In tough times like this, insider moves can signal upside
for a specific company even when the broader economic outlook is
challenging. And this could hold true for any of the three stocks
-- David Sterman
Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
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