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Who You Gonna Call? Try the Super-Insiders
By Michael Brush
Exclusively for InvestorIdeas.com
January 24, 2008
So many market commentators are in such a state of sheer panic and fear, it doesn’t seem like they can offer much sound advice on what to buy if you think we are near a wash-out bottom for stocks.
So who do you turn to for ideas?
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Here’s one answer. Check in with an elite group of super-insiders to see what they are up to.
By elite super-insiders, I mean the ones who are sitting on phenomenal gains from purchases made during the past 12 months. This indicates they have a knack for picking out winners even in a toppy market right before a phenomenal fall.
That is no small feat.
Then, if they happen to be buying something else in the current turmoil, it could be a great signal that you might want to follow them.
McMoRan Exploration (MMR)
Take Robert Day, for example. He is a director at Freeport-McMoRan Copper & Gold (FCX). It is a mining company that is down around 30% since the start of the year – sucked under by concerns about the economy and a recent earnings miss.
Despite the sharp decline, Day is still up $11.7 million, or 68%, on January and March 2007 purchases of his company’s stock. So says an InsiderScore.com screen for insiders whose purchases produced the biggest percentage gains in the past year. Sure it is only one stock purchase, but he clearly knew the right time to enter Freeport-McMoRan shares.
Recently, Day was lining up another big bet on a different stock. It’s McMoRan Exploration (MMR), which does oil and gas exploration and production in the Gulf of Mexico.
Back in early November, a month into the current bout of market madness, he picked up $1.2 million worth of the stock at an average price of $12.40. That is not too far under the recent price of $13.70. The purchase is even more telling because Day already had substantial exposure to the stock. He exercised 367,000 options on the stock back in June, without selling the stock he received.
McMoRan Exploration looks cheap, trading at a price to sales ratio of around one, compared to a sector average of 2.29, according to Reuters.
As for Freeport-McMoRan Copper & Gold, insiders were selling a lot when it was up in the $110 range last year. But at $77, the stock is zeroing in on levels where insiders were last seen buying -- in the $63-$64 range in March.
Short on fresh ideas, but worth watching
Some super-insiders look great on paper. But they are short of prolific when it comes to offering new ideas.
Take Questcor Pharmaceuticals (QSC) director Neal Bradshe. He tops the list of super-insiders, with a breathtaking 588% gain on his March purchases of the stock, according to InsiderScore.com. He’s turned $323,400 into $2 million.
Problem is, Bradshe seems like a one-hit wonder. I don’t see him making any other purchases. But he is worth watching.
A more prolific super-insider
Frost Phillip, a director at Ladenburg Thalmann Financial Services (LTS), is another matter. He’s up nearly $1 million on various small purchases of Ladenburg Thalmann, a brokerage and money manager, over the past year. And he’s also pointing to plenty of other ideas with his buying habits.
He’s been a regular buyer of Opko Health (OPK) since last August, even recently at the current stock price. The biopharmaceutical company develops treatments for eye disorders.
Phillip also bought some Cellular Technical Services (CTSC.OB) in early December at just a little bit below current levels. The company develops medical devices designed to treat problems like obesity and reflux.
Last February, he purchased significant amounts of Castle Brands (ROX), which makes booze, at over twice the current levels.
Green Mountain Coffee Roasters (GMCR)
William Davis, a director at Green Mountain Coffee Roasters (GMCR), stands out among insider buyers because he is up nearly 100% on purchases he made in his company’s stock last March. Davis saw value again in mid-December when he was a buyer at about $37. The stock has gotten even cheaper, trading for about $34.
High IQ insiders
To find super insiders I also like to check InsiderScore.com’s “insider IQ” rankings. The system compiles the records of insiders in set time frames after purchases.
Top of the list is Harold Simmons who helps lead several basic industrial companies that sell everything from ball bearings to titanium. Here’s what Simmons has been up to lately.
- He was purchasing shares of Titanium Metals (TIE) last week at around current prices.
- He was also buying shares of titanium dioxide pigment maker Kronos Worldwide (KRO) in early January, not too far below current levels.
- And last week he was buying NL Industries (NL), which sells security systems and ball bearings, again not too far below current levels.
Comsys IT Partners (CITP)
There is only other Einstein-level insider among the top 15 on this rarified list who was also actively buying of late. This super-insider is actually an investment group called Scepter Holdings. It ranks number 9 for insider smarts.
Last week it bought $2 million worth of Comsys IT Partners (CITP) for around $10.50, averaging down on what currently looks like a losing position. The company provides information technology staffing and project management services.
The bottom line: These buys don’t guarantee that the stocks purchased will go up. But if these guys can’t help us figure out where to put money now, who can?
Disclaimer
At the time of publication, Michael Brush did not own or control shares in any of the companies listed in this column. Mr. Brush is an independent columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About Insiders Corner: http://www.investorideas.com/insiderscorner/. InvestorIdeas.com Disclaimer: www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not affiliated or compensated by the companies mentioned in this article.
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