When insiders buy shares on the open market, their companies could enjoy bullish times ahead. Corporate insiders often have the inside track on their companies' prospects, and often have significant exposure to their companies' stock through options or restricted shares that are part of their compensation. Besides, insiders probably wouldn't risk plowing too much of their own money into their own company's stock -- reducing their portfolio's diversity, and increasing its risk -- unless they thought the stock will rise.
With that in mind, I screened for companies where at least one insider made an open-market buy in the last 30 days. These five consumer services stocks made the list:
Net Number of Buys
No. of Shares Bought
Market Cap ($million)
Ruby Tuesday (NYS: RT)
Royal Caribbean Cruises (NYS: RCL)
The Cheesecake Factory (NAS: CAKE)
Stewart Enterprises (NAS: STEI)
International Speedway (NAS: ISCA)
Source: Capital IQ, a division of Standard & Poor's, as of August 5, 2011
When it comes to the number and total value of insider open-market buys, more can be better; I've sorted this table accordingly. Insiders at Ruby Tuesday made six open-market purchases worth a whopping $1,600,000, while one insider buy at International Speedway was worth only $4,000. Both are bullish signs, but the purchase of Ruby Tuesday, which missed earnings expectations and guided its fiscal year down last month, looks more promising. What's more, none of these stocks made the screen on June 30th.
Insider buying signals that someone who should be in the know is betting that the stock will rise. You can use this list of recent insider purchases as a starting point for further research -- or a good reason to make a contrarian play.
Are these insiders right? To help you find out, the Motley Fool recently introduced a free My Watchlist feature. You can get up-to-date news and analysis by adding companies to your Watchlist now:
At the time thisarticle was published Fool contributorCindy Johnsondoes not currently own shares of any stock in this story.Motley Fool newsletter serviceshave recommended buying shares of International Speedway. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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