The first half of 2012 was mixed for the U.S. equity market. While all three major indexes posted significant gains in the first three months of 2012, the second quarter was disappointing.
Issues such as the euro zone debt crisis and concerns over a global economic slowdown weighed down sentiments during the second quarter of 2012. The second quarter also saw extreme volatility.
Looking ahead, a lot of uncertainty still remains as we enter into the second half of 2012. Although European leaders have announced some key measures at a recent European Union summit to tackle the euro zone debt crisis, a great deal of uncertainty still remains. Meanwhile, recent economic data from China, euro zone and U.S. has been disappointing. Also, adding to the uncertainty is the upcoming Presidential election in the U.S.
In such an environment, investing in equity market could be difficult. However, investors can still find some stocks that can earn significant returns in the medium- to long-term. How do you find such stocks?
One great way is to look for stocks that have seen significant insider buying activity. When company insiders buy shares, it is a sign of confidence in that company’s long-term prospects. In this article, we will take a look at a few stocks that have seen some insider buying activity in the recent past.
First up is Opko Health Inc. (NYSE: OPK), a multinational pharmaceutical and diagnostics company engaged in the development of a range of solutions to diagnose, treat and prevent various conditions. According to a recent SEC filing, Phillip Frost, Opko Health’s Chairman and CEO, bought 45,000 shares of OPK common stock for $4.71 per share.
OPK shares are currently trading at $4.67. Year-to-date, the stock has fallen 4.69%, underperforming the broad market.
Opko Health last month entered into a definitive agreement to acquire a 45% stake in a private Israeli company that produces a third-generation hepatitis B vaccine. OPK bought the stake from FDS Pharma LLP.
Genesco Inc. (NYSE: GCO), a retailer and wholesaler of footwear, apparel and accessories, also saw some insider buying activity recently. According to a SEC filing, Thurgood Marshall Jr., a director at Genesco, recently bought 3,600 shares of GCO common stock at $58.75 per share for a total investment of $211,499.
This is the first time in the past year, Marshall Jr. has bought shares of GCO.
Genesco shares are currently trading at $61.81. Year-to-date, GCO shares have gained 0.11%, underperforming the S&P 500.
For the first quarter ended April 28, 2012, GCO reported earnings from continuing operations of $20.8 million, or $0.86 per diluted share, compared to earnings from continuing operations of $15 million, or $0.63 per diluted share reported for the first quarter ended April 30, 2011.
GCO’s adjusted earnings from continuing operations were $23.8 million, or $0.98 per share, compared to $15.7 million, or $0.67 per share reported for the same period last year. Net sales for the first quarter rose 25% to $600 million.
Based on the strong first-quarter results, GCO also raised its guidance for fiscal 2013. The company now expects adjusted earnings per share for fiscal 2013 to be between $4.70 and $4.82.
Next on the list is Moneygram International Inc. (NYSE: MGI), a global payment services company offering products such as global money transfers, bill payment solutions and financial paper products. A recent SEC filing showed Steven Piano, Executive Vice President, Human Resources at Moneygram, bought 280 shares of MGI common stock at $14.58 per share.
MGI shares are currently trading at $15.46. The stock has fallen 12.9% so far this year, underperforming the S&P 500.
For the first quarter of 2012, Moneygram had reported total revenue of $318.1 million, representing an increase of 8% over the same period last year. The company’s total fee and other revenue rose 9% to $314.9 million in the first quarter.
MGI’s adjusted EBITDA for the first quarter ended March 31, 2012 was $68.4 million, representing an increase of 13% over the same period last year. Net income for the first quarter was $10.3 million.
For the full year 2012, MGI expects total revenue growth of 7% to 9%. Adjusted EBITDA for the full year is expected to grow between 9% and 11%.
The final company on the list is Methode Electronics Inc. (NYSE: MEI). Based in Chicago, Illinois, Methode Electronics is a global designer and manufacturer of electro-mechanical devices.
According to a SEC filing, Donald W. Duda, President and CEO of Methode Electronics, recently bought 3,860 shares of MEI common stock at an average price of $8.5 per share. Duda is not the only insider who bought shares in the company recently. CFO Douglas A. Koman also bought 3,616 shares of MEI common stock at an average price of $7.95 per share.
MEI shares are currently trading at $8.50. Year-to-date, the stock has gained 2.53%, underperforming the S&P 500.
The insider purchases at MEI came a few days after the company reported its fourth-quarter financial results.
For the fourth quarter ended April 28, 2012, MEI reported net sales of $126.4 million, up from $119.4 million reported for the same period last year. Net income for the quarter was $5.8 million, or $0.15 per share, compared to $10.1 million reported for the same period last year. Excluding one-time items, the company’s net income for the fourth quarter was $6 million.
For the full fiscal year, MEI reported net sales of $465.1 million, compared $428.2 million reported for the previous fiscal year. Net income for the full fiscal year was $8.4 million, or $0.22 per share. Excluding one-time items, MEI’s net income for fiscal 2012 was $18.7 million, or $0.49 per share.
For fiscal 2013, MEI expects revenue to be between $495 million and $525 million. Earnings per share for the fiscal year are expected to be between $0.52 per share and $0.67 per share.
So these were some of the companies that saw some significant insider buying activity in the recent past. We recommend investors always keep an eye on insider buying activity.
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