(By Rich Bieglmeier) The Labor Day holiday made for a lean week for insider buying. There were a few nice size chunks of stocks bought by individual management members at Philippine Long Distance Telephone Company (PHI), PolyOne Corporation (POL), Tuesday Morning Corp. (TUES), Thomas Properties Group Inc. (TPGI), and 31 cent Signature Group Holdings Inc (SGGH); however, only YRC Worldwide Inc. (YRCW) experiencing buying multiple and meaningful buyers.
On the last two days of August, three insiders – the CEO and two directors – purchased $23,000 shares for $127,000 at an average price of $5.55. Their timing was pretty good as the trucking company's stock is up almost 10% today and more than 20% in the last five days of trading.
Since the company implemented a 1:300 reverse stock split nearly a year-ago, the stock price has steadily, and sometimes abruptly, declined from $20ish to an early April low of $4.56. The insider buying is intriguing considering the stock price's hardship.
The buying becomes more curious when you consider that the American Trucking Associations expects tonnage to weaken in the second half of the year. It also flies in the face of FedEx Corporation's (FDX) announcement that the economy will experience more softness as we head towards 2013, three straight under 50 readings for the ISM manufacturing surveys, including a horrible new goods orders.
We can only speculate, but the insider buying at the transportation company appears to be company specific and certainly against industry trends. When you consider today's stock price action, we can't help but get that feeling that something is about to break, or the recent run up is short-covering in response to the insider buying news.
iStock believes the short-term momentum can continue to as much as $8. YRC Worldwide's chart shows the stock price accelerating past the 50-day average, with the 12 and 26-day averages on the verge of bypassing the key 50-day trend-line, too. Today's breakout was accompanied by more than double the average daily volume, another bullish sign.
YCR's fundamentals, at least the way we look, at them are brutal. The company is losing a ton of money, costs are rising, margins are shrinking, and revenues, while rising modestly, aren't keeping pace with the increase in expenses – not good.
There are only two things we see that we like. The company can't get much cheaper on a price-to-sales basis as the company trades for a penny for every dollar per share in revenue, and their cash balance is growing. That's it.
Although a few insiders have recently purchased the stock, we feel YRC Worldwide Inc. (YRCW) only warrants consideration from high risk takers. If you can stomach and afford to see $5 or lower, again, while waiting for a turnaround story or buyout to emerge, then the stock might be for you. iStock, on the other hand, will pass.