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5 Excellent Picks for 2012

Many investors and analysts use insider buys as a signal of whether to invest in a company. Insider buys do not always correlate with a surge in stock prices. However, it does portray management’s strong confidence in the company and management’s belief that the company is undervalued. Insiders are like any other investor who purchases shares when they believe they can make a profit. In this article, I take a look at five companies whose insiders have recently loaded up on company shares.

Kraton Performance Polymers (KRA) shares are trading just below $30. The company is a leader in the development and production of styrenic block copolymers (SBCs). The company produced polymers are used in a wide range of products ranging from consumer and personal care items, to automotive, paving and roofing materials. Shares are currently trading above both the 50-day moving average of $27 and the 200-day moving average of $22. Within the last 52 weeks the company has traded as low as $14 and an as high as $48.

Despite the recent price appreciation, Kraton is still trading relatively cheap. The company is trading at a price to earnings multiple of 7.8, its largest global competitor BASF SE ADS (BASFY.PK) is trading at a multiple of 9.4 and the average price to earnings ratio of the industry is 12.6.

Kraton has a market cap of $1 billion and an enterprise value of $1.3 billion. The company has generated revenues of $1.4 billion during its last 12 months of operations. Revenue and earnings have grown each quarter at 20% and 55%, respectively on a year over year basis. The company has $45 million of cash on hand and $395 million of total debt outstanding. Despite the long term debt, the company is extremely liquid with a current ratio of 4.5.

Valeant Pharmaceutical International (VRX) shares are currently trading just above $47. The company develops and manufactures pharmaceutical products; its portfolio comprises of 490 products. Shares of Valeant have traded between $32 and $57 within the last 52 weeks. The current share price is below the 50-day moving average of $49, yet above the 200-day moving average of $43.

The company is trading at a major premium to the market and its competitors. Its largest competitor Teva Pharmaceutical (TEVA), a developer of generic products is trading at a price to sales ratio of 2.3, the industry average is 3.3; whereas Valeant is trading above at a price to sales multiple of 6.5. Valeant has a market cap of $15 billion and an enterprise value of $20 billion, the company has $260 million of cash on hand and $5.2 billion of total debt outstanding.

Clear Channel Outdoor (CCO) shares are trading below $13. The company provides outdoor advertising services in North America, Latin America, Asia, and Europe. The company owns display faces, and utilizes billboards, bulletins and posters to reach its target market. Shares of Clear Channel have traded between $8 and $15 within the last 52 weeks. Shares are currently trading at the 50-day moving average of just below $13 and above the 200-day moving average of $11.

Insiders recently purchased 15k shares, and according to the price to sales ratio, the company is somewhat undervalued. Clear Channel is trading at a price to sales ratio of 1.5, in comparison its largest competitor Lamar Advertising (LAMR) is trading at a multiple of 2.6.

Clear Channel has a market cap of $4.5 billion and an enterprise value of $6.4 billion. Revenues have grown modestly at 8% each quarter on a year over year basis. The company has $630 million of cash on hand and total debt outstanding of $2.5 billion. The company is liquid with a current ratio of 2.

Tesoro (TSO) shares are trading below $28. The company refines oil and other feedstock into transportation fuels such as gasoline, jet fuel, diesel fuel and etc. The company owns and operates seven refineries throughout the country including refineries in Alaska and Hawaii. Shares have traded between $17 and $30 within the last 52 weeks. The current share price is above both the 50-day and 200-day moving averages of $25 and $24 respectively.

Though shares have recently rallied, they are still undervalued. Tesoro is trading at a price to earnings ratio of 7.3 compared to the industry average of 11.4. Moreover, the company is trading at a price to sales ratio of 0.13, in comparison the industry average is .41. Understandably, insiders have recently purchased company shares in the open market.

Tesoro is a medium sized oil refiner; the company has a market cap of $3.9 billion and an enterprise value of $4.3 billion. The company has total cash of $1.1 billion and total debt outstanding of $1.6 billion.

Bank of Commerce (BOCH) shares are currently trading at $4.00. The company provides a wide range of financial services for its business and consumer banking customers in northern California. Shares have traded between $2.90 and $4.60 within the last 52 weeks. The company is currently trading above its 50-day moving average of $3.50 and 200-day moving average. The company also pays an annual dividend of $0.12, which yields 3.00%.

A company executive believes Bank of Commerce is undervalued, and the insider recently purchased 11,000 shares in the open market. The company is definitely undervalued compared to its competitors. Bank of Commerce is trading at a price to earnings ratio of 10.8, whereas the industry average is 15.9. Likewise, the company is trading lower on a price to sales basis at 1.6 compared to the industry average of 2.3. Moreover, the company is trading below its book value of $6.50 a share.

Bank of Commerce is a small regional bank with a market cap shy of $70 million and an enterprise of $165 million. The company has managed to grow revenue and profits each quarter at a rate of 10% and 27%, respectively on a year over year basis. The company has total cash of $48 million and total debt outstanding of $146 billion.

About the author:

StockCroc
I'm mostly interested in income investing using dividends, preferred stocks and other debt instruments, and pair trading.

I fundamentally analyze every business from the top down.

In my personal life, I have a strong Jewish faith and enjoy playing Scrabble and entrepreneurship.

Visit StockCroc's Website


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