It’s been a couple of weeks since we wrote about a stock with insider buying. The choices were not up to our standards, so we let it be for a bit. Today we have found a few that are interesting.
First up is Fresh Del Monte Produce Inc. (FDP): Fresh Del Monte Produce is one of the world’s leading vertically integrated producers, marketers and distributors of high-quality fresh and fresh-cut fruit and vegetables, as well as a leading producer and distributor of prepared fruit and vegetables, juices, beverages, snacks and desserts in Europe, Africa and the Middle East. They market and distribute products to retail stores, food clubs, wholesalers, distributors and foodservice operators in more than 90 countries around the world.
Since March insiders at Del Monte have been buying the stock; the first wave in the $14.5 range and the 2nd wave in late July and August in the $21-to-$23 range. When you see that insiders were dumping the stock in February around $25, only to see the stock drop to a low as $13 in early March, it gives us a sense that FDP insider have a god sense of timing. Even the first wave of buying at $14 looks good at yesterday’s close of $22 and change.
Fundamentally, most of the key metrics we follow are in place. The stock trades at just 41 cents per share for every dollar they do in sales. This compares favorably to the industry average of 74 cents on the dollar. We are happy with any number under 1. Del Monte has a forward P/E to expected growth rate of less than 1 to 1. The forward P/E of 8.36 is a nice discount from analysts’ expectations of 12.4% earnings growth. And the earnings growth rate could increase as 3 of the 4 analysts covering FDP have raised their outlook for 2010. Finally, the company still trades under its book value of $25.25 and with a reasonable PEG Ratio of 1.34.
According to point & figure chart analysis, FDP recorded a triple top breakout on July 23 and now has a $38 price objective. Our technical analysis of FDP’s stock chart says the stock could settle in a little bit, but the next rally in the market (if there is one) could take the produce company towards it 52 week high of $26.66 and possibly close to its one year consensus price target price of $27.75.
Suggested Closing Price Stop: $17.88
Today’s Correct Call Calendar readers will learn about a stock that insiders and George Soros have been buying.
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