Do you want to know about the stocks that both Gurus and Insiders are buying? GuruFocus is very glad to announce that we have added Insider Buys as a premium feature, in addition to the Guru stock picks and portfolios we have been tracking.
We believe that by tracking the stock picks of value Gurus we “stand on the shoulders of giants.” Most of the Gurus we track are buy and hold value investors. They do extensive research before they buy a stock. They tend to hold a stock for long time after they buy. Their purchases provide us a long term perspective of the companies’ business.
Still we are generating too many ideas from the Gurus’ picks. We have created features like “Consensus Picks” and “Guru Bargains” to narrow down to the best choices. Premium Members can access tools such as Sector Picks, and Guru Sreener to locate ideas in particular industries, market caps and other criteria.
Still, we needed more conviction. That is why we added Insider Buys as another position sign for stock picks. Especially with Insider Buys we can track the stock purchases of company officers and directors within two business days after they purchase. We have filtered the data so that only the ones that are purchased at market prices are listed. This provides us a current view of the company officers and directors on the valuation of their stocks. It is a great compliment to the Gurus' long-term perspective of the companies’ business.
Why are Insider Buys positive?
One of the greatest investors of all time, Peter Lynch, said that "insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise."
Not all insiders are created equal. One long-term study published a few years ago showed that top executives of companies beat the market by an average of six percentage points a year. Over 20 years that's the difference between turning $10,000 into $67,000 and turning it into $194,000. To focus on the top executives, we created features like CEO Buys and CFO Buys, where registered members can browse through the latest purchases of stocks by their own company CEOs and CFOs.
Insider Cluster Buys
Is it even better if multiple officers and directors are buying their company stocks with their own funds? Absolutely! One Citibank study found that multiple purchases by several execs within the past three months signaled big gains to come; as they later did, predictably, purchases at small companies with limited analyst coverage, and the biggest returns were found from insider buys of undervalued stocks.
With our new premium feature of Insider Cluster Buys you can browse the stocks that multiple company officers and directors have bought. You can browse by the number of buying activities and the number of unique insider buys during the past 3 months.
When Both Gurus and Insiders are Buying
Insider buys of undervalued companies create big gains. But how can we know if a stock is undervalued? Let’s turn to our Gurus. Value Gurus tend to buy stocks that are undervalued. If we found stocks that our Gurus bought, and multiple company officers and directors are also buying, are they interesting?
They may not be 100% winners, but this pool of stocks is certainly a great place for you to begin your homework.
Triple Buying Signals: Gurus and Insiders are Buying, and Companies are buying back shares!
How about adding another criterion, whether the company is also buying back shares? Now we have three great positive signals: Gurus buy, Insiders buy and companies are buying back. These three conditions are extremely strict, and only a very small number of stocks can pass this test. We developed a Triple Buying Screener for Premium Members to screen stocks based on these three signals.
Interestingly when we do a screening, Mueller Water Products, Inc. (MWA, Financial) (MWA-B) shows up on the top of the screener, and this is a company Guru Bruce Berkowitz just built a large position, and he owns 11% of the company now.
To find more about the stocks that pass these screening criteria, go to Triple Buys.
- CEO Buys, CFO Buys: Stocks that are bought by their CEO/CFOs.
- Insider Cluster Buys: Stocks that multiple company officers and directors have bought.
- Double Buys:: Companies that both Gurus and Insiders are buying
- Triple Buys: Companies that both Gurus and Insiders are buying, and Company is buying back.