"Eating your own cooking" is a good sign in the stock market. When a company's executives are buying its shares, it often pays for investors to follow suit.
Lately, there's been a lot of buying, and it's happening at companies you may never have heard of. Here's a peek at recent insider buys.
Tupperware
Tupperware Brands Corp. (TUP, Financial) has had a tough go of it for years now. The stock peaked in 2017 at about $73. Today it's below $26. Of seven analysts who cover the stock, only one rates it a buy. Most call it a hold, which on Wall Street is a lukewarm endorsement at best.
The company's book value (assets minus liabilities per share) went negative in 2017 and remains so. But there are some good signs. Revenue growth, which had been slightly negative for the past decade, turned slightly positive in the latest four quarters.
Fernandez Calero, who came over from Avon Products to take over as CEO about a year ago, bought 20,000 shares in March, bringing his holding up to 445,532 shares, worth about $11 million at current quotes.
The company's business model of selling through "Tupperware parties" in people's homes no longer works as well as it once did in the U.S. However, the company doesn't depend only on the U.S. It is active in India and Indonesia, as well as Germany, New Zealand and Australia.
The best thing about the stock is that it's extremely cheap. The shares fetch only 8 times earnings and 0.74 times revenue. I think the waning of the pandemic will be good for Tupperware, and the stock is probably good for at least a bounce.
Container Store
The Container Store Group Inc. (TCS, Financial) is doing very well lately, as people spending more time at home stock up on things to organize their abodes. Will the good times last? I don't know, but my hunch is yes.
The stock looks attractively cheap to me at 12 times earnings and 0.7 times revenue. Perhaps CEO Malhotra Satish thought the same. He bought 20,500 shares on May 20, bringing his holdings to 70,600 shares worth about $957,000.
On weak point is the balance sheet. Debt is 142% of stockholders' equity; my normal limit is 100%. Still, I'd rather be a buyer than a seller.
Evergy
Evergy Inc. (EVRG, Financial) is an electric utility serving eastern Kansas and western Missouri. It generates most of its power from coal and natural gas, but gets 27% from renewable energy, mostly wind, making it is one of the largest wind companies in the U.S. About 17% of its power comes from the Wolf Creek nuclear plant.
In March, David A. Campbell, the president and chief executive officer, spend $529,200 to add to his hoard of Evergy shares. He now owns 64,054 shares, worth just under $4 million. He and Andrews Kirkland, the chief financial officer, both bought 10,000 shares in March.
I think utility stocks – traditionally stodgy, slow growers – are overvalued now. Evergy shares go for 19 times recent earnings, and 18 times what analysts expect for the coming year.
The stock is near $62 as I write this. If for some reason it falls to $50, I'd be a buyer. That's about what Bluescape paid. Kirkland and Campbell made their purchases at about $53.
The record
A year ago, I recommended three stocks that showed insider buying. Carrier Global Corp. (CARR, Financial) has returned 117.6%. Greenbrier Companies Inc. (GBX, Financial) has gained 98.6%, and Zions Bancorp NA (ZION, Financial) is up 78.5%.
All three stocks decisively beat the Standard & Poor's 500 Index, which climbed 38.6% including reinvested dividends from June 2, 2020 through May 28, 2021.
Bear in mind that my column results are hypothetical: They don't reflect actual trades, trading costs or taxes. These results shouldn't be confused with the performance of portfolios I manage for clients. Also, past performance doesn't predict future results.
Today's column is the 58th column I've written on the subject of corporate insiders' trades. The record to date is mixed but mostly positive.
- Stocks I've recommended after insiders bought shares have beaten the S&P 500 by almost five percentage points on average over 12 months.
- Stocks that had insider buys, but that I said to avoid, have trailed the S&P by 24 percentage points.
- Stocks where I noted insider buys, but made no recommendation (or an ambiguous comment) have beaten the index by 16.3 points on average.
- On the other hand, stocks where I noted insider selling have done better than I expected, beating the index by 2.1 points.
Disclosure: I don't own any of the stocks discussed today, personally or for clients.
John Dorfman is chairman of Dorfman Value Investments in Newton Upper Falls, Massachusetts. His firm or clients may own or trade the stocks discussed here. He can be reached at [email protected].
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