Sometimes investors overreact and sell their stocks because company executives have sold theirs. However, remember there are various reasons insiders may decide to sell their equity, whether it be in order to pay taxes, pay their child’s college tuition or possibly to fund a vacation. Investors should not attempt to read minds when it comes to sells, as there are way too many possibilities. On the contrary, investors should take heed to insider purchases.
Insiders only buy company shares for one reason: They believe company shares are trading at a deep discount. Insiders of the five companies listed below have purchased shares of their company; by taking a deeper look into each company, investors can identify and invest in the shares with offer the most upside potential.
Air Transportation Service Group (ATSG) provides equipment and freight services to the transportation industry. Shares are currently trading just under $6, up 33% from their 52-week low of $4 and down from highs of $8.50. Insiders recently purchased almost 55,000 shares at the commencement of 2012.
Air Transportation has a market cap of $380 million and an enterprise value approaching $700 million. Recent insider purchases may prove to be a lucrative one as the company is currently trading a forward price-to-earnings ratio of 6.8 and a price-to-book ratio of 1.2. The company has $29 million in cash on hand and $336 million of total debt outstanding.
Lingand Pharmaceuticals (LGND) engages in the development and acquisition of royalty revenues generating pharmaceutical assets, the company partners with large cap pharmaceutical corporations such as Brystol-Myers Squibb (BMK), Pfizer (PFE), GlaxoSmithKline (GSK) and many others. Shares are current trading around $15, up 67% from their 52-week lows of $9 and down from highs of $16. Insiders have recently purchased over 70,000 shares.
Lingand Pharmaceuticals has a market cap of $295 million and an enterprise value of $315 million. The company is priced at a premium compared the industry. Shares are trading at a P/E of 29 in comparison to the industry average of 17. The company has just over $17 million of cash on hand and only $30 million of total debt on hand. The company is a growing company, which had a strong 2011; revenues grew from $23.5 million in 2010 to $30 million, the company also managed to retain $10.2 million as profits compared to the net loss of $10.4 million reported in 2010.
Insiders of National Penn Bancshares (NPBC) have recently snapped up 220,000 shares in the open market. Despite trading 4% off of 52-week highs, insiders evidently believe the company is trading at a deep discount at $9 a share. National Penn is a regional bank which operates in the northeastern region of the U.S.; the company also pays shareholders a healthy dividend of 2.2%.
National Penn has a market share of $1.4 billion and an enterprise value of $2.3 billion. National Penn is also trading at a premium. Shares are trading at a P/E of 16 compared to the industry average of 13. Nevertheless, the company has outperformed its competitors in terms of quarterly revenue and profit growth, 16% and 140% respectively.
The company has a relatively strong balance sheet of $1.4 billion of total debt and $450 million of total cash on hand; both figures include customer deposits. In 2011 the company increased profitability; adjusted earnings per common share were $0.59 compared to $0.30 in 2010.
Jamba (JMBA) owns and operates a chain of nationwide restaurants which specialized in beverages. Shares of Jamba are currently trading near $1.75, down from 52-week highs of $2.50 and up from lows of $1.20. As of late November 2011, insiders took advantage of relatively discounted prices and purchased over 10,000 shares in the open market.
Jamba is a small-capitalization company with a market cap of $120 million and an enterprise value of $93 million. Shares are currently trading at a P/S of 0.53 — a discount compared to the industry average of 0.9. However, the company has reported a loss of $13.5 million (trailing 12 months). On the contrary the company has reported a profit in the last two quarters. Jamba Juice does have a strong balance sheet, which consists of no debt and $25 billion of cash on hand.
BB&T (BBT) is a regional lender with branch locations in various states. Shares of the lender are trading above $29, just cents off their 52-week high and 50% above their lows of $19. The company pays an annual dividend of $0.64 a share, which currently yield 2.2%. Insiders have recently purchased almost 30,000 shares near the current price.
BB&T has a market cap of $20.5 billion and an enterprise value of $41 billion. The company is trading at a slight premium compared to its competitors. Shares are trading at a P/E of 16, compared to the industry average 14. The company’s recent impressive performance is certainly factored into share prices; revenues and profits have grown 27% and 88% respectively on a quarterly year-over-year basis. The company has almost $5 billion of cash on hand and a total of $25 billion in total debt outstanding.