There are a whole host of different reasons why an insider might sell some of their companies shares, and they are too numerous to list here, but the only reason why an insider would buy more shares of their company’s stock is quite simple: they believe the shares are going to go up in value.
We all know that the stock picking ability of Warren Buffett has literally made him one of the wealthiest men alive. So if you are looking for a good way to begin research on stocks that you might want to own, it would probably be a good idea to look into his portfolio and see which of those companies has a lot of insider buying taking place. Remember, insider buying means a belief that the stock is about to rise. That is a good sign that you should certainly use to your ultimate advantage.
There are three stocks in Warren Buffett’s portfolio that have recently had some insider buying. The companies getting the most attention are Gannett Co. Inc. (GCI), The Washington Post Company (WPO), The Coca-Cola Company (KO) and General Electric Company (GE).
Gannett Co. Inc. (GCI)
As of March 31, 2012, Warren Buffett officially owns 1,740,231 shares of Gannett Co. Inc. (GCI). This company only represents an insubstantial 0.035% of his overall portfolio.
Gannett Co. Inc. (GCI) is actually tied with General Electric Co. (GE) where the second-most insider buying is taking place at one of the companies in Warren Buffett’s portfolio. One of the directors of Gannett Co. Inc. (GCI) actually made a 20,000 share purchase during the second-quarter. The company closed trading on Tuesday at $14.04 per share, and this was after a 6.3% rise in price. Many different newspaper company’s stock went up on Tuesday due to reports that News Corp. plans to spin off its publishing division.
In the first quarter of 2012, Gannett announced a $0.28 earnings per share which is down from $0.37 earnings per share in the prior year quarter. It made this announcement on April 16. The net operating revenues were also down by 2.6% from the prior year in advertising gained through publishing as well as publishing circulation. They did have an increase in their digital and broadcasting segments.
The company has mainly focused on building their digital content and advertising platforms. This will allow them to generate further growth and expand their business using the current technological advances. There digital revenue growth has increased 13% already in its publishing segment.
As far as future plans are concerned, they expect to generate anywhere between 2% to 4% growth in annual revenue, as well as higher earnings growth, by the year 2015. They also plan to return more than $1.3 billion of this money to the shareholders by the year 2015.
Gracia Martore, Gannett’s CEO and president, shared the company’s plans at a presentation that he gave on Thursday in New York to media and entertainment analysts. This is what he had to say:
“In addition, our new all-access subscription model has been rolled out in 38 markets and is progressing as anticipated. New ventures like Digital Marketing Services and the USA TODAY Sports Media Group that leverage and extend our brands and assets are gaining traction and delivering results. We are confident in our strategy and our ability to achieve sustainable revenue growth while maintaining a strong balance sheet and generating increasing shareholder value.”
Gannett also increased its annual revenue by 150% to an overall $0.80 per share. They also purchased 2.4 million shares for roughly $35.5 million during this quarter.
The Washington Post Company (WPO)
Warren Buffett officially owns 1,727,765 shares of stock in the Washington Post Company (WPO). This was determined at the end of the first quarter, and these shares represent 0.86% of Mr. Buffett’s overall portfolio. He actually bought the shares in the middle of 1973, and he is also the largest shareholder in The Washington Post Company. Although Warren Buffett has been on the board of this company for nearly 40 years, The Washington Post recently told us that he doesn’t plan on seeking re-election to the board now that his term has expired in May.
The last time there was an insider buy at The Washington Post was on December 30, 2011. 76 shares were purchased for the cost of $392 per share. Although since then, the share price has fallen to a much cheaper level of $363.55 this past Tuesday. And this was on an uptick of 0.18% during the trading day.
In May of 2012, The Washington Post reported first-quarter earnings of $31 million. This increased to $15.2 million in the quarter of the prior year, and their revenue came in at $972 million which is down from $1.04 billion in the prior-year quarter. The television broadcasting division increased their revenues while the cable TV division had flat earnings. The education and newspaper publishing divisions were both down as well.
