Famed money manager Peter Lynch gave us the inside scoop on how to look at insider transactions. Executives can sell their stock for any reason, he said, but they buy for only one: They think the price is going to go up!
Today, I've highlighted a handful of insiders who have made big purchases of their own company's stock in the past week. These aren't executives getting big chunks of shares from option grants. Rather, they're insiders putting their own money on the line, buying shares at market prices. I then paired that information with insights from the members of Motley Fool CAPS to see whether they think the stock has the same prospects the insiders do.
Market Value of Transactions
CAPS Rating(out of 5)
Hasbro (NYS: HAS)
John Frascotti, global chief market officer
Infinera (NAS: INFN)
David Welch, EVP
Opko Health (NYS: OPK)
Philip Frost, CEO & chairman
Sources: finviz.com, Motley Fool CAPS.
Although following the lead of insiders can be profitable, we still recommend that you do further due diligence to determine whether these stocks ought to be sold from your own portfolio -- or would make a good addition! So this isn't a list of stocks to sell or buy, but just the inside track on companies you might want to check out further.
A transforming event
It's all fun and games until someone misses a quarter. Then it becomes a rout. That's the position Hasbro recently found itself in as second-quarter earnings badly missed expectations after you back out currency fluctuations and income-tax benefits. Mattel (NYS: MAT) did appreciably better as Barbie came back in fashion even as Hasbro's Girls category slipped 11%. The stock has fallen 12% over the past month.
Although that's two quarters in a row Hasbro has missed expectations, I'm expecting it to be a temporary situation. The toymaker was shipping Transformers toys to retailers this quarter, and with the third installment adding up to another blockbuster, third-quarter results should recognize those sales. Moreover, it now has its TV channel The Hub up and running that will add additional support for revenues.
CAPS member Ikarruss thought the quarterly results were good enough, even after missing Wall Street's best guesses, but with insiders buying he sees that as confidence in a recovery.
HAS just reported a good Q. It was not up to expectations on the bottom line, but it was still good. The CEO put up money on his [speech] about investing for the long term. I'll give him some trust.
Toy with leaving your opinion on the Hasbro CAPS page and tell us whether you think it can transform itself into a grower again.
Keeping an eye on things
The optical-network sector had its lights knocked out this year as almost all the names in the space have suffered steep declines. JDS Uniphase (NAS: JDSU) is down 55% from the 52-week high it hit back in February, while Finisar (NAS: FNSR) has plunged 63%. Infinera's decline began earlier than its rivals (it started in January), but it has dropped only 46%.
There were macroeconomic trends that hurt the industry, but Infinera looks like it's leading the way back up. In its latest earnings report, it's looking to see additional gains as booking momentum returns and its shares have risen 20% off their lows. CAPS member StocksForLimits says it still represents a good buy: "longer term hold ... might pull back a little but that just presents an opportunity to buy more."
Head over to the Infinera CAPS page, eyeball the opinions there, and add your thoughts on its future.
A conservative estimate
Specialty pharmaceutical Opko Health has been boosting sales by going south of the border. reporting an increase in revenues earlier this year from sales in South America, though losses widened. It added to that in June with a grant for $1 million from Mexico.
Opko's chairman and CEO is the company's biggest shareholder, owning more than a third of outstanding shares. He's been purchasing shares regularly all year long, indicating a level of confidence in Opko as it strives to target areas of illness including neurological disorders, infectious diseases, oncology, and ophthalmologic diseases. It has a non-exclusive arrangement with Bristol-Myers Squibb (NYS: BMY) to investigate its diagnostic technology and how well it diagnoses patients with Alzheimer's disease and other cognitive impairments.
CAPS member MizzouFanVan looks to the CEO's purchase as reason to believe in Opko's growth, but you can add the stock to your watchlist if you want to see whether such confidence is warranted. Then add your opinion to the Opko Health CAPS page to let us know whether you think its stock will fly south as it looks to South America for gains.
On the inside track
Following the insiders can be a path to profits, but it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Sign up today for the completely free service, and tell us whether it's worth trading on this inside information.
At the time thisarticle was published The Motley Fool owns shares of Infinera.Motley Fool newsletter serviceshave recommended buying shares of Infinera and Hasbro and shorting Hasbro. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Fool contributorRich Dupreyhas no financial position in any of the stocks mentioned in this article. You can see hisholdings. The Motley Fool has adisclosure policy.
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