After a long couple of weeks with little to no volume, it seems as though shares of Vringo (VRNG) have finally come back to life as news surfaced that Noel J. Spiegel, a Director at Vringo, recently purchased 15,000 shares at $3.00 a share. I would like to talk about this insider purchase and what it means for current Vringo shareholders.
First, investors should know that Mr. Spiegel joined Vringo's team back on May 8, 2013 when he was called to serve on the Board of Directors. Andrew D. Perlman, Chief Executive Officer (CEO) of Vringo talked about the hiring of Mr. Spiegel saying,
"I am pleased to welcome Noel to Vringo's Board of Directors. We believe that Noel's tenure of over forty years at Deloitte & Touche LLP, coupled with his experience on public company boards of directors, will benefit Vringo as we continue to grow and execute on our business plan."
It's interesting to me that Mr. Perlman talked about Spiegel's extensive experience working on boards of directors. Most investors probably did not realize that Spiegel still currently serves as the Independent Director at American Eagle Outfitters (NYSE:AEO), as well as the Independent Director at Radian Group (NYSE:RDN).
Spiegel talked about his move to Vringo saying,
"I am honored to join Vringo's Board of Directors. The management team has moved quickly and strategically to accomplish a significant amount since early 2012. I believe that the company has a solid foundation for future growth and a strong portfolio of assets."
Spiegel wasn't lying when he said that he believes in Vringo's solid foundation for future growth as it took him less than two months to start purchasing shares of Vringo with his own money. Investors have to feel confident that an insider like Spiegel is putting his money where his mouth is.
All over the world insiders of companies are buying and selling shares. While you shouldn't base your entire investment decisions off of what insiders are doing, watching what they are doing can help provide you with a list of stocks worthy of further research.
Peter Lynch, has had a great track record on Wall Street. So what are some of his secrets to his success? Lynch said:
"There's no better tip-off to the probably success of a stock than people in the company putting their own money into it. Insider selling usually means nothing, and it's silly to react to it. There are many reasons that officers might sell. They may need the money to pay their children's tuition or to buy a new house or to satisfy a debt. They may have decided to diversify into other stocks. But there's only one reason that insiders buy: They think the stock price is undervalued and will eventually go up."
Spiegel believes shares of Vringo are a bargain at these levels and that's why he is buying shares. It's crazy to think that Spiegel, with less than two months of experience at Vringo, feels so confident in Vringo's future that he's willing to put down his own money. Vringo's shareholders have to be happy with what is taking place, as well as feeling a little bit better about their investment in Vringo now.
Insider Trading Plans
With news of insider buying, shorts have been quick to point out all of the insider sales that Vringo has had since the start of the year. While this may be true, shorts should pay special attention to why insiders had to sell some of their shares.
On January 28 and April 29 of this year, portions of restricted stock units were granted to certain Vringo officers and directors according to the vesting of the Company's 2012 Equity Incentive Plan. The vesting of these securities caused income tax liabilities for the officers and directors. Vringo clarified to investors that the proceeds from the stock sales were being used to pay the income tax associated with the vesting of the restricted stock units. The stock sales were affected according to pre-existing trading plans established pursuant to Rule 10b5-1 and are reported on Form 4 filings with the United States Securities and Exchange Commission.
From this we see that insiders were only selling shares to cover the cost of income tax associated with the restricted stock units. Investors can be rest assured that insiders were not unloading shares because they did not believe in the company.
Mr. Spiegel's Track Record
Measuring performance in the stock market these days is a must. Whether it be of analysts' buy/sell recommendations, as well as money managers' track records, past performance can shed a lot of light on future performance. While nobody can predict the future, learning from the past is never a bad thing, as it allows you to gain a better insight in the next time around. So let's take a look at Mr. Spiegel's performance as well as his share purchases in the table below.
|8-26-11||American Eagle Outfitters||10,000||$10.40||$104,000|
Radian Group through its subsidiaries, operates as a credit enhancement company in the United States. The company operates in two segments, Mortgage Insurance and Financial Guaranty. Radian Group Inc. was founded in 1977 and is headquartered in Philadelphia, Pennsylvania.
As we can see from the table above, Mr. Spiegel made two purchases in Radian Group. Yesterday, Radian Group closed the day at $12.73. If Spiegel were to sell his shares at that price he will make a very nice return of over 500%. Not a bad investment right?
American Eagle Outfitters together with its subsidiaries, operates as an apparel and accessories retailer in the United States and Canada. American Eagle Outfitters, Inc. was founded in 1977 and is headquartered in Pittsburgh, Pennsylvania.
As we can see from the table above, Mr. Spiegel made quite the investment in American Eagle Outfitters. Yesterday, American Eagle Outfitters closed the day at $18.72. If Spiegel were to sell his shares at that price he will make a return of over 80%. While it's not quite the 500% return like his other investment turned out to be, it's still quite a remarkable return.
As you can see in the table below, Spiegel is not that bad of an investor. Heck, I would do anything I could just to get half of the returns that he gets. While this is no indication that Vringo will automatically climb 300-400% based on Spiegel's investment, it certainly doesn't hurt his chances. History does have a funny way of repeating itself. Below is a table of Spiegel's returns if he were to cash in on them.
|8-26-11||American Eagle Outfitters||10,000||$10.40||$104,000||80%|
* Returns reflect yesterday's closing prices
Investors in the stock market must remember that insiders have access to every bit of company information that you could ever want. Based on this insight, it would be tough to bet against them. After all, they know where their company is headed and what's really going on inside. My money is on Vringo as I have stated many reasons why in my previous articles of Vringo here, here and here.
Investors are always reminded that before making any investment, you should do your own proper diligence on any stock mentioned in this article. Have a great day and as always, I look forward to hearing your thoughts or questions that you might have.
Disclosure: I am long VRNG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.