Warren Buffett has been increasing his purchases of newspapers lately. In a CNBC interview he actually stated that he did not like The Washington Post business model of not charging for their product:
“Newspapers have been giving away their product at the same time they’re selling it, and that is not a great business model. So when they put papers up on the internet and you get it free, you’re competing with yourself… And you’re seeing throughout the industry a reaction to that problem and an answer to it. You shouldn’t be giving away a product that you’re trying to sell,” he said.
There are other online newspapers such as The Wall Street Journal, The New York Times and News Corporation who are certainly charging for their online product right now.
Coca-Cola Company (KO)
Warren Buffett’s portfolio consists of owning 200 million shares of Coca-Cola (KO), which was determined at the end of the first quarter. This is actually 20% of Mr. Buffett’s entire portfolio, and he has never once sold any shares of his Coca-Cola stock since he first started buying it up many years ago.
There were actually three insiders buying Coca-Cola stock during the second quarter. All three of the buyers were Coca-Cola directors. The biggest purchase out of the three was made by Director Barry Diller in April where he spent $20.3 million to purchase his shares. He bought each share at an average about $77 each, and the price has dropped a little bit since then although it is relatively close at $75.25 per share. That price is actually a 0.67% increase on the day.
It should also be noted that there were six insiders that sold shares of Coca-Cola stock in the second quarter as well.
Director Barry Diller, along with one another director, bought their shares two days prior to Coke announcing that they were seeking approval for a 2-for-1 stock split. The chairman of Coca-Cola was pushing for this split, and if it goes through it will be the 11th stock split in the 92 year history of the company. Coca-Cola stock last split 16 years ago, and the shareholders are going to vote on this decision on July 10.
“Our recommended two-for-one stock split reflects the Board of Directors’ continued confidence in the long-term growth and financial performance of our Company,” said Coca-Cola CEO and Chairman Muhtar Kent. “Our system’s 2020 Vision to double our revenues over this decade provides a clear roadmap for creating value for our consumers, customers, bottling partners and shareowners. A stock split reflects our desire to share value with an ever-growing number of people and organizations around the world.”
The other first-quarter announcement that Coke made was a dividend increase from $0.47 to $0.51 per share per quarter. This is actually the 50th annual dividend increase in consecutive years.
General Electric Company (GE)
Warren Buffett also own shares of the General Electric Company (GE). His total shares of this company are 7,777,900, and it makes up about 0.21% of his total portfolio. There were two GE insiders who bought company shares over the last three months. One of the directors purchased 30,000 shares at a cost of about $19.50 per share. The second director bought 4000 shares, and paid roughly $19.75 per share.
Both of these purchases happened toward the end of April, and the stock has gone up slightly for both individuals since it closed on Tuesday at $19.80 per share. This was a 1.43% share price increase for that particular day.
The Wall Street Journal reported a rumor that General Electric is seriously considering selling off large portions of GE Capital. There are many investors who believe that GE is getting much too large, and that it needs to downsize in this area.
GE announced earnings growth for the eighth consecutive quarter, and GAAP earnings from continuing operations of $3.3 billion, which is down 4% from the quarter in the prior year. The company’s revenues also declined around 8%, and this is largely due to the sales of Garanti and NBCU in the same quarter of the prior year.
GE is expecting double-digit growth in earnings during the year 2012 within its industrial business. They believe this is good news for GE Capital since they are hoping that the industrial growth will take advantage of overall global growth. This company earns 50% of its revenue from businesses overseas.
The first-quarter earnings of GE capital were up 27%, and this is excluding the sale of Garanti, for a total of $1.8 billion. This division of General Electric benefited from their first profit in real estate since the third quarter of 2008. It is also known that General Electric is going to start getting dividend payments from GE Capital. This will be the first time receiving dividend payments since the financial crisis first began. The dividend is said to consist of about 30% of the total earnings of 2012.