Very few chief executives have been buying their own company's stock lately. In a computer search this weekend, I could find only three who bought shares in a significant quantity since the beginning of October.
Biogen
Michel Vounatsos, the CEO of Biogen Inc. (BIIB, Financial), shelled out $748,061 on Nov. 30 to add to his hoard of shares in the Cambridge, Massachusetts biotech company. In all, he holds more than $9 million worth at current quotes.
Investors have focused hypnotically on Biogen's proposed Alzheimer's treatment, aducanumab. In early November, Biogen stock fell 31% in a day when a Food and Drug Administration advisory panel said that evidence for the drug's efficacy was inadequate.
Does Biogen need an Alzheimer's drug to be a successful company? I think not. It has drugs for non-Hodgkin's lymphoma, leukemia, arthritis, multiple sclerosis and psoriasis, among other conditions. It had a 41% return on stockholders' equity last year, and fat profit margins.
Yet Biogen shares go for only 8 times earnings. It's cheap because there is new generic competition for its multiple sclerosis drug, its leading drug.
If someone finds an effective medicine for Alzheimer's, it will be a boon to humankind and a bonanza for the discovering company. If Biogen comes up dry (as everyone has up to now), it will still be a good investment in my book.
Intel
Robert Holmes Swan, CEO of Intel Corp. (INTC, Financial), bought 8,021 shares of Intel on Oct. 28, continuing a string of quarterly purchases. He now owns more than 289,000 shares, worth more than $15 million.
I've often mentioned Intel as a stock I like for its dividend appeal – a combination of dividend growth and above-average yield. Right now, the yield is 2.5%. The company has increased its dividend every year for 11 years in a row, and I expect this year will make it 12.
To me, rising dividends are a sincerity barometer, indicating that management believes earnings progress is sustainable.
Intel shares have fallen 8% in the past 12 months, as rival semiconductor companies have shown faster growth. It now sells for about 10 times earnings, making it cheaper than it's been in the past eight years.
The knock on Intel has been that it's too dependent on chips for personal computers, as opposed to smart phones and other mobile devices. There is some truth to the criticism, but the company has adapted to changing circumstances before, and I think it will again.
Verso
Verso corp. (VRS, Financial) is a pulp and paper company based in Miamisburg, Ohio. Its interim CEO, Randy Nebel, bought 15,000 shares in mid-November.
Verso has had a revolving door in the executive suite. Mike Weinhold resigned as president in March, after less than four months in the job. Adam St. John resigned as CEO in September, without giving a reason, after less than a year in the post.
The stock is super-cheap, at about three times earnings. But I wouldn't buy it unless and until I can get comfortable with more information about those executive departures. Also, Verso's record is spotty. It has lost money in nine of the past 15 years, and posted losses in the latest two quarters.
The record
This is the 56th column I've written about trades by corporate insiders (not to be confused with illegal "insider trading"). My results have been mixed.
The best part of my record deals with stocks where insiders bought, but I warned people not to follow suit. Those stocks have underperformed the Standard & Poor's 500 Index by 24 percentage points.
Stocks where insiders bought and I advised people to do the same have trailed the S&P 500 by about a percentage point.
Stocks where insiders bought and I made no recommendation, or an ambiguous comment, have beaten the S&P 500 by 13.4 percentage points.
Finally, stocks where I noted insider selling have paradoxically beaten the S&P by two percentage points. This supports the common Wall Street wisdom that insider buys have more predictive value than sells.
This record is based on 46 columns, all those written from 1999 through a year ago. I also wrote half a dozen columns about insiders in 1997 and 1998, but I'm unable to find some of the prices from back then.
Bear in mind that my column recommendations are hypothetical: They don't reflect actual trades, trading costs or taxes. These results shouldn't be confused with the performance of portfolios I manage for clients. Also, past performance doesn't predict future results.
Disclosure: I own Biogen call options in a fund I manage. I own Intel shares for some of my clients.
John Dorfman is chairman of Dorfman Value Investments in Boston. His firm of clients may own or trade securities discussed in this column. He can be reached at [email protected].
