Recent insider buying on the following three companies got us wondering if something was up. Insider trading, of course, is not the last word on whether a stock is going to move, but it can provide clues. And insider buying is generally more helpful than insider selling, which can be done for any number of personal reasons from paying off a tax bill to putting a down payment on a new house.
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But there's nothing like broad-based, insider buying - when it's done in quantity - to signal that those closest to a company have confidence that the shares are about to rise. Here are those three outfits with all the salient information you need to make a smart investment decision.
Insider Buying at Walmart
Walmart Stores, Inc. (NYSE:WMT) is a household name to nearly all American consumers. But beyond our borders the world's largest retailer also operates in 14 other countries, as well as Puerto Rico.
In the last six months, Walmart stock has risen over 6% and pays a dividend of 2.2% annually. The price/earnings multiple on the shares is a competitive 13.45 and price to book is 3.0.
The company's 6% rise in the last six months is a shade less successful than the broad retail sector as represented by the Retail HOLDRs ETF (NYSE:RTH), which has gained 7.7% over that same period. Company Director, James Breyer, decided last week to purchase 5000 share of the company for his personal account. The total cost of the trade exceeded $250,000, making it what we would term "significant."
Citigroup's Inside Buying
Citigroup, Inc. (NYSE:C) is one of America's largest banks by market cap, with a value of over $121 billion. In the last six months, the company's shares rose better than 10% while offering no yield. For comparison's sake, the Financial Select Sector SPDR ETF (NYSE:XLF) is up slightly over 1% for the same period. P/E for the shares is still negative, as the company has yet to show a full year's profit since before the financial crisis of 2008.
Last week, Manuel Medina-Mora, the company's CEO of consumer banking for the Americas, spent over $2 million purchasing over 540,000 shares of Citigroup.
Price to book on Citigroup shares registers a very low 0.8.
American Apparel's Insider Holdings Increasing
American Apparel Inc. (AMEX:APP) sells its own branded clothing line to consumers in store and online. The company's shares are up over 20% in the last half year.
Last week, the company's CEO and Chairman bought over 1.6 million shares in four separate purchases totaling in excess of $2 million.
The company is now facing litigation over allegations of their use of illegal immigrants.
The Bottom Line
Let's face it. Insiders know more than we do. When they buy their own shares it's indicative of a confidence in near term price appreciation. Nothing could be simpler than that. (For related reading, take a look at Can Insiders Help You Make Better Trades?)
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