The insider buy alerts from InsiderCow.com were coming in fast and furious yesterday for CapitalSource (CSE) as 7 different insiders picked up more than 205 million (yes, thats million) worth of its company’s shares immediately following a secondary offering of the stock. Whoop, scratch that. Two more insider buy alerts came in literally just seconds ago – 2 more insiders, each purchasing nearly 4.3 million worth of stock, bringing the total to 9 different insiders for a total of nearly 214 million.
About CapitalSource
CapitalSource Inc. (CSE) is a specialized commercial finance company providing loans to small and medium-sized businesses. Capital Source provides debt financing products that it negotiates and structures on a client-specific basis, through direct interaction with the owners and senior managers of its clients. The Company has three lending businesses: Corporate Finance, Healthcare and Specialty Finance, and Structured Finance. Corporate Finance generally provides senior and mezzanine loans principally to businesses backed by private equity sponsors. Healthcare and Specialty Finance generally provides asset-based revolving lines of credit, first mortgage loans and other senior and mezzanine loans to healthcare businesses and other companies. Structured Finance generally provides asset-based lending to finance companies and commercial real estate owners.
Converting to a REIT
On September 19th, the stock shot up 20% on news that the company would convert to a REIT (real estate investment trust) on Jan 1, 2006.
Fundamentally Outstanding
CapitalSource is a company with outstanding fundamentals. Applying my ranking system, I come up with a score of 27/30, which puts it in the top 100 stocks that I track. Beginning in 2002, the company has posted year over year growth of 500%, 83%, 38% and 29% (est. for ’05). Net margins are double the industry average at 28%, but they have been declining a bit in the past 2 years. Return on equity has been rising every year for the last few years and is very good at 15%.
Technically… A Different Story
Technically, it’s been a different story. The stock has been basing nearly the entire time since the company went public on August 7th, 2003 and the action could be characterized as sloppy. The Relative Strength rating is poor and the stock is currently having trouble staying above the 200 day moving average despite the pop following the news of the REIT conversion.
It’s strange that the stock has basically gone nowhere since its IPO considering the kind of growth it’s posted over the last couple years. With a PE to growth ratio of .73, perhaps its time that the stock price reflect the growth. I’m sure the insiders making large bets feel the same way.