Seeking Alpha
Newsletter author
Profile| Send Message|
( followers)  

Happy New Year and welcome to edition thirty of Insider Weekends. Insider buying plunged in the last week of 2010 with insiders purchasing just $4.46 million of their stock when compared to $126.08 million in the week prior. As you might recollect, a big part of last week’s purchasing was on account of Michael Dell’s $100 million purchase of Dell (DELL). Selling also dropped significantly with insiders selling $263.45 million worth of stock when compared to $730.96 million in the week prior.

Sell/Buy Ratio:

The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider buying in that week. The adjusted ratio for last week rebounded to 59.02. In other words, insiders sold more than 59 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the week prior when the ratio stood at 5.8. We are calculating an adjusted ratio by removing transactions by funds and companies and trying as best as possible only to retain information about insiders and 10% owners who are not funds or companies.

Insider Sell Buy Ratio December 31, 2010

Insider Sell Buy Ratio December 31, 2010

Note: As mentioned in the first post in this series Introduction to Insider Weekends, certain industries have their preferred metrics such as same store sales for retailers, funds from operations (FFO) for REITs and revenue per available room (RevPAR) for hotels that provide a better basis for comparison than simple valuation metrics. However metrics like Price/Earnings, Price/Sales and Enterprise Value/EBITDA included below should provide a good starting point for analyzing the majority of stocks.

Notable Insider Buys:

1. Starwood Property Trust, Inc. (STWD): $21.48

Director Jeffrey G. Dishner acquired 30,000 shares of this mortgage real estate investment trust (REIT), paying $21.41 per share for a total amount of $642,399.

Starwood is a commercial mortgage REIT with a yield of 7.5% and has seen multiple insider purchases by directors in recent months with another director picking up 15,000 shares earlier this month.

P/E: N/A Forward P/E: 15.68 Industry P/E: 16.52
P/S: 68.36 Price/Book: 1.14 EV/EBITDA: N/A
Market Cap: $1.03B Avg. Daily Volume: 629,386 52 Week Range: $16.44 – $21.73

2. Winmark Corp. (WINA): $33.64

Chairman & CEO John L Morgan acquired 5,000 shares of this retail company, paying $32.43 per share for a total amount of $162,150. Mr. Morgan increased his stake by 0.31% to 1,631,059 shares with this purchase.

Mr. Morgan purchased shares 18 times this year and when we covered his last purchase in mid-October we wrote,

Amongst the many brands the company owns are Play It Again Sports, Plato’s Closet, Once Upon a Child, Music Go Round, and Wirth Business Credit.

We have mentioned Winmark in the past because the CEO has been consistently buying shares this year. The President of Winmark Capital also acquired a small quantity of stock in August. The company has great margins and revenue has been increasing through this recession. However the stock is close to its 52 week high and trades for more than 10 times book value. Average daily volume is also low and this might explain why my order to buy shares were canceled and I was asked to call my broker to buy shares.

P/E: 20.27 Forward P/E: N/A Industry P/E: 19.39
P/S: 4.14 Price/Book: 8.48 EV/EBITDA: 10.56
Market Cap: $168.57M Avg. Daily Volume: 6,414 52 Week Range: $19.48 – $35.5

3. Paramount Gold and Silver Corp. (PZG): $3.99

Director John Carden acquired 50,000 shares of this mining company, paying $2.71 per share for a total amount of $135,276.

This appears to be a late filing because the actual transaction took place on Dec 17th and the stock has already run up 47% since Mr. Carden’s purchase. There were a couple of other oddities about this filing that did not allow us to calculate the increase in Mr. Carden’s stake.

The only other insider transaction this year was by the CFO in January when he picked up 150,000 share for just 65 cents. The primary asset of the company is the San Miguel mine in Chihuahua State, Mexico. A recent gold and silver discovery at San Miguel combined with the rise in the price of gold, which closed at $1,404 per ounce on December 30th, has fueled the rise in the stock of this gold exploration company.

P/E: N/A Forward P/E: N/A Industry P/E: N/A
P/S: N/A Price/Book: 7.42 EV/EBITDA: -45.41
Market Cap: $526.99M Avg. Daily Volume: 1,449,420 52 Week Range: $1.15 – $4.03

4. Chesapeake Midstream Partners, L.P. (CHKM): $28.77

Chief Executive Officer Michael Stice acquired 3,700 shares of this oil & gas pipeline company, paying $27.04 per share for a total amount of $100,048. Mr. Stice increased his stake by 77.08% to 8,500 shares with this purchase.

