John Dorfman: Insiders buy at Carrier, Hershey and T-Mobile

A few corporate chieftains bought their own company’s stock in November.

Numerous studies, most notably at the University of Michigan, have shown insiders do better, on average, than regular investors. Trades by chief executive officers generally do better than those of other insiders.

Let’s glance at a quintet of insider purchases from last month that piqued my interest.

Carrier

You may have owned a Carrier air conditioner at some point. Carrier Global Corp. (CARR) is a giant in the heating, ventilation and air conditioning (HVAC) business.

Until 2020, Carrier was a subsidiary of the conglomerate now known as RTX Corp. (RTX). It has notched strong and consistent profits, yet its stock has underperformed the Standard & Poor’s 500.

My guess is better times lie ahead. Perhaps CEO David Gitlin thinks so too. On Nov. 25 he bought just over $1 million of Carrier stock and now hold about $45 million of it. This purchase was his first in five years.

Hershey

Kirk Tanner, former CEO of PepsiCo Inc. (PEP) and Wendy’s Co. (WEN), will soon occupy the CEO seat at Hershey Co. (HSY). He bought some Hershey shares in November and now owns about $9 million worth, plus about $14 million in PepsiCo shares.

Hershey’s shares are well off their high, reached in 2023. But I personally wouldn’t buy them yet. The stock sells for 28 times earnings, a bit rich considering the company is fighting high cocoa prices.

Roper Technologies

Based in Sarasota, Fla., Roper Technologies Inc. (ROP) is a conglomerate of some 30 businesses, most of which have to do with technology in general and software in particular.

“Each portfolio company operates independently from the others,” Roper says. Free cash flow goes to the parent company, and “is then utilized to acquire additional businesses.” Among Roper’s units are Vertafore (software for the insurance industry) and Frontline Education (educational administration).

Laurence Neil Hunn, Roper’s CEO, has generally been a seller of Roper shares over the years. However, he spent more than $4 million to buy some shares Nov. 12 and now owns some $85 million worth.

T-Mobile US

T-Mobile US Inc. (TMUS) has been gaining market share from AT&T (T) and Verizon (VZ). In the past five years, it has increased earnings at a rapid clip, 27%. Last month it named a new CEO, Srini Gopalan.

Gopalan celebrated by spending almost $2 million on T-Mobile US shares. That brings his total holding to about $32 million as of late November.

I’m not keen on T-Mobile stock. T-Mobile US’s debt is almost twice as large as stockholders’ equity. And revenue for the past five years has grown at a 5.1% clip — respectable but not spectacular.

Central Bancompany

Central Bancompany Inc. (CBC) is a mid-sized bank whose stock just started trading publicly on Nov. 20. Based in Jefferson City, Mo., it has 159 branches in seven states — Missouri, Colorado, Illinois, Iowa, Kansas, North Carolina and Oklahoma.

The first thing I look for in a bank stock is a return on assets of 1% or more. Central Bancompany has beaten that standard every year since 2019, often by a considerable margin. In the past four quarters, it earned 1.6% on assets.

John Thomas Ross, the bank’s president and CEO, bought some shares last month in the public offering and now owns some $12.2 million worth. Sixteen other insiders also purchased shares.

Performance

This is the 76th column I’ve written about insider buys and sells. I can calculate the returns for 66 of those columns — all of those written from the beginning of 1999 through a year ago.

Stocks where I noted insider selling have trailed the Standard & Poor’s 500 Total Return Index by 2.3 percentage points over the 12-month period following publication.

For some stocks, I noted insider buying but said I would avoid the shares anyway. These have trailed the S&P by a massive 24.3 percentage points.

Stock where I noted insider buying but made no comment, or an ambiguous comment, have beaten the index by 14.2 percentage points.

That’s all fine, but alas, the stocks I’ve recommended based on insider purchases have trailed the index by 2.8 points. The overall verdict therefore is mixed.

Bear in mind that my column results are hypothetical and shouldn’t be confused with results I obtain for clients. Also, past performance doesn’t predict the future.

Disclosure: I have no personal positions in the stocks discussed today. I own RTX and PepsiCo for a few clients.

Correction: In a mid-November column, I mistakenly said Reinsurance Group of America Inc. (RGA) was trading at about $235. The actual price range in November was $180.65 to $190.76.