At many companies, a key window is about to close...
Several weeks before a quarter ends, insiders are blocked from conducting any more transactions in company stock. It's a smart move that helps reduce the chance that an insider will profit (by buying or selling) in the face of quarterly results that are better (or worse) than outsiders are expecting.
Yet before the insider trading activity slows sharply, these folks have sure been busy: The past 30 days has seen a tremendous amount of selling, as you'd expect in a stock market hitting all-time highs, but also a large amount of insider buying.
Here are the recent buys that have caught my eye. (All data supplied by InsiderInsights.com .)
1. Clean Energy Fuels (Nasdaq: CLNE )
In early March, three directors bought a combined 0,000 of this stock, and in early June, director Warren Mitchell followed that up with another 0,000 purchase. This has been a vexing story for investors, as the company's base of natural gas filling stations is not yet large enough to push the company into profitability. Shares have slid from the mid-s two years ago to a recent .
The good news: The business is almost there, as positive EBITDA (earnings before interest, taxes, depreciation and amortization) is expected to emerge in the third quarter -- and grow from there. Management expects a new 12-liter natural gas engine, which is undergoing testing by fleet testing, to help give a solid boost to demand later this year, which sets the stage for around million in EBITDA by next year.
2. Dick's Sporting Goods (NYSE: DKS )
This sporting goods retailer recently warned of sales weakness, especially in the golf and hunting categories. As a result, shares have pulled back sharply, to the mid-s to levels not seen since early 2012. In response, four different insiders have acquired a combined 143,000 shares, worth roughly million.
Despite the shortfall, Merrill Lynch stands by this stock with a "buy" rating, noting that DKS is "the best-positioned sporting goods retailer in the U.S.," capable of double-digit annual earnings growth, once the near-term sales headwinds in those two departments have calmed. Other categories such apparel, footwear and team sports gear are still expected to fuel positive same-store sales comparisons in the quarters ahead. Merrill's current price target represents 30% upside.
3. Kinder Morgan (NYSE: KMI )
This energy pipeline firm is considered to be one of the pillars of the master limited partnership ( MLP ) category, with a market value exceeding billion. Back in January, my colleague Joseph Hogue laid out a strong case for the long-term health of this company's business model. The short-term picture has been a bit more challenged. Over the past year, shares have steadily drifted downward and are only now reversing course -- thanks perhaps to massive amounts of insider buying.
Since February, five different insiders have acquired more than million in stock, without a single insider sale during that time. They may be pointing the way towards a solid dividend growth story. Analysts at Merrill Lynch predict this stock's dividend will grow 8% in each of the next three years, which is below the double-digit dividend growth rate seen in recent years but should be enough to push the payout to a share by 2016. That will work out to a 5.7% prospective yield for patient investors.
4. Ameresco (NYSE: AMRC )
I've been a big fan of this company's business model: Ameresco helps companies and government agencies to sharply boost the energy efficiency of the buildings they own. But it's been a tough stock for investors to handle. Shares have fallen sharply in recent months as demand for the company's services has slowed. Sales are likely to be flat this year and grow a modest 6% in 2015, according to analysts' forecasts.
Clients appear to be holding off on major programs to see if Uncle Sam will kick some stimulus money toward energy-efficient improvements. That money is unlikely to arrive, and these potential customers should eventually move forward on their own anyway, as investments in energy efficiency have short payback periods.
Insiders are taking advantage of the lull in the share price: A cluster of insiders has acquired roughly 100,000 shares at an average price of around . Shares have begun to rebound above that point in recent sessions, but they remain far below the 52-week high of .
5. TrueCar (Nasdaq: TRUE )
Other stocks with recent significant insider buying include:
• Gladstone Capital (Nasdaq: GLAD )
• Xenoport (Nasdaq: XNPT )
• 8x8 (Nasdaq: EGHT )
• Freightcar America (Nasdaq: RAIL )
• Natural Grocers by Vitamin Cottage (Nasdaq: NGVC )
Risks to Consider: The standard caveat applies: Insiders tend to be clear value-spotters, in a long-term context, but their ability to signal short-term stock price moves is limited.
Action to Take --> Insider buying is best used as a basis for further research and should constitute just one factor in your buying decisions. Indeed other factors, such as valuation and growth, should be primary factors -- the presence of insider buying should merely underscore any bullish conclusions.
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