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 only buy for 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 if they think the stock has the same prospects the insiders do.
Market Value of Transactions
CAPS Rating(out of 5)
Apple (NAS: AAPL)
Robert Iger, director
Incyte (NAS: INCY)
Baker Brothers Life Sciences Capital, 10% owner
Universal Display (NAS: PANL)
Discovery Capital Management, 10% owner
Sources: FinViz.com, Motley Fool CAPS.
Although following the lead of insiders can be profitable, we still recommend 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.
You can bank on it
If the courts are ruling that Apple can't get Samsung phones banned for violating its patents, I'm not sure why investors are so worried that HTC will get hit. Yet HTC's shares tumbled on the prospects that just might happen, no doubt because the cases are being heard in different venues. Apple's attempt to get the Samsung Galaxy banned was heard in a U.S. district court; the HTC case is before the U.S. International Trade Commission.
Related, but of more immediate worry to Apple, is that the Android operating system has increased its lead over the iPhone in the smartphone market during the past three months, according to comScore. Not surprisingly, Research In Motion's (NAS: RIMM) continues to fade.
But worse for many smartphone makers is the erupting scandal that your phone is logging every single thing you're doing on it -- calls, numbers, texts...everything! -- and sending it to Carrier IQ, a company that helps carriers gather data about the performance of their network. AT&T, Sprint (NYS: S) , HTC, and Samsung have all confirmed the software is on their phones. Oh, and you can't disable the software.
Apple says the software is disabled on its phones, and RIM says BlackBerry phones do not have it.
The broad appeal of Apple's products is enough for CAPS member meeyatch69, who expects the stock to start growing again: "The recent swoon should be erased as simple to use top notch products find broader markets. Competition for the ipad is out there but will not catch up in the near term."
Let us know in the comments section below or on the Apple CAPS page if insiders will continue to gorge themselves on the stock. Also add it to your watchlist to be notified of the latest developments.
All in the family
Not only are brothers Felix and Julian Baker buying up shares of biotech Incyte through their Baker Biotech Capital fund, but they're also purchasing shares through another vehicle, 14159 Capital. Together, they purchased more than $32.2 million worth of stock last week.
With Incyte's Jakafi twice-daily therapy for myelofibrosis being the first to market, beating out YM BioSciences' (ASE: YMI) JAK1 and JAK2 Inhibitor CYT387, it's likely they're expecting the drug to put a lot of distance between the two companies. YM's treatment is a once-a-day drug, which, theoretically anyway, would be more attractive. For what it's worth, the Bakers are also major holders of YM stock through their Baker Brothers Advisors vehicle.
What I also liked about Incyte on my brief review was that it's NOT a one-trick pony. Unlike many recent small-cap biopharms with a drug approval pending, there are two other candidates besides Jakafi for myelofibrosis, a rare bone marrow disease. If Jakafi became a sell on the news, there was other potential in the pipeline.
Add Incyte to your watchlist and let us know in the comments section below if you think other investors will join the Baker brothers in filling out their portfolio.
The warning by Corning (NYS: GLW) that demand for its Gorilla Glass isn't as robust as previously expected had investors doing a monkey see, monkey do routine, sending shares of Universal Display lower, too.
Of particular concern might be the growing dichotomy in the tablet market. An analyst believes that Corning should see consistent iPad-related demand, but the rest of the market is tailing off. With Apple's share of Corning's Gorilla Glass sales having dropped from 80% last year to about 50% as Corning added customers, that's a troubling trend. And the TV market remains worrisome. According to DisplaySearch, LCD shipments fell flat in the third quarter, and industrywide revenues were down 2% as panel prices dropped.
Flat panels are a great investment to own at your home but the business aspect is spooky. Flat screens today will last decades and demand will slow. New TV types like 3-D and holographic will help, but even those TVs will face the same problem.
Add the panel maker to the Fool's free portfolio tracker and tell us on the Universal Display CAPS page if it's time to tune in.
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 Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of Corning, Apple, and Universal Display, as well as creating a bull call spread position in Apple. 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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