(By Rich Bieglmeier) The cluster insider buys that iStock seeks when review the roster of the previous week's purchases weren't as bountiful this week as they were last week. Instead of 15, today only two companies with Verso Paper Corp. (VRS
) and Tronox Incorporated
Despite three insiders buying 47,010 shares of VRS in the week that was, we prefer the TROX story as the company has an immediate, impactful event pending.
Tronox is a global leader in the production and marketing of titanium bearing mineral sands and titanium dioxide pigment, which is used in consumer products, such as paint, plastic, and certain specialty products.
Last week, two members of the management team purchased 35,500 shares totaling more than $900,000. Senior VP & Chief Administration Officer, Robert C.Gibney picked up $278,565 of TROX. More interestingly, Robert C Senior VP, Gen Counsel, Secretary and Officer, Michael J Foster put a nice round lot of 25,000 Tronox shares ($636,250) in his portfolio.
iStock finds the purchase by the house attorney interesting in light of the fact that chemicals company is in the middle of a $25 billion lawsuit with Anadarko Petroleum Corporation (APC)
Tronox alleges that Anadarko Petroleum is on the hook because the 2005 spin-off that created the materials company was fraudulent. TROX claims it was burdened with billions of dollars in environmental cleanup claims at more than 2,000 polluted locations, which drove to the company to file for bankruptcy in 2009. On Valentine's Day, 2011 the company emerged from Chapter 11.
The pair tried to settle the claim but failed to do so in the middle of July; so, the trial goes on with the U.S. Department of Justice and the Environmental Protection Agency joining the Tronox trust in the fight. iStock believes a win could boost TROX immediately after an award is announced.
However, all is not lost if TROX is on the wrong side of the decision or the settlement is less than expected. On June 29, 2012, management announced a 5 for 1 stock split, declared a dividend of US$1.25 per share (pre-split) on Class A and Class B shares, and authorized the repurchase of up to 2.5 million Class A shares.
Tom Casey, chairman and chief executive officer of Tronox said, "While we have considered issuing a special dividend as a way to return capital to shareholders, we believe our stock is undervalued at the present trading levels and therefore the best use of corporate resources is to invest in ourselves at these prices by repurchasing our shares."
Prior to last week's insider purchases, Mr. Casey backed up his words with an indirect buy of $1,013,199 of his company's stock on August 16, 2012. What do you think about that?
We think investors can expect to see TROX's margins expand despite falling prices. Analysts believe the company will earn $3.46 for the year, putting a forward P/E on the stock of 7.77. Meanwhile, the average minerals company trades at 16.75 times earnings.
Once the fog of the Anadarko Petroleum is lifted, and the company proves that it's fully vertically integrated model gives Tronox Incorporated (TROX) a market leading, competitive advantage over its peers, iStock believe both insiders and outside investors will be rewarded.