(By Street Authority) When executives of a company step in and buy its stock, it can provide a glimpse into an overlooked or misunderstood value opportunity.
Sadly, these insiders are often lousy market timers. They tend to acquire shares after a stock has lost a lot of value (even as they think the company's operating outlook remains bright). In many instances, the selling pressure isn't yet finished, and these insiders simply jumped in too soon. The good news: you can profit from their bad timing by picking up shares at lower prices than what insiders paid for them.
You can find a clear example of this with advertising firm MDC Partners (Nasdaq: MDCA), which is a member of my $100,000 Real-money Portfolio. Insiders have been buying this stock for an extended period, even as it has drifted ever-lower.
I think this stock is a deep bargain for its own intrinsic reasons, and those rounds of insider buying at much higher levels give me that much more confidence.
Here are three other attractively-valued stocks that are now much cheaper than what insiders paid for them.
1. Halozyme Therapeutics (Nasdaq: HALO)
I wrote about this stock in mid-April right after it was crushed. Halozyme is pursuing a range of drug-development opportunities with major pharmaceutical firms, so the recent pullback could present a solid buying opportunity.
Randal Kirk, who usually knows when to buy low and sell high, had been buying all the way. He picked up stock last summer when it was trading at $6, then in November 2011 when it moved up to $8, and then made his largest purchase yet (1.36 million shares) when the stock had moved past $10 in February. Shares are now right back at $8, though as I mentioned a few weeks ago, it's far too soon to write this company off.
2. Titanium Metals (NYSE: TIE)
Harold Simmons has never been shy about spending large sums of money to gain control of companies.