There is a CNBC story out today about "Business confidence booming." iStock guesses that it all depends on how you define booming. The survey of 33 chief financial officers (CFO) from Europe and Asia found, "The overwhelming majority of respondents-65 percent-see the global economy modestly improving over the next six months, with 4 percent seeing it "strongly improving" over the same period."
However, the CNBC survey showed, "Over 80 percent of respondents had fears over slowing growth to some degree. Just 9 percent indicated that they were unconcerned."
In the same story, it's noted that the International Monetary Fund (IMF) has a "growth estimate for developed countries - including the euro area, the U.S., U.K., Japan and Canada - at 1.2 percent in 2013 and 2.0 percent in 2014."
Definitely "Booming."
While the CFOs in Europe and Asia are looking forward to sonic growth, the enthusiasm doesn't seem to be shared on this side of the Atlantic and Pacific oceans, at least as measured by insider buying. Executive buy tickets for publicly traded companies were anemic for the third consecutive week.
CFOs can check-off any box they want in a survey, but they almost never lie with their wallets.
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Although we did not find a CFO insider purchase of interest, we did find a COO who might be trying to pick a bottom? Molycorp, Inc. (MCP) Chief Operating Officer and Exec. VP, Geoffrey R. Bedford opened his checkbook to the tune of $150,000 to buy 30,000 MCP shares at $5 per, which is just 30 cents above the company's 52-week low of $4.70.
Molycorp, Inc. produces and sells rare earth and rare metal materials in the United States and internationally. The company's Resources segment extracts rare earth minerals, including rare earth concentrates; rare earth oxides (REO). Despite the word rare in the name, the metals are! quite common and used in all sorts of things, from tablet computers and TVs to hybrid cars and wind turbines…
One would think that the popularity of stuff like hybrid cars, TV and tablets would be a boom for Molycorp, but that has not been the case as light rare earth metals prices are struggling. Unfortunately, that's about half of MCP's business.
That's what makes Bedford's buy standout. This is the 46 year-old's first Molycorp transaction in the couple of years besides exercising some options. In addition to cluster buys, seven-figure purchases and past-performance. iStock also keys on insider buying at or near low water marks. It makes you wonder when Wall Street is negative on a stock, as evidenced by trading near a 52-week low, why somebody with intimate knowledge of the company and industry is writing a six-figure check?
As prices fell for Molycorp's products, so has its valuation on a price-to-sales (P/S) basis. Investors paid up to 173 times sales in the last half-decade. Bedford bought at 1.16 times sales, which is close to the five-year low of 1.02. In fact, MCP has traded with a P/S ratio greater than 1.16 for only 12 days in 2013.
Analysts are calling for a 56% jump in revenue for MCP in 2014 as compared to 2013's consensus estimate. If beleaguered basic materials company traded at its average 2013 P/S of 1.14, then the stock would price out at $11.78 sometime in the next 14 months or so. Heck, using the five-year minimum price-to-sales ratio, the stock would find its way to $8.53 in the same time-frame. Either way, the COO and new shareholders would be delighted.
Overall: Molycorp, Inc. (MCP) Chief Operating Officer, Geoffrey R. Bedford appears to be bottom fishing. If Wall Street analysts are right about 2014's sales figures, then he will probably be close, and MCP's shares have a chance to – dare we say - boom!
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