Wireless insiders lead "Best of 1999"
It comes as no surprise that many of this year's biggest insider trading winners are concentrated in smaller capitalization stocks within the wireless communications and Internet segments.
We searched our InsiderScores.com database for a list of technology insiders whose purchases were particularly well timed during the year. It came as no surprise that many of 1999's biggest insider trading winners were concentrated in smaller capitalization stocks within the wireless communications and Internet segments.
One such example is Adaptive Broadband (ADAP). Shares of this Sunnyvale, Calif.-based communications equipment supplier have soared an impressive 730 percent, from $9 to the current $74.75. The company supplies satellite and microwave products used to provide wireless broadband access.
Between March 15 and May 18, two Adaptive insiders purchased a combined 13,500 shares at $9.81 to $16.75 apiece. Director Terry Ward started the accumulation with a 4,000-share addition on March 15 at $9.81 and followed with another 2,000-share purchase in May. CEO Frederick Lawrence joined in by picking up 7,500 shares in May as Adaptive shares climbed north of the $15 mark.
Even after Adaptive shares had doubled, Ward remained a buyer in November, adding 2,100 shares at prices from $32.88 to $34.56. Insider buying at successively higher prices is often a signal of a major price breakout, and shares of Adaptive did not disappoint, registering another double by the end of the year.
Although Adaptive has reported larger losses than expected for four of its last five quarters, the demand for wireless communications has spurred analysts to predict that Adaptive will begin generating profits the quarter ending March 2000. In fact, analysts are projecting an earnings growth of 16 percent for the company in the next five years.
Another company whose executives have timed their purchases impressively is Titan (TTN), where five insiders combined to buy a total of 27,300 shares at prices ranging from $4.88 to $6.88 between March 10 and April 14. Titan's business focuses on satellite communications and computer systems, with the bulk of its sales resting with the U.S. government.
Titan's chief executive and president, Gene Ray, bought 10,000 shares March 24 at $4.88 apiece. Shares of Titan, which had gained 200 percent by the end of the third quarter, tacked on another 200 percent return in the fourth quarter.
Analysts are bullish on Titan's prospects; all five analysts covering the stock rate it a "strong buy." The company's earnings grew 30.5 percent in the last year, easily outpacing the industry average earnings growth rate of 12.4 percent. And it appears that Wall Street is expecting Titan's future to be just as bright, projecting the company's earnings growth to top that of its industry peers over the next five years as well.
Insiders at Rural Cellular (RCCC) also capitalized on the white-hot market for anything wireless, watching their stock climb a stellar 760 percent since January 1999, from $11.50 to $99. Three Rural executives profited nicely from this rise, as they bought a total of 65,450 shares during May at prices between $17.14 and $18.06.
Rural has consistently beaten analysts' earnings estimates for its last five quarters. Most recently, the company reported record earnings of 36 cents per diluted share for its third quarter, blowing away the consensus estimate of a 22-cent loss.
The prescient buying was not confined to the wireless world, however. Three insiders from Internet software and services provider Harbinger (HRBC) wisely stocked up on company shares in early March. The three added a total of 69,750 shares at $5.84 to $6.84. At the time of the purchases, Harbinger shares were flirting with their all-time low, having traded as high as $27 just one year earlier.
One of the bargain-hunters taking advantage of the discounted prices was chief executive C. Tycho Howle, who purchased 51,750 shares at $5.88 to $6.44. Since that round of insider buying, shares of Harbinger have gained nearly 450 percent, reaching all-time highs above the $30 mark.
Our final "Best of 1999" selection is Radiant Systems (RADS), a provider of touch screen point-of-sale systems. Three insiders purchased a combined 11,000 shares from Feb. 10 to Feb. 12 at $9.25 to $9.75, including CEO Erez Goren, who picked up 5,000 shares. Radiant's shares have surged to a new all-time high of $36.75, a 294 percent increase from Goren's purchase.
My guess is that the next tumble in the Nasdaq will once again stimulate some interesting insider buying. The class of 2000 "best" insider buyers will most likely be found in the same kind of out-of-favor stocks--not in the high fliers that are dominating the news today.
Insider buying rewards the patient visionaries. So, when prices start to come down, keep a close eye on the buying practices of tech executives for an early look at the coming year's potential winners.