Jack Adamo's Insiders Plus

 


 

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JACK ADAMO’S INSIDERS PLUS

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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.

  1. A stock that is significantly mis-priced because of short-term problems that we believe will change within a reasonable timeframe.
  2. A stock whose tangible asset value significantly exceeds its stock price, and for which we see a catalyst to realizing that value.
  3. 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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