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A Few Insiders Saw Value Before the Rally

Investors might have been tipped to the current rally in stocks by the recent behavior of a few corporate insiders.

In the past few weeks, a number of executives have offered to take their public firms private by purchasing all the outstanding shares that they don't currently own, indicating to some analysts that stocks are deeply undervalued.

"To me, this is consistent with what we're seeing in terms of insider activity," said Michael Painchaud, director of research and principal at Market Profile Theorems. "Insiders are stepping up more aggressively to buy stock as opposed to sell stock."

On Monday, Quintiles Transnational (QTRN), which provides testing services to drugmakers, said its chairman, Dennis Gillings, had offered to buy the firm for $1.34 billion, or $11.25 a share, representing a 35% premium over last Friday's share price.

That offer comes on the heels of a similar proposal from the CEO and president of trucking firm Landair Corp. (LAND). The two executives made a formal offer Friday to buy the company for $18.6 million, or $13 a share in cash -- a 25% premium over Thursday's stock price.

And in late September, Dole Food (DOL) CEO David Murdoch offered to purchase the remaining 76% of that company's outstanding shares for $1.3 billion, or $29.50 each, after other efforts to increase the share price failed. Investors have since objected to the offer, saying it is too low.

"If you have the head of a company looking to buy all the shares that are out there, they obviously must think the shares are cheap and have a lot of upside potential," noted Thomson Financial research analyst Kevin Schwenger.

Before the announcements were made, Dole was trading 25% below its 52-week high, while Quintiles were off by 57% and Landair was 16% below its high of $12.45.

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