Bosses know best, and they are buying at these four companies Dorfman

Chief executives probably know their companies better than anyone else. So when the boss is buying his own company's stock, it's wise to pay attention.

Here are four stocks I think deserve a look. In each case, the chief executive officer (CEO) has made a significant purchase in the past few weeks. Two are large-capitalization companies, one a mid-cap, and one a small-cap.

Centene

Centene Corp. (CNC) is the largest in the bunch, with a market value of $30 billion. Based in St. Louis, Missouri, Centene is a managed care company that focuses heavily on Medicaid patients.

Medicaid is a series of state programs that serve poor and disabled people. The cost is shared between the states and the federal government, with Uncle Sam picking up 61% to 85% of the tab.

Will President-elect Trump's Department of Government Efficiency try to slash Medicaid spending? If so, it would be tough on Centene.

Apparently, Sarah London, Centene's CEO, doesn't expect a harsh outcome. She spent about $250,000 to add to her holdings in November. Andrew Lynn Asher, the chief financial officer, spend about $1 million to add to his.

Twenty Wall Street analysts cover Centene. Ten say to buy the stock, and 10 others give it a tepid "hold" rating, which is as close to "sell" as most analysts ever get.

My recommendation is to buy, mostly because the shares are cheap by all of my favorite measures. They sell for only 10 times earnings, 0.2 times revenue and 1.1 times book value (corporate net worth per share).

Markel Group

Markel Group Inc. (MKL), with headquarters in Allen, Virginia, is a specialty insurer. Among its offerings are professional liability insurance, reinsurance and equine insurance.

Thomas Gayner, the CEO, spent about $155,000 in early November to add to his holdings.

Markel has shown a profit in 13 of the past 15 years. Profitability has usually been unimpressive until recently. In the past four quarters the company earned 19% on stockholders' equity. I consider 15% or more to be a good return.

Markel's market value is about $23 million. The stock sells for only eight times earnings - my kind of multiple. However analysts expect earnings to fall in 2025.

HighPeak Energy

In a September column, I noted that Jack Hightower, the CEO of HighPeak Energy Inc. (HPK), had recently bought $2.8 million of his own company's stock. Since then, he has paid about $1.8 million for additional shares.

I think Hightower's buys deserve attention because he has a record of successfully founding, growing and selling mid-sized energy companies.

The price of a barrel of oil (west Texas intermediate) was more than $100 in mid-2022. Today it's less than $69 a barrel, despite Middle East tensions and a (mostly unsuccessful) attempt by the U.S. to keep Russian oil out of the world market.

I think the oil price is more likely to rise than fall further, and I think HighPeak looks like a reasonable purchase at current quotes (about $15 a share, or about 12 times earnings). HPK is a mid-cap stock, with a market value of about $1.9 billion.

i3 Verticals

i3 Verticals Inc. (IIIV) of Nashville, Tennessee, offers payments systems and software to small and medium-sized businesses. It's a small-cap stock, with a market value of about $583 million.

This is an extremely speculative stock, since i3 posted losses six years in a row from 2018 to 2023. However, it's turned profitable lately, and analysts expect earnings to increase in fiscal 2025 (ending in September), 2026 and 2027.

Gregory Daily, the CEO, spent $2.1 million to buy shares on Nov. 25. He has made three substantial purchases before (in 2019, 2021 and 2023) and has been rewarded with gains on each. The company has more cash than debt.

The record

My record in columns on insider purchases and sales is mixed.

Stocks that I said to avoid, even though insiders were purchasing them, have trailed the Standard & Poor's 500 Total return Index by more than 24 percentage points.

Stocks where I noted insider selling have trailed the index by a little more than two percentage points.

Stocks where I talked about insider buys, but made no recommendation (or an ambiguous comment) have beaten the benchmark by about 16 percentage points.

Stocks I recommended based on insider buys have returned about 8.5% - respectable but 0.2 percentage points behind the index.

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 don't own the stocks discussed in today's column, personally or for clients. My firm purchases professional liability insurance from Markel.

John Dorfman is chairman of Dorfman Value Investments in Boston. His firm of clients may own or trade securities discussed in this column. He can be reached at [email protected].