By Chad Tracy
Based on new research into the insider filings for the fourth quarter of 2012, I have found 10 of the most popular stocks among insiders on Wall Street.
And the results are interesting, to say the least.
Remember, the Securities & Exchange Commission requires all institutional investors who have more than $100 million under management to file their holdings in 13F forms.
Now, before I give you the list of popular stocks among institutional investors during the fourth quarter, one quick word of caution…
Ordinary investors like you and me, (and by ordinary I mean people with less than $100 million under management), may be tempted to simply imitate the moves of big-name institutional investors. After all, these people have huge teams of researchers and analysts, and are paid big bucks to find the best stocks for their clients. So buying whatever they buy makes sense, right?
Well, yes and no. Believe it or not, there is actually a big advantage ordinary investors like us have over the big boys -- we don't have to buy or sell stocks every quarter. We don't have to stay busy all the time buying and selling in order to collect fees, justify our big salaries and keep our clients happy. And in reviewing the list, I found that most of the companies in the top 10 have seen a big run-up in price during the past several months, so they may not be good "buys" right now.
So, warnings aside, here are 10 stocks heavily favored by institutional investors according to 2012's fourth-quarter 13F filings:
1. Williams Cos. Inc.
2. Kinder Morgan Inc.
3. Advance Auto Parts Inc.
4. Colgate-Palmolive Co.
5. Valeant Pharmaceuticals International
6. Starbucks Corp
8. Barrick Gold Corp.
We've covered Starbucks recently at StreetAuthority, so I won't talk about the company in this article. [We did, however, detail a unique competitive advantage that has allowed Starbucks to post 200% gains during the last two years in this article
As I said, almost all of the stocks on this list have seen a big run-up on price during the past several months, pushing them above what I consider to be good value "buys."
At today's prices, only
Medtronic and Barrick Gold
) of the 10 companies are still selling cheaply enough for me to recommend.
Medtronic is in the medical technology business. The company commands an almost 50% market share with its core heart devices as well as market-leading positions in spinal products, insulin pumps and products to treat chronic pain.
And right now the stock is still relatively cheap, trading at a forward price-to-earnings ratio of 11 compared to an industry average of 22.
Due to the aging boomer population, I'm bullish on the health care sector in general. People all over the world are living longer, so the demand for the kind of life-saving products that Medtronic produces will likely continue to rise in the coming years.
Contrarian investors with an appetite for risk should take a closer look at Barrick Gold.
I say "contrarian" because during the past several years the company's share price has seen a brutal decline.
That said, investors haven't been able to buy shares of Barrick Gold near $30 since early 2009. That's why buying the stock now could be a huge opportunity.
Investing in gold miners is always a speculative proposition. And Barrick is no exception.
Right now, the company is involved in talks with protesters who have set up blockades at its Lagunas Norte mine in Peru. Last year, Barrick was forced to halt operations at its Pierina mine (also in Peru) temporarily, after one person was killed in a clash between nearby residents and police.
Political hurdles aside, Barrick has two major projects that could mean big profits for the company in the near future.
In 2012, Barrick began production at its Pueblo Viejo in the Dominican Republic. Barrick will serve as the operator for the mine, with a 60% interest. Goldcorp
) owns the remaining 40%. Total pre-production capital costs were estimated at $4 billion, and Barrick's share of production should amount to an estimated 650,000 ounces during the first five years -- at a cost of about $325 per ounce. If these projections pan out, that would mean a gross profit of roughly $480 million at today's gold prices.
In 2014, Barrick plans to begin production at its Pascua-Lama mine, located on the border between Chile and Argentina. This mine is expected to average 825,000 ounces of gold in the first five years.
It may not happen right away, but with promising projects like Pueblo Viejo and Pascua-Lama in the pipeline, I think Barrick's share price could rebound over the coming year and retest resistance in the $42 range.
Risks to Consider: Health-product companies like Medtronic are always in danger of product recalls or expensive lawsuits that can hurt profits and damage the company's reputation.
As far as Barrick goes, besides the aforementioned political risks of operating mines in foreign countries there is also the risk that interest rates will stay low for the next several years, reducing the demand for gold and lowering prices.
And while this may happen in the short-term, for the long-term I believe the worldwide fiscal policy of "monetary easing" will eventually create a huge demand for gold as inflation soars and paper money loses its value.
Action to Take: I think Medtronic is a buy at today's prices. For investors interested in Barrick, I would recommend waiting. Before I'm willing to invest in the miner, I would like to see evidence that the stock has indeed bottomed-out and has started to rebound. This hasn't happened yet. I would also like to see the company's current political issues resolved quickly and peacefully.
Chad Tracy does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC owns shares of GG, SBUX, WMB in one or more of its “real money” portfolios.
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