(By Rich Bieglmeier) Do you want to profit from insider trading like a US Congressmen? Or without the conviction and soon to be jail time for Rajat Gupta? Isn't that backwards? Shouldn't elected officials be held to a higher standard, surely we jest!
Well, iStock won't offer you any secret tips, mostly because we don't have any; no, we inside trade by proxy. How? By monitoring the purchases of the folks running America's publicly traded companies.
iStock specifically looks for cluster buys form day-to-day management. While it always makes for a nice story when the likes of Warren Buffet, Carl Icahn, and other "gurus" take a beneficial ownership position, we'd rather see the management team putting their money on the table.
When the CEO, CFO, VPs… those responsible for getting the product out the door and the fat profits to the bottom line all think the time is right to buy, it would be wise for investors to pay attention. After all, who knows your financial position better than you do? The same can be said for the executives running companies, at least until they are under oath, right Mr. Dimon?
iStock really gets interested when off-brand companies are purchase by insiders in clumps. PharMerica Corporation
) is a perfect example. Last week, three insiders, the CEO, CFO and a VP purchased 55,000 shares for a total investment of $526, 661.
CEO, Gregory Weishar, purchased the bulk of stock with 35,500 shares and $336,000 out of pocket. Michael Culotta, CFO, stepped up with $142k for 15,000 shares, and Executive VP, William Monast ponyed up nearly $48,000 for 5,000 shares.
FYI – these purchases are so fresh that they haven't hit the major websites, yet. So, the "word" hasn't totally filtered out to the masses.
Anyway, Mr. Monast's and Culotta's smaller buys intrigue iStock the most. Monast is the head of sales, while Culotta runs the numbers as the Chief Financial Officer. Who would know the future prospects of a company better than the chief salesman and the main number cruncher? Nobody!
iStock thinks the trio's purchases might prove to be shrewd. Based on some of our favorite metrics, PMC appears to be a solid value at its current price. The institutional pharmacy services company trades for less than its book value of $14.27, for only 15 cents per share for every dollar in sales (price to sales), and has a PEG ratio of a mere 0.53.
Meanwhile, the average peer trades for 54 cents for every dollar in sales, a PEG of 1.18, and an average P/E of 20.47 while PharMerica trades at 12 times trailing earnings and 8 times 2013 estimates.
As you can see, there is plenty room for various multiple expansions to par for PMC.
PharMerica's price has been under major pressure. The stock price has a 52-week high of $16.45 and has been as low as $9.03. As we type, the stock is trading north of $10 and 90 cents higher than the average insider buy price of $9.42.
According to our view of its stock chart, iStock can see PharMerica Corporation (PMC) experiencing short-term resistance at $11. After double ones, the next ceiling is in the neighborhood of $13.
Because of insider trading rules, insiders are prohibited from buying and selling stock in a heartbeat. It can take up to six months to know the reason(s) why Weishar, Culotta, and Monast told the world a story with their wallets. We highly doubt the trio sees $13 as the end game.
With current valuations in mind, iStock believes PMC is at least a six month hold with a price target of $15.50.