For the past eight weeks, Insider Monkey has been publishing articles about the stocks insiders were buying like crazy. The stocksthey listed in the first 6 articles have performed spectacularly compared to the S&P 500. Having slightly underperformed the S&P 500 index during the seventh week.
Overall, insiders are better at investing than outsiders because they know more about their companies than do most investors. This holds especially true for smaller companies, which are either followed by only a few analysts or none at all. Academic studies conducted during the past 40 years confirm that stocks bought by several insiders outperform the market by about 7 percentage points per year in those studies.
Last week, I brought 3 more companies insiders are buying to your attention. Here are their performance numbers since we highlighted them:
1. A. Schulman Inc (SHLM): Barington’s James Mitarotonda bought more than 15,000 shares during the past few days. In his last transaction, he paid $21.35, which was also the closing price for the stock on Friday, Jan 21st. Schulman’s Chief Marketing Officer, Paul R. Boulier, purchased 1,200 shares at $21.08 a few days earlier than Mitarotonda did. Schulman lost 0.7% during the past five trading days, underperformed the S&P 500 index which lost 0.5%.
2. Advanced Photonix Inc (API): Advanced Photonix made our list about a month ago. That time it returned 21% in one week, reaching $1.9 per share. API lost 0.6% last week.
3. Winmark (WINA): Winmark also underperformed the market last week, losing 1.4%.
This has been the worst weeks so far for our insider purchases. The average return for these three stocks was -0.9% vs. -0.5% for SPY. Currently insiders aren’t buying a lot of stocks. They are contrarian investors. They usually buy after large price declines, not price increases.
1. Trustco Bank Corp (TRST): This is a solid bank with a 4.3% dividend yield, and a P/E ratio of 15.9. It doesn’t seem to be a cheap stock, yet an insider purchased 5,000 shares at around $6.15 per share. On Friday, the stock closed at $6.05. There were several insider purchases in this stock a year ago when the stock price was around, you guessed it, $6. The stock underperformed the market last year, and we don’t think it’s going to deliver 20+% returns per year. It seems like a solid dividend stock which is more attractive than bonds. For the sake of following insiders’ performance, we won’t exclude this stock from our calculations.
2. Bank of Hawaii (BOH): This is also a solid bank with a 3.8% dividend yield and a P/E ratio of 12.3. It seems like a better long term buy then TRST. Insiders have been buying since the end of October when the stock price was $43.5. The latest insider purchase was on Wednesday, at $45.76. The stock closed the week at $46.76. Bank of Hawaii was downgraded on Tuesday, and this triggered a two day slide. This also gave our insider an opportunity to buy company shares at a small discount. A year ago the stock was trading at around the same level and there were several insider purchases. BOH also seems like a solid dividend stock which is more attractive than bonds.
3. RLI Corp (RLI): These are the types of insiders Insider Monkey likes. RLI Corp reported its fourth quarter earnings on Monday night and the results exceeded analysts’ expectations by a large margin. The consensus was earnings of $0.98 per share, but RLI reported $1.66 per share. The company’s P/E ratio is 10 based on its operating earnings and it is less than 9 based on its comprehensive earnings. The company’s management is taking steps that will benefit shareholders rather than themselves. They paid a special dividend of $7 per share in December, in addition to their regular dividend which has a 2.2% yield. Recently, they acquired a Seattle based private insurance company for $137 million which should contribute to their earnings as well.
Disclosure: I do not own any of these stocks at the time of this writing no plans to buy any in the future.
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