They forget that not all insider trading carries the same weight. For example, trades made by a president or vice president have more significance than the actions of lower level company officials. The strongest signals tend to come from key executives who are the closest to the day-to-day operations of the firm.
Of course, there are times when the insider trading does send out loud and clear “buy” signals. I found one such stock and I’ll share it with you today.
Tracking insiders is just one of many tools I use as part of my fundamental analysis. Keep in mind that insiders make dumb mistakes just like anyone else.
Some insiders do poorly in terms of their timing. You see, insider buys don’t necessarily turn into immediate price gains. Studies have shown that most of their profits come after 30 days, if they happen at all.
I tend to dismiss insider activity unless it involves both a significant number of shares and participating insiders. But when a large insider buy is combined with rising earnings and an upward chart trend then it’s time to take notice. That’s what’s going on with my latest pick.
Equinix, Inc. (EQIX) is a tech company that provides data center services to their clients in the Americas, Europe, the Middle East, Africa, and the Asia-Pacific. The Redwood City, California-based company has a market cap of $8.9 billion.
Spo Advisory Corp, who is 10% owner at Equinix, bought 74,900 shares for $13.3 million in late April. The stock is trading well off its 52-week high, but shares have been climbing steadily in the past few weeks to about $186 since the insider buy.
What makes the stock particularly exciting is that the company has shown strong revenue growth across all three geographic regions it covers. That growth was led by Equinix’s Cloud and IT services (up 15% year over year).
Equinix reported first-quarter 2014 earnings of 81 cents, well ahead of analysts’ estimates. Earnings per share improved a whopping 23.9% from a year ago. Total revenue for the quarter was $580 million, a solid 12.4% increase year over year. Equinix’s ongoing partnerships with Verizon and AT&T are expected to help keep pushing revenues higher going forward.
During the quarter, Equinix launched a new service called Performance Hub that guarantees improved networking performance and happier end users. Companies such as Chevron, eBay, and NVIDIA have already started using the service in Equinix data centers globally. This service should boost earnings when it come available worldwide in the second half of the year. Plus, Equinix just announced plans to rapidly expand the number of locations offering its Solution Validation Center, which allows companies to test tech upgrades prior to rolling them out.
Wall Street has seen the light when it comes to Equinix. Currently, there are 11 analysts who rate the stock as a buy, no analysts rate it a sell, and two rate it a hold. Overall, the company is quite attractive to investors thanks to consistent revenue growth, expanding profit margins and growth in earnings per share. The recent insider trading action is the icing on the cake for me.
Keep in mind that your trade timing in Equinix is crucial as with any investment. Stocks like that one will be covered in my C.H.I.R.P. service along with clear entry and exit points. C.H.I.R.P. subscribers always receive key timing details in order to maximize profits for each stock pick. Please check your email for an exclusive invitation.
Note from Midas Legacy Editor: “Banker X” must remain anonymous for our purposes, but in his official capacity he’s a CNBC-quoted bestselling author. A former investment banking insider, Banker X is a multi-millionaire and his C.H.I.R.P. service subscribers get an unfair (but perfectly legal) advantage over other investors due to his inside contacts. Check your email to see if you received a limited time invitation to C.H.I.R.P.