Every time the
swoons, the level of insider buying picks up sharply. It's the
natural reflex company officers and directors have in a bid to
defend their stock. Trouble is, these folks don't have the greatest
track records. If the market falls further, then their stocks often
perform poorly. And if the market rebounds, then their stocks
simply rise in tandem with the rest of the pack.
Instead, I like to watch the actions of insiders when markets are
moving sideways or are on an upswing. That's when insiders give a
much clearer signal that
To be sure, insider buying appears to be at a lull since the market
has been surging. The
of daily and weekly filings has been fairly low in 2012. But the
stocks that are seeing fresh insider buying surely deserve a close
look right now. The 11 stocks in the table below have been the
beneficiary of at least $400,000 of fresh buying since the start of
Although this list almost exclusively involves officers who
actually work at the company in question, I've also included
in this table, even though some of the biggest buying came from its
major shareholders (who must register their moves with the SEC just
as company officers do).The reason I bring this up is because
I've recently written
about the intriguing
potential for this fast-food operator, and it's a
sign that the company's key investors are showing a $100 million
vote of confidence in new
I usually caution that turnarounds can be slow to take shape,
because they involve upfront investments in the business that
investors tend to dislike. But if Wendy's management can make
tangible progress and shares continue to languish at current
levels, then it will be interesting to see what shareholder Nelson
Peltz will do. His investment firm, Trian Fund, already owned 23%
of Wendy's at the end of 2011, and this stake has now bumped up to
27%. It's curious to note that in June 2011, Peltz announced that
an unnamed third-party had approached him about taking Wendy's
private. Nothing seems to have come out of that overture, perhaps
because the two parties disagreed on a
Perhaps Peltz was just blowing smoke. But it's clear that shares
are sharply undervalued in relation to
, and would post major gains if the wide spread between the two
firms' operating metrics ever narrowed.
This company is at the opposite end of the spectrum from Wendy's.
The medical device maker was listed on the Australian stock
exchange back in 2002 and was cross-listed on the Nasdaq beginning
in February 2010. Shares got off to a rousing start then, doubling
in value on their second day of U.S. trading to almost $18, but
it's been downhill ever since, with shares now trading below $4.
Unilife sells safety syringes that can be pre-filled by drug
manufacturers or to hospitals that order them un-filled. These
syringes' needles automatically retract after usage, eliminating
the chance of unnecessary spikes for health care professionals.
Getting Food and Drug Administration approval for a pre-loaded
syringe is a cumbersome process, as each drug/syringe pairing needs
to be approved. The company already has a licensing and supply
agreement with Sanofi-Aventis (NYSE:
), with more expected to follow. Sanofi has spent $40 million to
help Unilife refine its technology and is expected to pay Unilife
$5 for each syringe.
The share price sell-off comes as investors grew impatient for the
Sanofi relationship to start ramping up. Analysts once said Unlife
would be in the midst of a major revenue upturn by now, but recent
quarterly results have shown minimal revenue. This should normally
tell investors to simply move on to other ideas -- yet in this
instance, a fresh look for upside is merited.
First, the Sanofi relationship appears stalled but not broken.
Sales may only hit $10 million to $15 million in the current
that ends this June, but analysts expect to see sales finally start
to build in fiscal 2013. The current consensus forecast of $69
million in fiscal 2013 sales is likely a stretch. Investors would
be cheered if Unilife had just $30 million or $40 million in sales,
as this would at least imply a better sales ramp to come.
Second, CEO Alan Shortall has spent nearly $1 million acquiring
stock on the open market in the past seven weeks. He has a clear
read into discussions that Unilife is holding with current and
potential partners and would be foolish to pony up this kind of
money if the company's 2012 prospects were dim.
Risks to Consider:
Unilife is clearly a high-risk play, but investors seem to have
abandoned this still-promising medical device firm. Also, when
looking at the entire list above for further investment ideas,
remember that insiders may know their own businesses very well, but
are not always great stock pickers. So use their moves only as a
basis for further research.
Action to Take -->
As long as the market stays aloft, keep an eye on insider filings.
In an environment where bargains are getting harder to come by,
stocks bought by insiders may provide one of the few areas for
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-- David Sterman
David Sterman does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC does not
hold positions in any securities mentioned in this article.