Insiders Are Bullish on Jilted 3Com

Tech shares are out of favor, and economic growth in China is slowing. But shares of China-oriented network-equipment maker 3Com (COMS Quote) have looked relatively impressive, managing to tread water since I entered them in April of this year. Talk about defining success downward.

I still like the shares, however, based on such quaint measures as revenue and earnings-per-share (EPS) growth. 3Com's cash and cash flow appear decent as well. When good old-fashioned valuation metrics start to matter again, I think COMS is a good bet to continue outperforming the indices.

3Com was left at the altar in March of this year by Bain Capital and its Chinese partner, Huawei Technologies. It was on its way to being bought out for around $5.30 per share. But when the Committee on Foreign Investment in the United States (CFIUS) voiced concerns about the deal, Bain and Huawei bailed. Trading for more than $3 at the beginning of March, and more than $4 at the beginning of this year, 3Com fell to below $2 on March 20 after the courtship officially ended.

But seven executives and directors thought shares were still worth taking home, despite their jilted status. This cluster of insiders bought 960,000 shares of 3Com at an average price of $2.22 between March 27 and April 1.

Adding significance to the buying cluster, all seven of the purchasers increased their direct holdings significantly with their transactions. Plus, several of the buyers were either smart sellers of 3Com in the past, or chose then to make their largest-ever open-market investment in a company they've been associated with for years. Though there has been no insider activity since last spring's buying cluster hit my database, there has been no selling either -- despite the onset of tremendous secular weakness in the market. In short, 3Com's insider profile remains bullish.