Another week, another all-time high for the S&P 500 as third-quarter earnings season winds down. The 10 Year Treasury yield had its biggest weekly gain in a month and wound up the week hovering just above 1.9%, its highest level since late July. The boost in yields this week boosted cyclical sectors like energy and financials while hurting high dividend payers like Utilities and REITs.
For the week the Dow rose just over one percent while the S&P 500 rose .9%. Small caps underperformed with the Russell 2000 just over a half percent on the week.
So what stocks are insiders still buying even as the market hits all-time highs? Here are three names that caught our eye.
Let's start with Granite Construction (GVA), a small infrastructure contractor and a construction materials producer based in Northern California. The company's CFO and a director bought just over $160,000 worth of stock combined on November 5th. This follows nearly $500,000 worth of insider stock purchases by five insiders in August and September which was the first insider buying in this name in a year.
As can be seen above, shareholders have had a tough 2019 so far. The company posted Q3 results late in October that significantly miss top and bottom-line expectations. In early August, Goldman Sachs downgraded the stock to a Neutral. D.A. Davidson did the same just after third-quarter results and also slashed its price target on Granite from $45 to $30.
The company recently raised $200 million through a convertible debt offering. Granite says it 'plans to use the proceeds to pay the cost of the convertible note hedge transactions, use up to $30 million of the net proceeds for share repurchase, and the remainder to repay a portion of Granite’s revolving credit facility and for general corporate purposes'.
There was not much good news within the third-quarter results. However, the company did state that committed & awarded Projects totaled $4.7 billion in the quarter, which was up nearly 45% from the same period a year. Insiders seem to betting 2020 will be a better year for the firm, while analysts are more in a wait and see mode.
Next up is microcap Data I/O Corporation (DAIO). This small manufacturer of programming systems and services for electronic device manufacturers is based just outside of Seattle and has market capitalization of just $30 million. One insider must see value in this name as he just bought just over $425,000 worth of stock in three transactions from November 6th through the 8th. It was the first insider purchases in this name since March of 2016.
That purchased was made just over $3 a share and was well-timed as the equity nearly quintupled by late 2017. Unfortunately, for 'buy and hold' shareholders, the stock has made a 'round trip' and once again is trading with a $3 'handle'.
The company posted dismal Q3 results that showed revenues shrunk by more than 40% on a year-over-year basis. I can't find a single analyst rating on this stock. There is one bull contributor on this name here on SeekingAlpha. He has published a few optimistic articles on DAIO here in 2019, the latest piece in August. He is now joined by one insider it appears.
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Finally, we have a big dividend payer seeing insider buying. The SVP for investments added just over $300,000 to his core holdings in Gaming & Leisure Properties (GLPI) on November 5th and November 8th. He also made purchases in February and August at prices about 15% lower than current levels.
This REIT is based northwest of Philadelphia and owns real estate property that it leases to gaming operators in triple-net lease arrangements. It posted Q3 results on October 31st. FFO (Funds from Operations) beat bottom line expectations while revenues increased almost 14% from the same period a year ago.
2019 has been a good one for shareholders so far. The stock has appreciated some 25% so far in 2019 in addition to fat dividend payouts (The REIT currently has an approximate 6.5% annual yield). One insider seems to be signalling that good times will continue to roll on for this name.
And those are three small cap concerns seeing recent and notable insider buying.
Thank You & Happy Hunting,
Bret Jensen
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