News Analysis date published New: 
Friday, October 26, 2012 - 13:00
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Friday, October 26, 2012 - 13:02
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Friday, October 26, 2012 - 13:00

Insiders Love These 3 Retirement Savings Stocks

Friday, October 26, 2012 - 1:00pm

One of my favorite investing strategies is to follow the big money and mimick what the insiders and large money managers are doing.

Fortunately, insiders are required to make their stock transactions public using the SEC form 13F. These filings can provide you with a powerful edge when it comes to choosing which stocks to purchase.

In my experience, I've found that insider purchases often provide better forecasts than insider sales. This is because there are too many reasons for insiders to sell a particular stock. Perhaps the person simply needs to free up capital for personal needs or the executive is selling stock options that would expire soon anyway. In other words, an insider sale doesn't necessarily mean the company is about to have issues.

But an insider buy is a different story. Most purchases happen because the insider truly believes the stock price will move higher. After all, why would they spend their hard-earned money if they didn't think they'd profit with the investment? This is why I place much more weight on purchases than sales when it comes to following the insiders.

Combine this strategy with the one from investing expert Carla Pasternak, the face behind High-Yield Investing, and you could be holding one of the strongest retirement portfolios a person can have. Carla likes to find under-the-radar dividend-paying stocks that can provide investors with the income needed to enhance their quality of life after they leave the workforce. She calls these Retirement Savings Stocks.

Whether you are currently retired, about to retire or just starting to build a nest egg, I think the best time to buy Retirement Savings Stocks is now.

There are many great choices when it comes to heavy insider-buying in Retirement Savings Stocks, but the three stocks below stand out to me as prime candidates...

1. Old Republic International Corp. (NYSE: ORI)
Yield 7.5%

Besides the CEO Aldo Zucaro, who just purchased 10,000 shares of company stock, many other respected investors seem to like this insurance company as well. Hedge fund kingpin Israel Englander, of the highly respected Millenium Management, ramped up his holdings by 63% in the second-quarter of the year. Englander is a highly respected stock trader in the hedge fund world.

It's important to note that Old Republic has lost money during the past several years, but is now showing solid signs of improvement. Operating revenue was up almost 14% in the third-quarter, reaching $1.3 billion. In addition, the company's radio-frequency identity and geometry (RFIG) business is losing less money -- 24% less, to be more precise -- than previous years. In other words, the loss is tightening, which may turn into a profit if the trend continues. Annualized dividend sits at 71 cents per share.

The stock market reacted well to the company's latest results and pushed shares up more than 2% upon release.

2. Integrys Energy Group (NYSE: TEG)
Yield 5%

Two names in the all-time list of the top 10 greatest hedge fund managers own shares of this $4.3 billion natural gas and electric utility -- Renaissance Technologies' Jim Simon, who owns almost 130,000 shares, and Winton Capital Management's David Harding, who has a stake of roughly $29 million in the company.

This utility stock trades at 20 times trailing earnings and experienced earnings improvement in the past quarter. Carla has named Integrys Energy as one of her favorite DRIP stocks (dividend reinvestment plan) available because it has steady payouts and no fees. It currently pays an annual dividend of $2.72 per share.

3. Alliant Energy Corp. (NYSE: LNT)
Yield: 4%

Here's another Midwestern electric and natural gas utility that has become one of my top three dividend-paying/insider buying stocks. Board member Patrick Allen recently bought 459 shares in the company, for a total investment of almost $20,500.

Year-over-year earnings were 29% stronger this past quarter, totalling $2.53 per diluted share. Revenue, on the other hand, dipped 3.1% year-over-year to $3.5 billion. The stock currently pays a dividend of $1.80 per share annually. This stock has a trailing price-to-earnings (P/E) ratio of 18.

Risks to Consider: It's important to note that just because a company has insider buying activity does not guarantee the stock will increase in value. In the stock market, things can change fast and there are no promises. We can only hope to build a profitable portfolio by making the best choices based on the information available.

Action to Take --> I like all three of these high-yielding stocks for a strong retirement-focused portfolio. Adding to your position with DRIPS is a proven strategy for building wealth over the long term.

David Goodboy 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.

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