There's a lot to be said about strong insider buying statistics. Certainly, they're a show of confidence by those most in the know. Historically, they've also been indicative of underlying strength in a stock, as strong purchases are routinely followed by sustained share price appreciation - all the more so when the dollar value of the shares purchased is substantial.
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Large scale insider buying implies that the proper research has been done to justify the transaction, indirectly sending signals to outside investors about the findings of others' comprehensive stock analysis. That said, below we highlight three stocks recently acquired by insiders with far greater sums than are usually seen in the insider buy statistics.
CEO Goes on Insider Shopping Maul
On Wednesday, April 7, B. Francis Saul II, CEO of Saul Centers, Inc. (NYSE:BFS), bought 13,600 shares of the company that bears his name, for a total of nearly $570,000. Saul Centers is a Real Estate Investment Trust (REIT) that specializes in developing and managing shopping centers.
Mr. Saul has been on something of a buying spree in the last 30 days, acquiring better than 60,000 shares of the company in nine separate transactions. During that period the shares have appreciated by better than 16%. For the year, BFS stock is up almost 42%. It pays a 3.43% dividend and trades with a price/earnings ratio of 34.89.
For the sake of comparison, the SPDR Dow Jones Wilshire REIT ETF (NYSE:RWR) is up nearly 14% year to date.
Insider Buying Revs up
Westport Innovations, Inc. (Nasdaq:WPRT) is in the business of developing and marketing a line of environmentally friendly engines for heavy duty and industrial use. On April 6, insider Kevin Douglas purchased 293,000 shares of the company for a grand total of $5,098,000. Since mid-February, however, Douglas has been on a rampage, acquiring over 1.1 million shares in ten transactions. The company's stock has risen by nearly 40% since then.
Ardea Biosciences, Inc. (Nasdaq:RDEA) develops treatments for HIV, cancer and gout. On April 6, two separate directors purchased 500,000 shares in transactions totaling $10,000,000. RDEA is up more than 135% in the last 12 months, against the SPDR S&P Biotech ETF (NYSE:XBI), which rose just 31.5%.
The Bottom Line
When the buying is big and the transactions are many, it's likely something is up. The above three issues should be closely monitored for any additional indications to enter a position in those securities. (Insider tracking can inform your investment strategy, but it requires research and a level head. Find out what to look for in When Insiders Buy, Should Investors Join Them?)
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