Insider Buys Flash a Green Light for This Sector

When insiders buy their own stock, it can often suggest they think the stock is
undervalued. Cynics may argue that a tiny purchase by an insider who is himself
worth gazillions may not mean anything, especially if the stock has been
languishing. The truth is most people see through that, and even really rich
people hate losing money, no matter how small an amount it may seem. In other
words, when insiders buy, you should pay attention. The more they buy, the more
attention should be paid. However, heres another thing to consider when you see
insiders buying a stock. It may not only portend good things for that company,
but for others in the sector. For instance, Ive been following theme-park
operator Cedar Fair (NYSE: FUN ) for a while. Ever since shareholders nixed a
private buyout at $11 per share, Cedar Fair has proven to be fun for those same
shareholders because the stock has since doubled. Some of this is due to
management finding ways to boost value, but most of it has been driven by
consistent increases in attendance at the companys theme parks. Plus, insiders
have made a whopping 43 purchase transactions in the past two years, with 15
coming in the past six months. One director even purchased 4,225 shares as late
as November at $21.50. The stock is presently at $24. This shows a lot of
confidence in the companys plan, and its ongoing growth. Does this bode well for
other stocks in the leisure sector? I think it may, and heres why. Theme-park
visits are discretionary spends, and it isnt cheap to bring a family of four
along for the day. There are fees for parking, admission, food and beverage (at
inflated prices), and souvenirs. It may also entail a stay at a local hotel. So
Id take a good hard look at the hospitality sector. The numbers there are
improving . The average daily rate (ADR) for hotel rooms is on the rise (up
3.7%) after plummeting an unprecedented 10% in 2009. Occupancy, which also hit a
record low of 55% in 2009, is back up to 60%. Revenue per available room
(RevPAR), which was destroyed to the tune of -17.2% in 2009, came back 5.9% in
2010 and 7.8% in 2011. New supply is restricted. Its all looking good. That
means investors should look seriously at hospitality. I like Ashford Hospitality
Trust (NYSE: AHT ), which has inexplicably sold off 35% in recent months,
despite being the REIT that managed its liquidity and debt maturities better
than any of its peers during the financial crisis. It also kept paying on its
generous preferred dividends (Series D at 8.45%, Series E at 9%). Id also grab
Wynn Resorts (NASDAQ: WYNN ), which finally sold off from a stratospheric high
and is on sale at 33% off, with expected growth of 16% this year. Another place
to look for improving metrics is Vail Resorts (NYSE: MTN ). People are skiing
again, also not an inexpensive choice for leisure. Earnings are expected to
rebound a whopping 50%, with long-term growth of 15%. Finally, if you want to
get more diversified, you can do worse than Walt Disney (NYSE: DIS ) . While
unemployment remains high, many families are apparently finding those
discretionary dollars somewhere. Just keep an eye on theme-park attendance
figures and hotel RevPAR to guide you. Lawrence Meyers holds shares of Ashford
Hospitality Trust.