Are These Insiders Telling You to Buy?
Famed money manager Peter Lynch told us executives can sell their stock for any reason, but typically buy only for one: They think the price is going to go up!
Today, I've highlighted two insiders who've recently made big purchases of their own company's stock. These aren't option grants but rather insiders putting their own money on the line, buying shares at market prices just like you and me.
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)
|EXCO Resources (NYS: XCO)|
WL Ross & Co., 10% owner
|Sonus Networks (NAS: SONS)|
Empire Capital Management, 10% owner
Source: Company filings.
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.
Everybody in the pool!
Most thinking people recognize natural gas must be a key part of our energy future, and the fact it's just so darn plentiful ought to make it a no-brainer. Yet its abundance and the improved means of accessing it have depressed the industry like nobody's business. While drillers from ATP Oil & Gas (NAS: ATPG) and Ultra Petroleum (NYS: UPL) will continue to develop their properties to their detriment today, they will be building up cheap inventories they'll be able to sell at substantial profits in the future.
But it still means they've got to wade through the morass first before reaching that higher ground. Right now, EXCO Resources is still stuck in the muck, its stock down almost 60% from its highs and its credit rating dumped further into junk territory by ratings agencies that see it almost wholly reliant on nat gas for revenue, but no relief in sight for pricing. Moreover they contend higher margin avenues like oil and natural gas liquids are open to EXCO.
Of course, much of the industry is running away from dry gas toward liquids, which is going to have an impact and may already be showing up after Pioneer Drilling guided revenues to the lower end of its prior forecasted range. The liquids market may just turn out to be all wet, too. It's going to require investors with long-term horizons, which billionaire Wilbur Ross says he's got when it comes to EXCO.
He started loading up on EXCO Resources last year and added to his holdings again in March. When the market turns, he'll be sitting on a vast resource, but his heavily indebted nat gas vehicle will hopefully be around to see that day dawn. I didn't see any turnaround on the horizon for EXCO back in April, and though shares have risen a bit since then, it's still a long slog forward.
Add EXCO to your watchlist to see if it keeps its head above water, then let us know on the EXCO Resources CAPS page if you think Wilbur Ross might have a better understanding of the turnaround potential.
The new roadrunner
Until now, Acme Packet (NAS: APKT) has been the leading player in the enterprise session border controller market, owning 34% of the space, according to the industry watchers at Infonetics, and being the only one to actually grow share last year.
Sonus Networks is looking to upset the landscape by buying Network Equipment Technologies, a manufacturer of Internet communications equipment for both government and the private sector, in an effort to beef up its presence in the enterprise SBC market. SBCs set up Internet calls over landline and wireless phone networks, and simply means that as more information gets routed over the Internet, it'll need robust gatekeepers to regulate the flow of traffic from outside networks.
While some analysts are cautious about the deal, believing Sonus may have overpaid for a company experiencing declining revenues, others find it a viable competitive threat to Acme's position, if for no other reason than its relationship with Microsoft.
Sonus has its own issues to contend with, but Empire Capital -- which continues to raise its ownership stake, having bought consistently throughout the month of May -- isn't forcing the issue as its stake remains passive. Undoubtedly like the 94% of the CAPS community rating the network equipment provider to outperform the broad market averages, it sees real opportunity to gain ground on a rival at a discounted price. Shares have fallen 37% from their highs, and analysts are expecting earnings to triple next year. It's apparent the investor community agrees with Empire that Sonus will be more than capable of taking on Acme.
Add Sonus to the Fool's free portfolio tracker, then let us know on the Sonus Networks CAPS page or in the comments box below if you think it will soon control the market.
On the inside track
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The article Are These Insiders Telling You to Buy? originally appeared on Fool.com.Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Microsoft and Ultra Petroleum. Motley Fool newsletter serviceshave recommended buying shares of Acme Packet, Ultra Petroleum, and Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.