Two knowledgeable insiders recently made large purchases of stocks not too far off their six-month highs, which is notable because moves like these are considered unusually strong signals of valuation support.
The biggest, and most newsworthy, was the purchase of 667,000
shares, worth $8.8 million, by Mexican billionaire Carlos Slim, on Wednesday and Thursday last week. Slim, who already owned about 15.8 million Saks shares, added meaningfully to his stake in a couple days of quiet trading.
Before these buys, his last action on the company was the sale of 1.2 million shares in November and December 2003. The Alabama-based department store chain's stock has been depressed for years. It's currently some 16% off this year's high, and it is off about 65% from its all-time high in 1998.
The company, which is expected to earn 61 cents per share this year and 81 cents per share next year, has struggled to gain traction among shoppers and investors amid fashion and operational miscues. On Nov. 11, the company surprised investors with a third-quarter loss of 18 cents a share, and it blamed charges related to closures of 12 Saks Fifth Avenue Enterprise stores, the summer hurricanes and "difficult sales trends beginning in the second quarter."
Slim's purchase came amid speculation, sparked by the purchase of
( KMRT), that Saks' real estate might be worth at least as much as its retailing expertise -- as well as suspicions that more retail combinations might be in the offing. Saks shares jumped nearly 20% from Oct. 21 to Nov. 5, but had slipped quite a bit just before Slim's big shopping spree. Slim has built what authorities believe is one of the largest fortunes in Latin America as a turnaround buyer of retailers, restaurants and railroads, primarily in Mexico. He controls his native country's largest telecommunications firm,
Telefonos de Mexico
( TMX), with a 29.5% stake.
Meanwhile, in a world far removed from retail, veteran energy executive Peter J. Hill made a rare purchase of the shares of independent oil driller
Harvest Natural Resources
. The celebrated former British Petroleum manager, who has been chief executive at Harvest since 2000, bought 18,275 shares at $15.04, worth $274,856, on Nov. 11 as the stock traded about 15% off the high that it established earlier in the fall on the spike in oil prices. Hill has been a savvy buyer of his company's shares, making large open-market purchases in May 2002 at $4.15 that netted 70% in six months and at $7.21 at this time last year, which netted 98% in six months.
Harvest is best known for its exclusive properties in the coastal regions of Venezuela, but it also has important tracts off the coast of China as well as in Russia. On Nov. 4, the company reported good results from all operations. Hill told investors that the company's success stemmed from "sustained high gas production, high oil prices and low operating expenses."
He noted that the company had two rigs currently drilling wells in the Uracoa Field in Venezuela, and that it already had 10 wells completed and six more in the works. He told investors that the company had received an average of $19.87 per barrel for 2004 third-quarter sales, an increase of $5.90 over the same period last year.
Despite the doubling of share price in the past year, Hill's purchase gives credence to the notion that shares are still undervalued. They're trading at a forward price/earnings multiple of 11.2 despite a reasonable expectation on the part of analysts and investors that the company's earnings will grow better than 25% through the end of fiscal 2005. Even if executives are bearish on the direction of prices, they could lock in values now via future-delivery contracts, as explained in a
column last month.
P.S. Don't forget -- now is a great time to get in on bargain stocks before the prices go up. Get my picks with a
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Jon D. Markman is publisher of StockTactics Advisor, an independent weekly investment research service, as well as senior strategist and portfolio manager at Pinnacle Investment Advisors. At the time of publication, he had no positions in stocks mentioned. He also writes a weekly column for CNBC on MSN Money. While Markman cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at
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