An
introduction to ...
JACK ADAMO’S INSIDERS PLUS
Continued from front page
...
Insiders PLUS is a weekly Internet-based newsletter with a strong emphasis on
protecting investor capital and providing steady income. We do this by
investing in stocks with sustainable dividend growth, as well as precious
metals and other commodity-related stocks that provide protection against
currency debasement and long-term inflation. Most of our stocks pay
above-average dividends.
We find our investments primarily by searching in three areas:
- Insider transactions
- "Smart Money" purchases
- Special situations
These three areas are briefly discussed below.
Insider transactions
are transactions in which high-ranking executives
or board members of a company buy or sell significant amounts of their company’s
stock. This sometimes leads to an early tip-off as to the future direction of
the stock’s price. However, these transactions require expert interpretation.
Over the last few years, companies have learned to stage Insider buying in
order to make it appear that company executives are optimistic about their
company’s outlook. This practice is especially prevalent in distressed
companies. To our knowledge, Insiders Plus is the only publication
following Insider transactions that has recognized and attempted to publicly
unmask phony Insider buying. Insider selling is also distorted nowadays due to
excessive stock option grants to top company executives. This makes it
difficult to distinguish between selling due to company distress, and selling
just to take advantage of over-generous compensation packages.
Mylan
Labs made us 81% in under 2 years!
The above facts notwithstanding, there are still
leads to be found by studying Insiders – if you
know where and how to look. Note, however, that Insiders
Plus never recommends a stock based solely
on
Insider buying (or any other single criterion). All
potential recommendations are subject to rigorous
financial analysis, then further screened for
timeliness, using technical analysis.
Some notable Insider buys we’ve scored big with
are Mylan Laboratories (NYSE: MYL), which
gained 81.5% in less than two years; Archstone-Smith
(which has since been acquired), up 186% in
five-and-a-half years; and Cendant (acquired), which
earned us 61.6% in less than seven months.
Smart Money Purchases
are investment ideas
gleaned from investors with extraordinary long-term
track records, like Warren Buffett, Jim Rogers or
Sam Zell.
Some recent notable smart money winners include BHP
Billiton Ltd. (NYSE: BHP), which we sold for a
178% gain after a little more than three years; Peabody
Energy (NYSE: BTU), which earned us 68% in under
a year; and Market Vectors Junior Gold Miners ETF
which netted us 40.5% in less than 3 months.
Special Situations,
for our purposes, generally means one of three
things.
- A stock that is significantly mis-priced
because of short-term problems that we believe
will change within a reasonable timeframe.
- A stock whose tangible asset value
significantly exceeds its stock price, and for
which we see a catalyst to realizing that value.
- A stock that we believe will grow earnings at
a pace faster than the market anticipates, and
looks, technically, like it is ready to
"break out."
Avon Products Inc. (NYSE: AVP), which
netted us 69.3% in less than three years; JDS
Uniphase, which made 49% for us in less than 3
months; and J.C.
Penney (NYSE:JCP), which brought us a 174% gain
in just nine months, are a few of big Special
Situation winners we’ve enjoyed.
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