(By Rich Bieglmeier) iStock usually refrains from stocks that trade for less than a dollar. Low priced stocks are subject to manipulation. You can probably check the e-mail address used for junk e-mails right now, and find some pitch for some amazing stock that will turn your $100 into $1,000,000.
Sign me up for a hundred thousand shares!
But every now and then, our research uncovers a penny stock worth further consideration. iStock usually comes into contact with the needle in the haystack of insider buying.
Insider buying by four
Mad Catz Interactive Inc's (
MCZ) executive team pricked us enough to pay attention. However, one of the four insider's history of buying and selling Mad Catz grabbed iStock by the collar, more on that later.
MCZ designs, manufactures, markets, sells, and distributes accessories for videogame platforms, personal computers (PC) and Mac, and iPod and other audio devices. Its products include videogame, PC, and audio accessories, such as control pads, video cables, steering wheels, joysticks, memory cards, flight sticks, dance pads, microphones, car adapters, carry cases, mice, keyboards, and headsets.
While the gaming accessory company struggled in its most recent quarterly checkup, management is excited about its "pipeline of new products for the holiday season, with some key new releases, including the highly-anticipated Warhead 7.1 headset going into mass production in the next few weeks."
From our perspective, it could be another quarter or two before the MCZ's transition to high end accessories translate into bigger profits. A quick check of Mad Catz's balance sheet shows rising inventories and accounts receivables. Usually, it is a sign of a company making more favorable terms for buyers to purchase old, low-margin products sitting on the shelf. If the out-of-date video game peripherals aren't gone by the end of the current quarter, a write-off could be on tap.
There's no doubt that the quartet of insiders who bought 95,000 shares combined are aware of their inventory/receivables "problems," but they still opened their checkbooks.
One insider's track record really stands out. VP of Corp. Development, General Counsel and Secretary, Whitney E. Peterson bought more than 43,000 shares since February in the open market. What makes Mr. Peterson's buy more "important" than the rest?
Well, in February 2011, he sold shares at $2.01. It proved to be a prudent move, he missed the top by 32 cents; however, six months later, Mad Catz traded for less than 60 cents – timing is everything.
The fact that Whitney Peterson is back in the stock speaks volumes. iStock would consider Mad Catz Interactive Inc's (MCZ) a candidate for aggressive investors willing to accept high risk in the short-term, for potentially high rewards in the next six to 12 months.