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- By James Li
According to the All-in-One Screener, a Premium feature of GuruFocus, five stocks with high financial strength and profitability and multiple guru and insider buys over the past six months are Amazon.com Inc. (NASDAQ:AMZN), Fastenal Co. (NASDAQ:FAST), Foot Locker Inc. (NYSE:FL), Korn Ferry (NYSE:KFY) and Nvidia Corp. (NASDAQ:NVDA).
Guru and insider buy trends help uncover opportunities
Our research suggests that stocks with multiple guru and insider buys have good investing potential. The Most Broadly Held model portfolio, which tracks the performance of stocks with high guru ownership, has returned an annualized 15.36% per year over the past 10 years, outperforming the Standard & Poor's 500 Index benchmark return of 11.43% over the same period.
Likewise, Peter Lynch, the investing legend that managed the Fidelity Magellan Fund during the 1980s, developed a earnings line that compares a company's stock price to a value at 15 times earnings per share. Lynch also commented that while company insiders may sell shares for several reasons, insiders buy shares only when the price is expected to increase.
As such, investors may find good opportunities in high-quality stocks with at least three guru buys and two insider buys during the past three months. Figure 1 illustrates the Screener's Gurus tab, while Figure 2 illustrates the Screener's Insiders tab with the date range set from July 1 to Dec. 14.
The Screener listed five stocks with a financial strength rank of at least 6, a profitability rank of at least 7, at least four guru buys during the third quarter and at least three insider buys since July.
Forty-two gurus own shares of Amazon as of September, with 13 gurus buying shares during the third quarter. Additionally, the company had four insider buys during the past six months.
GuruFocus ranks the Seattle-based retail giant's financial strength and profitability 7 out of 10 on several positive investing signs, which include a high Altman Z-score of 6.4, a debt-to-Ebitda ratio that outperforms over 70% of global competitors and an operating margin has increased in the double digits on average over the past five years.
Gurus with large holdings in Amazon include Ken Fisher (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio). Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) also has a holding in the stock.
Ten gurus purchased shares of Fastenal, with seven gurus buying shares during the third quarter. Additionally, the stock had two insider buys during the past three months according to GuruFocus Good Signs, a Premium feature: Insiders bought 2,550 shares during the past three months.
GuruFocus ranks the Winona, Minnesota-based industrial distribution company's financial strength and profitability 8 out of 10 on several other positive signs, which include a double-digit Altman Z-score, a 3.5-star business predictability rank and profit margins and returns outperforming over 96% of global competitors.
Seven gurus own shares of Foot Locker, with five gurus purchasing shares during the third quarter. Over the past three months, the company had four insider buys for a total of nearly 2 million shares.
The New York-based company operates a network of stores around the globe, with each store retailing athletically-inspired shoes and apparel. GuruFocus ranks the company's profitability 8 out of 10 on several positive investing signs, which include returns outperforming over 80% of global competitors.
Eight gurus own shares of Korn Ferry, with six gurus buying shares during the third quarter.
The Los Angeles-based company engages in organized consulting and management recruitment that helps clients fill mid- to high-level management positions. GuruFocus ranks the company's profitability 8 out of 10, driven by a 3.5-star business predictability rank and an operating margin that has increased approximately 1.9% per year on average over the past five years despite outperforming just over 66% of global competitors.
Sixteen gurus own shares of Nvidia, with four gurus buying shares during the third quarter.
GuruFocus ranks the Santa Clara, California-based semiconductor company's profitability 9 out of 10 on several positive investing signs, which include a 3.5-star business predictability rank and profit margins and returns outperforming over 90% of global competitors.
GuruFocus launched in November several new features involving insider trades, including a "Company Executive" section on the stock summary page and insider summary statistics on the company's "Insiders" tab. Figure 3 illustrates the "company executive" section while Figure 4 illustrates the "Insider Statistics" section for Amazon.
GuruFocus also developed pages for individual insiders; for example, one can view information on Amazon CEO Jeff Bezos by clicking Bezos' name from the Executives section.
Disclosure: The author has no positions in the stocks mentioned. The mention of guru trades and holdings information reflect positions as of the third quarter and do not include trades made during October to December.
Per Securities and Exchange Commission regulations, the deadline to report quarterly trades is 45 days until after the quarter ends. Exceptions include trades in which the guru has at least a 5% stake in the company (two-week deadline) and insider trades (two-day deadline).
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This article first appeared on GuruFocus.