Key Executives Are Buying Shares Of These 6 Firms

When it comes to insider activities, actions speak louder than words. Too often, we see a company issue a bullish outlook while company executives and directors are unloading large blocks of stock. That kind of cognitive dissonance creates a big red flag.

Yet when insiders speak bullishly and choose to buy rather than sell, the signal to investors is crystal clear.  Here are some companies that are noting bullish prospects, right at a time when insiders are getting more skin in the game.  (All data supplied by insiderinsights.com.)

General Electric Co. (NYSE: GE)
Insiders tend to spend a few hundred thousand dollars when they are feeling bullish. Yet the directors at this conglomerate are taking much bolder action. William Beattie, a company director, acquired $20 million in stock in the open market in February. 

#-ad_banner-#In early April, GE unveiled a far-reaching restructuring that would see the company exit the capital markets business and focus more squarely on the industrial side of the business. My colleague Chris Walczak recently predicted that “the long-term impact of divesting GE Capital’s assets will be a huge win for shareholders.”

Insiders agree. Since April 20, four other directors have acquired another collective $2 million in stock. In fact, excluding a small 1,500 share sale in recent weeks, not a single other insider has sold any GE stock in 2015. Clearly, these directors believe that GE’s struggling shares are finally headed for lift-off. 

Chevron Corp. (NYSE: CVX)
Investors are starting to re-focus their attention on energy stocks. Crude oil at $60 per barrel has a very different impact on profit levels than $45 oil. And if oil moves back to $70 a barrel by the end of the year, as some Wall Street strategists predict, then energy stocks are likely to deliver some of the best gains in the market for the rest of 2015.

John Stumpf, a director at Chevron, is clearly seeing the glass as half full. He just picked up $19.5 million in stock on the open market (at an average price of $108 a share). Still, investors should know that if oil prices move back to recent lows, then this insider will likely be looking at sizable losses on that large investment. 

United Insurance Holdings Corp. (Nasdaq: UIHC)
I recently noted a severe over-reaction to a recent quarterly shortfall for this insurer. Company insiders share that view. Seven of them acquired a combined $935,000 in stock, according to Jonathon Moreland at InsiderInsights.com. 

He recently profiled the company, noting that “six of the seven buyers in this bullish cluster have traded UIHC before, and all of them have excellent track records with their past purchases. The six have between 2 and 8 past buys that have aged over one year. Their ‘hit rate’ is 100% (meaning that every single one of their purchases made money). And the average return of these winners after one year? Between 65% and 93%.” 

Keurig Green Mountain, Inc. (Nasdaq: GMCR)
Although this maker of one-cup coffee brewing systems was a must-own stock in recent years, thanks to torrid growth, investors are now losing faith. Shares have slumped badly in the past six months, and insiders did little to engender support, as they have been steady sellers of the stock. In a show of support, Coca-Cola (NYSE: KO) bought $830 million in company stock in February, at a price of $130 a share. Even that move didn’t help.


On May 12, a pair of insiders finally decided to issue a vote of confidence, acquiring a combined $1 million in stock (at an average price of $102). That move comes ahead of a launch of a second line of products later this year, called “Keurig Kold.” 

Meanwhile, management noted on a recent conference call that Keurig needs to better defend market share in the hot beverage segment by rolling out a series of machines with lower price points. Although the company’s per share profits are likely to modestly dip this year (thanks to those new product launch costs), analysts expect profits to grow around 15% in fiscal (September) 2016, to around $4.25 a share. Earnings per share should exceed $5 by fiscal 2017, according to Merrill Lynch. 

Altisource Residential Corp. (NYSE: RESI)
This real estate investment trust (REIT), which buys, renovates and leases homes in a number of metro areas, has hit a rough patch in recent months as the company transitioned to a new mortgage service provider and revised its contractual relationship with its outside management advisors. Investors have stepped to the sidelines for now, pushing shares down from the 52-week high of $29 to a recent $19. 

Yet that appears to be an over-reaction, by several measures. First, tangible book value stands above $22 a share. Second, this REIT now sports a 12% dividend yield. And lastly, RESI’s president George Ellison just bought $1 million in stock on the open market. Those three pillars point the way to a rebound in coming quarters, as the company moves past its recent transitional woes. 

Annaly Capital Management, Inc. (NYSE: NLY)
In a similar vein, insiders have been steadily buying shares (without any insider sales) of this mortgage-focused real estate firm. On May 8, CEO Wellington Denahan-Norris acquired nearly $2 million in stock at around $10 a share. Insiders at the firm have surely noted that tangible book value stands at $12.78 a share. 

Annaly once paid more than $2 a share in dividends each year, but industry pricing dynamics are no longer quite as favorable. Still, the current $1.20 a share payout, which looks quite sustainable, translates into an impressive 12% dividend yield. 

Risks To Consider: These insiders are making huge investments in company stock, even as the stock market flirts with all-time highs. And even the most promising open market purchases would be plunged underwater by a market pullback. 

Action To Take –> When insiders make a small purchase, it is often to just direct attention to an under-appreciated stock. But when insiders are committing millions of dollars, as some of these officers and directors are, they are looking to snag big profits. Although insider buying should never be considered as a primary catalyst in your investment analysis, it surely reinforces other bullish fundamental factors. 

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