For investors looking for the latest and greatest top TSX stock, we’ve got you covered. Indeed, various factors ought to be taken into consideration when picking stocks in this environment. However, one of the most telling attributes I think doesn’t get enough attention is insider buying activity.
Let’s take a look at why insiders are so bullish on this company right now.
Insiders believe it is a top TSX stock
Any time insiders are heavily invested in a specific company, I think it’s worth taking a look as to why. In the case of Linamar, approximately 51% of the company’s outstanding shares are held by four shareholders, including key executives and Linamar’s CEO. That’s a bullish vote of confidence for investors.
Indeed, insider selling has picked up in recent years. Following a GM strike and weakness with the company’s agricultural equipment business, insiders began buying this stock heavily, when they were down roughly 70% from their highs. Since then, shares have rebounded to near all-time highs of late.
Is it good timing? Maybe. However, insiders know their business better than anyone else. And the fact that insiders continue to buy and hold significant chunks of shares is bullish for long-term investors in this stock.
I think Linamar’s management team is onto something with this company. Indeed, the amount of skin in the game executives have is incredible. The company’s top executive Frank Hazenfratz holds roughly one-quarter of the outstanding shares of Linamar. When the CEO isn’t selling in this red-hot market, investors should certainly take note.
Fundamentals look juicy
From a fundamentals perspective, it becomes easier to see why Linamar has seen so much insider buying in recent years.
Indeed, the company’s average ROE of around 20% between 2013 and 2017 is solid. Should the company return to an ROE of around 15% per year, earnings per share could come in around $10. That would price this stock at around eight times earnings on a forward-looking basis.
Linamar is cheap, and given the fact this stock is trading at less than 15 times trailing earnings, this stock could be a double-up from here if it can get its earnings per share to the $10 level. Indeed, I think that’s a feasible scenario, given the red-hot auto manufacturing space right now.
For investors seeking a high-quality pandemic recovery play, Linamar looks very attractive right now.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
The Motley Fool has no position in any of the stocks mentioned. Fool contributor Chris MacDonald has no position in any stocks mentioned in this article.