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3 Transportation CEOs Make Big Bets On Their Companies

3 Transportation CEOs Make Big Bets On Their Companies
  • Insider buying has increased as the earnings reporting season winds down, even in the face of the markets hitting new highs.
  • Three transportation CEOs have made notable insider purchases in the past week.
  • Strong insider buying is often considered a positive sign for investors, particularly during volatile periods.

Insider buying has increased again as the second-quarter earnings reporting season begins to wind to a close, even with the markets having reached new all-time highs again. Notable among the this increase in the buying, the chief executive officers at transportation-related companies Penske Automotive Group, Inc. (NYSE: PAG), Royal Caribbean Cruises Ltd (NYSE: RCL) and Southwest Airlines Co (NYSE: LUV) handily increased their stakes recently.

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. Insider buying can be an encouraging signal for potential investors, particularly during volatile periods.

Of course these CEOs aren't the only ones getting in on the action. Executives and other insiders at the likes of Bank of America, CBRE, ConocoPhillips, Infinera, S.L. Green Realty, Texas Roadhouse, Viper Energy Partners and WisdomTree Investments have all made recent trips to the buy window. But here we focus on the three transportation-related companies mentioned above.

Penske Automotive

Chairman and CEO Roger Penske has scooped up almost 79,000 shares of this Michigan-based transportation services company at between $38.23 and $39.98 per share so far this month. That totaled more than $18.24 million. Note that Penske also purchased more than $18 million in shares in July. His stake was more than 30.8 million shares on last look.

This dealer, distributor and lessor of automobiles and trucks just reported better-than-expected quarterly results, and it has a market capitalization near $10 billion. It pays a 2.8 percent dividend. Short interest is about 5 percent of the float. The share price is up around 21 percent in the past month and traded below $40 on Monday. The S&P 500 is around 2 percent higher in that same period.

See also: Tupperware's Insider Selling Keeps This Analyst On The Sidelines

Royal Caribbean Cruises

Last week, Chairman and CEO Richard Fain purchased more than 21,000 shares of this Miami-based cruise line operator. At $68.52 per share, that cost him nearly $2 million. The buy came in the wake of a mixed earnings report that included efforts to play down Zika virus fears, but preceded the sale of around $500,000 worth of shares by the head of the company's Celebrity Cruises unit.

The world's second-largest cruise line operator has a market cap of nearly $16 billion, and it offers a 2.0 percent dividend yield. Its short interest was about 8 percent of the total float in the most recently reported period. Shares traded on Monday around $74, so the buy looks well timed. The stock is down about 27 percent year-to-date, while the S&P 500 is up more than 6 percent in that time.

Southwest Airlines

President and CEO Gary Kelly purchased more than 28,000 shares of this air transportation services provider. At a share price of $35.58, that transaction totaled about $1 million, and it brought his stake to more than 69,000 shares. Note that two other insiders also bought almost 10,000 shares last week. Also, unions have pressed for Kelly to step down as chief executive, but he has the board's support.

This Dallas-based airline operator sports a market cap of more than $23 billion, and it has a dividend yield near 1 percent. As the stock traded above $37.50 per share on Monday, here too the purchase appears to be well timed. The stock is down about 11 percent in the past 90 days, underperforming peers such as United and American.

At the time of this writing, the author had no position in the mentioned equities.

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