We had another one of those "great headline but lots to pick at" jobs reports this morning and the talking heads have been dissecting it line-by-line as they look for some actionable information for investors. There really isn't any, but that does not keep them from talking about it. Before this morning most of us had never even heard of Cleveland Fed Chief Loretta Mester, but we are not going to let us stop that from endlessly interpreting her remarks.
As a confirmed news junkie, I find all the talk and discussions fascinating. As an investor I find them just short of totally worthless. From the long term point of view I favor all of this is just noise and does very little to impact the long term potential of the type of stocks I like to buy. My time is better off reviewing valuations and tracking 13d filings and insider activity in search of bargain stocks with the potential for high long term returns.
I talked yesterday about CEO buying as a bullish indicator. Before I move on from recent insider activity I want to look for stocks that are showing another type that is wildly bullish for the long term performance of a company and its stock. Countless studies show that when a cluster of three or more insiders buy shares of their company in a one-month period it is a huge positive.
I ran a screen for stocks with cluster buying and it produced a pretty solid list of stocks for us to consider. One stock that I was tempted to overlook was shoe manufacturer Crocs (CROX). I initially was dismissive of the funny looking shoe company, but then a reality set in. Everyone in the family owns and wears them -- including me. I don't wear the namesake clogs but I probably go through two pairs of Crocs Santa Cruz slip-ons a year. My 20-something son lives in his cloggy looking shoes when he is off work and my youngest sends a fair amount of her time and allowance decorating her pair of bright pink Crocs. Thanks to an earnings miss, the shares have fallen sharply in the past month but at least three directors think the stock is too cheap as each one has purchased an additional 10,000 shares of the company.
Myers Industries (MYE) is in the plastics business. The company makes all sorts of things, such as containers, bins, garden pots and hanging baskets. It also has a division that supplies plastic and rubber products to the automotive industry for tire repair kits and under-vehicle repairs. Business has been somewhat stale this year, but at least five insiders, including the CFO and CEO, think the future is exciting as they have been buying shares in the open market.
I am intrigued that Tile Shop Holdings (TTS) has been on the insider buying list all year and yet the stock has just kept falling. The company makes natural and stone tiles and demand has been weak, along with the housing market, this year. The officers and directors seem to feel that there will eventually be a turnaround: Eight of them have made open market purchases in the past month. At some point, we will see the housing market turn around and demand for tile products will rise. However, this stock is for very patient investors only if you share my view that housing just bumps along the bottom for the next year or two.
I will also point out that many of the very small community banks are seeing strong levels of insider activity right now. They are too small to write about here, but it is worth your time to track them down.
Ignoring the noise and tracking insider activity has worked pretty well for me over the years. The day-to-day attempts to generate investable ideas from the news are not all that productive, but insider cluster buying is a proven bullish sign for future stock prices.