I’ve written recently about insider buying (see “Two REITs With Insider Buying” and “Kinder Morgan Insiders Backing Up the Truck”).
BUYING A BEACH HOUSE
As I wrote before, company insiders can sell their company’s stock for any number of reasons. Perhaps they are diversifying or reallocating their portfolios, or perhaps they decided to pony up for a beach house.
But there is only one reason why company insiders would buy their company’s stock, and that is because they consider it underpriced and due for a bounce.
With that in mind, I ran a stock screen at gurufocus for insider “cluster buys,” or large purchases by multiple insiders. In order to make the cut, a stock had to have multiple, unique insider buys over the past three months.
INSIDER BUYING
And with no further ado, here is a list of the top five ranked by number of insider buys:
- Aircastle Ltd (AYR): 21 insider buys for a total 663,400 shares.
- RLJ Entertainment (RLJE): 12 insider buys for a total of 30,082 shares
- ERF Wireless Inc (ERFB): 9 insider buys for a total of 229,412 shares
- Remax Holdings Inc (RMAX): 9 insider buys for a total of 51,450 shares
- Main Street Capital Corp (MAIN): 9 insider buys for a total of 6,113 shares
Of each of these stocks, only two have had significant price movements since the insider trading began. ERF Wireless is down 72% and Remax is up 37%.
An insider buying screen does not constitute exhaustive research, of course. You still need to roll up your sleeves and investigate any stock before you buy it. But a screen like this can be a useful first step. If the insiders are buying, it’s a stock that is worth a look.
= = =
Click here to learn more about the Sizemore Investment Letter.
Have you seen the latest issue of the TraderPlanet Journal
Read the cover story interview with Investor’s Business Daily’s Bill O’Neil
