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Seeking Stock With Over 40% Insider Ownership
Posted: Dec 22, 2008 14:39 PM by Peter Cherewyk
Insider trading and ownership can be a useful tool in determining who has a stake in the success of the company. Not just who, but also how closely their goals and rewards correlate to those of the common shareholders. Many investors use this public information to see who will be motivated to keep the stock price headed north.
It's important to note that insiders don't always make the right decisions - and following them into a stock purchase is never a guarantee. The motivation of individuals is impossible to predict but it's safe to say investors want to make money, and while insiders might be motivated to perform given their stock holdings, they may not have the same time horizon or risk tolerance as other investors. (Learn how these transactions can reveal a lot about a stock, in Keeping An Eye On The Activities Of Insiders And Institutions.)
To find this information, you could search the SEC website for insider activity. Other sites such as Yahoo! Finance or Zacks may be helpful as well. Below are five stocks with notable levels (above 40%) of insider ownership that may deserve further research.
| Company |
% Held By Insiders |
Market Cap. |
| Campbell Soup (NYSE:CPB) |
45.9% |
$10.3B |
| Emergent BioSol (NYSE:EBS) |
55.1% |
$761M |
| CVR Energy (NYSE:CVI) |
73.3% |
$325M |
| MGM Mirage (NYSE:MGM) |
54.6% |
$3.74B |
| Affiliated Comp. (NYSE:ACS) |
44.3% |
$4.24B |
| Source: Zacks Screen as of December 22, 2008 |
Anthrax Vaccine
Emergent BioSolutions Inc. is a biopharmaceutical company that focuses on immunobiotics. This includes vaccines and the treatment of disease and the body's immune system. The company was recently approved by the Food and Drug Administration (FDA) for a supplemental Biologics License Application (sBLA). This license is for an anthrax vaccine (BioThrax), and will reduce the total number of vaccinations from six (under the skin) to five (into the muscle).
Year-to-date the stock is up over 430% from around $5.00 in January 2008. In its most recent quarter earnings per share (EPS) was up 240% from $0.10 a share to $0.34 per share on $56.6 million in revenue. One thing to watch out for is the possibility of sale of up to $100 million in stock, debt and warrants that was registered on November 12. This could dilute the insider's holdings as well as the public's. (Learn how to find a healthy pharmaceutical investment in a market full of weak drugs in Measuring The Medicine Makers.)
Soup Stock
Campbell, the world's largest soup maker, reduced its fiscal 2009 outlook in late November due to the higher value of the dollar. Currently 25% to 30% of sales come from outside the U.S. and a higher exchange rate will increase the price for buyers in other countries. In the most recent quarter ending November 2, Campbell reported EPS of $0.71, which barely squeaked by the $0.70 per share seen in the same period in 2007. Adding back restructuring charges and commodity hedges, the earnings were $0.77 per share, one cent above analysts estimates. This was due partially to the 5.9% reduction of the weighted average shares outstanding from 388 million in 2007 to 365 million in 2008.
As times get tougher and families are forced to reduce spending, Campbell soup could start replacing more expensive alternatives. If the U.S. dollar starts to slip, and fuel remains low Campbell Soup might weather the stormy recession well. EPS estimates according to Thomson Financial Networks sit at $0.65, which is below the $0.69 per share seen one year earlier.
High insider holdings will not guarantee an increase in stock price. It should give investors confidence that their interests align with major contributors to the company. Further examination of the industry and sales potential of the product or service should follow. It's always nice to know that if you lost money, so did the top executives and you know they would be looking to fix things at the company to create a rebound in price - and a rebound for them would translate into your gains as well.
Learn more in Delving Into Insider Investments.
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