I would not be so quick to assume that all of the insider buying in Walter Energy is a mistake. Very often smart money is not so interested in what a stock does in the short term, whether you care to measure that in days, weeks, or months. And it is very unlikely that their buying was dividend-related.
I have rarely seen such compelling insider buying as shown by the WLT insiders in May, either in numbers, concentration, or size. Last time I noticed something like that was in Radian Group, RDN, back when the stock was about 2 - 2.50. Maybe a year or so ago? Walter trades pretty erratically, and can move in either direction in a hurry. At under .4 times sales, less than 75% of book, and down from $140/share a little over 2 years ago, I believe this is one of the cheapest commodity stocks around in spite of their debt load.
Walter got in trouble for 3 reasons: overexpansion, Obama policy re: anti-coal plants, and a sharp decline in the price of met coal. And yet China continues to build coal-fired plants! Their energy demands are huge if not exactly insatiable.
Personally, at around $10 when the insider buying took place in the mid to upper teens, I think WLT is a compelling buy. And rather than the insiders having made a mistake, my hunch is that within 18-24 months they will be crying all the way to the bank.
Disclosure: long WLT from higher prices, and recently added.
As a side note, I recall that when the stock had gotten as low as the mid to high 30s, the street was abuzz with rumours that one of the big global mining companies should buy them out. |
