Portfolio manager David Miller built a top-performing fund based on following insider transactions.Here are 13 stocks with compounding growth that Miller is bullish on right now.
"Our philosophy is pretty simple: We think the people who know the most about the companies are the top execs of the firm who are running the company themselves," Miller told Insider in a recent interview. Miller continued:"But if all of those executives, or at least some of them, are taking their hard-earned money — especially when their whole livelihood is already tied up with that company through their employment — and not just selling off stocks they got through options but taking more money out of their own pocket and doing Form 4 filings to buy more stock, that's really the indication that initially gets us involved in each of these businesses.
"We found that there were a lot of companies that kind of looked like falling knives, where stock prices were getting clobbered and insiders liked to buy into something that seemed cheap," Miller said."But sometimes, those insiders didn't have the best track record with their buys." "What I mean by that is companies where their business has some type of really unfair advantage that led to them doing exceptionally well long term," Miller explained."In a way that really wasn't cyclical like your typical company but was really driven by some type of moat that they had in their business or some type of really sustainable competitive advantage."
And while Miller does look at valuation, he said he's grown wary of both unusually expensive and suspiciously cheap stocks, which helps him avoid value traps.
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