Kentucky Derby winner Big Brown triumphed despite the thoroughbred's starting placement on the outside track. But in the horse race known as equity investing, market players are better off starting closer to the rail. One way to do that is to seek out a little (legal) inside information.
In this case, "inside information" refers to what an outfit's directors, officers, and key employees are doing with their holdings of the company's stock. When insiders sell their shares, other shareholders usually take that as a signal to sell, too. The opposite should also hold true: When insiders buy, that can be an expression of confidence in the future of the company, and other investors might want to think about buying as well.
For this week's screen, we looked for stocks that have recently had insider buying. We sifted for those issues with the highest insider-buying rank as measured by a proprietary Standard & Poor's method. This tool indicates insider sentiment by showing whether directors, officers, and key employees were buying or selling the company's stock during the most recent six months.
Then we wanted to confirm the stocks' desirability via another S&P tool. We screened for those issued ranked 4 STARS (buy) or 5 STARS (strong buy) by S&P equity analysts, indicating they are expected to outperform the S&P 500-stock index on a total return basis over the next 12 months and rise in price on an absolute basis.
Seven stocks made the cut:
Company
Ticker
S&P STARS Rank
Allied Waste
AW
4
Assured Guaranty
AGO
4
Chesapeake Energy
CHK
4
Home Depot
HD
4
Oneok Partners
OKS
4
Philip Morris International
PM
4
Sempra Energy
SRE
5