Insiders Swoop In On Coty's Post-Earnings Selloff

• Insiders at this beauty products giant have scooped up many shares.
• Those purchases followed a disappointing earnings report.
• The share price has risen handily since those insider buys.

Conventional wisdom says insiders and 10 percent owners really only buy shares of a company for one reason -- they believe the stock price will rise and they want to profit from it. So insider buying can be an encouraging signal for potential investors, particularly in an overpriced market. Case in point: recent notable buys at Coty Inc COTY.

Netherlands-based beneficial owner JAB Cosmetics has bought almost 4.1 million shares of this beauty products company in the past week. The share prices for the purchases ranged from $18.39 to $18.97, for a total of around $75.9 million. Also last week, Coty's chief legal officer acquired 40,500 shares at $18.50 apiece, or less than $750,000.

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These buys in Coty followed a fiscal second-quarter report that fell short of Wall Street expectations. The stock pulled back more than 8 percent after the earnings report.

Coty has a market capitalization of more than $15 billion. Short interest is more than 7 percent of the float, and the consensus recommendation of analysts is to hold shares. In the past week, the stock has recovered much of the ground lost after the report, and shares closed most recently at $19.74. That is well above these insider purchase prices.