A great way to find out what is going on with a company is by checking if there have been any insider transactions i.e. whether there has been buying or selling of the company’s shares by senior management or directors.
Although corporate insiders may sell shares in their companies for a number of reasons, there is generally only one reason when they buy shares; they are bullish about the company’s outlook.
Corporate insiders have much more knowledge about their respective industries than ordinary investors. And of course, they know more about their own companies than investors. So when they are putting their own money at stake by buying shares in their respective companies, it is generally a good sign. Therefore, it is always useful to keep a track of insider buying activity as you can find some useful long-term investments.
This week, we will look at 3 stocks that have seen significant insider buying activity in the recent past.
First up is U.S. Bancorp (NYSE: USB), the Minneapolis, Minnesota-based multi-state financial services holding company providing a range of financial services.
The Vice President and General Counsel of USB recently bought 8,000 shares at $25.52 per share.
USB has been one of the top performing financials this year. The stock has also outperformed the S&P 500, gaining 17.07%, compared with S&P 500’s 9.10%. USB currently has a market capitalization of 60.20 billion. The stock has a dividend yield of 2.46%.
Recently, the bank also released its first-quarter financial results, posting a 28% increase in net income for the quarter. USB reported net income of $1.338 billion for the first quarter. The bank’s first-quarter earnings were driven by year-over-year increase in total net revenue and a lower provision for credit losses.
USB also saw strong lending activity during the first quarter, including $28.9 billion of new and renewed commercial and commercial real estate commitments, $2 billion of lines related to new credit card accounts and $25.1 billion of mortgage and other regional originations.
Richard K. Davis, President and CEO of U.S. Bancorp, noted that USB’s first-quarter 2012 results clearly demonstrate that the momentum, the company has established and built over the past several years is continuing to drive performance in 2012.
U.S. Bancorp is not the only regional bank that has seen significant insider buying activity in the recent past. Huntington Bancshares Incorporated (NASDAQ: HBAN), the Columbus, Ohio-based multi-state diversified regional bank holding company, has also seen some insider buying recently.
Stephen D. Steinour, President and CEO of HBAN, on April 23, bought 18,150 shares of the company’s common stock at $6.42 per share. The purchase came a few days after Steinour bought 10,000 shares of HBAN common stock at $6.54 per share.
Daniel B. Benhase, Senior Executive Vice President at Huntington National Bank, also bough 5,000 shares of HBAN common stock at $6.51 per share recently. James Dunlap, also a Senior Executive Vice President, bought 3,000 shares at $5.44 per share.
HBAN shares, like USB, have also outperformed the broad market this year. Year-to-date, HBAN shares are up 18.03%. HBAN currently has a market capitalization of $5.61 billion.
The purchases from senior executives at HBAN came a few days after the bank released its first-quarter results. HBAN reported first-quarter net income of $153.3 million, or $0.17 per share, representing an increase of 21% over the same period in the previous year.
HBAN’s return on average assets rose from 0.92% in the fourth quarter of 2011 to 1.13% in the first quarter of 2012. Net interest margin for the quarter was 3.40%, up 2 basis points from the fourth quarter of 2011.
CEO Steinour said that by staying focused on executing its strategic plan, HBAN is making steady progress in improving long-term profitability and adding to its earnings growth opportunities. Steinour noted that the first-quarter’s financial results contained two significant items; the first was a gain relating to HBAN’s recently announced FDIC-assisted purchase of Fidelity Bank in Dearborn, Michigan, and the second was an addition to HBAN’s litigation reserves. He added that when looking at the performance adjusted for these significant items, revenue is meaningfully higher with noninterest expense, after considering seasonal FICA and other payroll taxes, basically unchanged.
The final company on our list of 3 stocks with insider buying is Southwest Airlines Co. (NYSE: LUV), operator of a passenger airline.
Although shares of Dallas, Texas-based company have fallen 5.37% this year, it seems that insiders see some potential upside. On April 24, Southwest Airlines Director, Douglas H. Brooks bought 5,000 shares of LUV common stock at $7.90 per share. The purchase was the first one filed by Brooks in the past twelve months.
The purchase came a few days after Southwest Airlines released its first-quarter financial results. The airline reported first-quarter net income of $98 million, or $0.13 per share, compared with net income of $5 million, or $0.01 per share reported in the first quarter of 2011. Excluding one-time items, LUV reported net loss of $18 million, or $0.02 per share for the quarter, compared with a net income of $20 million, or $0.03 per share reported for the same period in the previous year.
Gary C. Kelly, Chairman, President and CEO of Southwest Airlines, said that despite a modest loss, excluding special items, LUV’s first-quarter results were notable, with outstanding revenue production, and except for jet fuel, better-than-expected operating costs. Kelly noted that record first-quarter revenue results were produced with strong revenue management and network optimization, along with benefits from the AirTran acquisition and All-New Rapid Rewards.
Kelly also said that the first quarter marked another important milestone in the integration of AirTran with the approval by the Federal Aviation Administration (FAA) of the Single Operating Certificate.
So these are our 3 stocks that have seen significant insider buying in the recent past. Of the three, HBAN and USB have already made significant gains this year, outperforming the broad market. The recent insider buying activity suggests that there could further upside.
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