If you want someone to really pay attention to what you are
saying, then all you have to do is put your money where your mouth
is.
Consider the
CEO
of Company X. His stock price is in the proverbial toilet. He can't
get a break on
Wall Street
, and the problems on
Main Street
aren't looking like they're going to do much for his
bottom line
, either. No one is too surprised if he sells
shares
of his own company's stock.
But what if he starts buying? That's a whole other ball game, isn't
it? The executive management and board members know what's really
going on and how the company can react to it.
That's the point of monitoring insider transactions.
So today, we're going to look at potentially game-changing
companies insiders have been buying.
Using the Bloomberg Professional Service, I performed a special
search function to display all insider trades for the past six
months with a
market value
of more than $1 million. Because stock is often part of an
executive's total compensation package, I excluded filings that
were made to exercise stock options.
Here are what I believe to be the most illuminating insider trades
of true game-changing stocks from the past six months...
1. Amyris (Nasdaq: AMRS)
This is a biofuel company, but that's not the whole story -- not by
a long shot. The better description for Amyris is as a "synthetic
biology" company. Its scientists use special organisms that are
basically little living factories that have been genetically
programmed to produce a certain compound. This process leverages
the natural abilities of plants to process sugar, and renewable
sources of plant sugar is the inevitable future of fuel.
Amyris is a pioneer in this field. The company was founded in 2003
and won grant funding from the Bill & Melinda Gates Foundation
to develop the underpinning of an anti-malaria drug. The effort was
a complete success, and Amyris licensed the technology to drug
giant
Sanofi (
SNY
)
, the largest vaccine maker in the world.
Now the company is setting its sights on biofuel, specifically on
generating cellulosic ethanol from Brazilian sugarcane.
What would be perfect here is for me to tell you that this buy was
made by a notable energy expert with unassailable credentials. But
it was actually none other than
Total SA (
TOT
)
, the French oil giant. The company made a $24.5 million bet on
this technology, buying nearly 4.6 million shares of the $215
million company at $5.78 each.
The stock-price chart for this company is brutal: It's down more
than 67% for the year. As the stock fell, however, Total stuck its
neck out and continued to buy more. That speaks to the enormous
amount of conviction Total must have in this company. It's a line
in the sand that screams: "You idiots! Fools! These shares are
worth more than this!"
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2. GeoEye (Nasdaq: GEOY)
This company was the target of a series of buys, totaling more than
$40 million, made by six insiders late last year.
GeoEye is a satellite company that sells images to intelligence
agencies, among other customers. International tensions in a
variety of "closed" hotspots like North Korea and Iran make this
type of signal intelligence invaluable, and such images are the
lifeblood of operations in forward areas like Afghanistan. Without
good satellite coverage, Osama bin Laden would still be living in
his Abbottabad compound.
It surprises people that the military is not the supplier of these
images. But the primary contractors for satellite images are
Digital Globe (
DGI
)
and Geoeye. Both have more business than they can handle.
This series of insider buys happened in the latter part of November
2011 at an average purchase price of $21.98, fairly close to where
the stock trades right now. The nice thing here is that this is a
true "conviction buy" by individuals. None of these trades were
made by a
hedge fund
or another major shareholder -- only executives and directors.
Their message is clear: As the company's stock falls under its
fair value
, we're going to buy it. I expect to see more of this -- Shares are
trading at 11 times
earnings
and 11 times anticipated earnings, but for the past two years
they've been valued far more richly, at 16.7 times earnings, or
more than 50% higher than they are now.
It's a value play then, to some degree. But is it a game-changer?
Yes.
Satellite technology, and GeoEye itself, changed the nature of
intelligence gathering. The company has leveraged its ability to
gather extra-terrestrial images for other commercial purposes, and
production and other services for its clients now accounts for 20%
of its revenue, an area that is likely to grow. This remains an
aggressive growth play.
3. Genomic Health (Nasdaq: GHDX)
This game-changer tests patients for cancer using genomic-based
therapies. The human genome is the genetic blueprint for the body,
and pharmaceutical companies are learning that using the body's own
systems against disease is a very effective therapeutic approach.
Researchers have found that the various intracellular signals that
cause the body to carry out certain functions can be stopped. There
are hundreds of clinical trials for various treatments that target
all sorts of maladies, most notably cancer. The proteins that
signal a cancer cell to divide, for instance, can be stopped, which
effectively ends the tumor's ability to grow.
I covered genome-based companies in a recent issue of
Game-Changing Stocks
. Rather than reinvent the wheel, you can
find out how to access that issue here
.
These insider buys were made by Baker Bro. Advisers LLC, a hedge
fund. With its long history of discovering innovations in the
health care/biotech space, its leading experts on the cutting edge
of the field and with billions of dollars to invest, Baker Bros. is
closely watched. It tends to make big bets on a few industry
leaders, and its "conviction" buys are a
bellwether
on Wall Street.
4. SunPower Corp. (Nasdaq: SPWR)
This was the biggest insider play of the past six months, and it's
a doozie, both for its size and because of the area -- solar has
been largely viewed as dead in the post-Solyndra world, a cruel
joke and a metaphor for failed technology.
Not so fast...
I've got to tell you: It blew my mind when I saw who made this
trade. It was Total SA -- again. The French oil company made a
massive bet on biofuel with its Amyris play, but it's made a
gargantuan play on solar.
So far, it has been a loser. The trades were made at $8.88 and the
shares have since fallen to $5.44. The question, of course, is what
exactly this French oil company is thinking. We'll take that up in
my next issue of
Game-Changing Stocks
.
Risks to Consider:
These are all cutting-edge companies with fairly small
market
capitalizations. As such, you need to be prepared for quite a bit
of volatility.
Action to Take -->
All of these companies are worth looking at, and they all have the
potential to deliver serious short-term and long-term results. My
favorites mirror the Total plays, Sunpower and Amyris.
--Andy Obermueller
Andy Obermueller 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.