This company is a subsidiary of the more well known natural gas company Cheasapeake Energy (CHK) and is owned jointly by Cheasapeake Energy and Global Infrastructure Partners. The company completed its IPO on August 3rd at $21/share and announced its first quarterly distribution of $0.3375 per unit in October. This works out to $1.35 annualized or a yield of 5% at current prices (the yield on most finance websites is incorrect).

The company already owns nearly 3,000 miles of pipelines and just agreed to purchase another 220 miles of pipelines in Louisiana from a unit of Cheasapeake Energy for $500 million. Keep in mind that CHKM is structured as a Master Limited Partnership (NYSE:MLP) and hence you may have to pay taxes on the distributions even if you own it in a retirement account.

The yield is a little less than other MLPs like Kinder Morgan Partners’s 6.3% yield and Suburban Propane’s 6.1% but newly formed MLPs often increase their distributions in the first two years after going public. The stock is already up 29% from its IPO price in anticipation of these increases.

Voluntary Disclosure: I have a long position in CHKM in my trading portfolio.

P/E: 22.8 Forward P/E: 20.4 Industry P/E: 15.66
P/S: 12.24 Price/Book: 1.87 EV/EBITDA: 16.43
Market Cap: $3.97B Avg. Daily Volume: 89,380 52 Week Range: $21.25 – $29.15

5. Encore Bancshares, Inc. (EBTX): $10.24

Director John Bryan King acquired 8,580 shares of this regional bank holding company, paying $10.33 per share for a total amount of $88,667.

These shares were acquired indirectly by Mr. King through various funds.

P/E: N/A Forward P/E: 25.6 Industry P/E: 17.1
P/S: 3.05 Price/Book: 0.83 EV/EBITDA: N/A
Market Cap: $116.73M Avg. Daily Volume: 13,388 52 Week Range: $5.9 – $11.44

Notable Insider Sales:

1. Starwood Hotels & Resorts Worldwide Inc. (HOT): $60.78

CEO Frits Van Paasschen sold 230,926 shares of this luxury hotel company for $60.33, generating $13.93 million from the sale.

200,000 of these shares were sold as a result of exercising options immediately prior to the sale. All of these shares were sold pursuant to a Rule 10b5-1 trading plan adopted by Mr. Van Paasschen on March 5, 2010 and amended on November 4, 2010.

P/E: 361.79 Forward P/E: 38.96 Industry P/E: 34.63
P/S: 2.32 Price/Book: 5.63 EV/EBITDA: 19.88
Market Cap: $11.59B Avg. Daily Volume: 2,557,070 52 Week Range: $33.15 – $62.72

2. Southern Copper Corp. (SCCO): $48.74

Chairman of the Board German Larrea Mota Velasco sold 250,000 shares of this mining company for $48.59, generating $12.15 million from the sale.

P/E: 29.06 Forward P/E: 14.91 Industry P/E: 16.17
P/S: 8.67 Price/Book: 10.71 EV/EBITDA: 16.03
Market Cap: $41.43B Avg. Daily Volume: 2,063,680 52 Week Range: $25.56 – $49.43

3. Hersha Hospitality Trust (HT): $6.6

Shares of this hotel REIT were sold by 3 insiders:

  • Director Eduardo Elsztain sold 1,408,474 shares for $6.57, generating $9.25 million from the sale.
  • CEO Jay Shah sold 50,000 shares for $6.50, generating $325,000 from the sale.
  • President and COO Neil Shah sold 50,000 shares for $6.51, generating $325,500 from the sale.

Mr. Elsztain sold his shares indirectly through various investment companies. There seemed to be a number of duplicate filings for Director Elsztain. Including those duplicate filings would have doubled the amount he sold.

P/E: N/A Forward P/E: 15.35 Industry P/E: 36.15
P/S: 4.28 Price/Book: 1.7 EV/EBITDA: 22.16
Market Cap: $1.12B Avg. Daily Volume: 1,749,390 52 Week Range: $3.14 – $6.69

4. Aaron’s, Inc. (AAN): $20.39

Shares of this retailer were sold by 2 insiders:

  • Chairman Charled Loudermilk Sr. sold 438,568 shares for $20.02, generating $8.78 million from the sale.
  • President and CEO Robert Loudermilk Jr. sold 45,000 shares for $20.02, generating $901,110 from the sale. These shares were sold indirectly through a trust.
P/E: 14.78 Forward P/E: 12.66 Industry P/E: 16.6
P/S: 0.9 Price/Book: 1.7 EV/EBITDA: 6.59
Market Cap: $1.65B Avg. Daily Volume: 101,271 52 Week Range: $16.16 – $24.32

5. Ocz Technology Group Inc. (OCZ): $4.82

President and CEO Ryan Petersen sold 1,634,725 shares of this computer components company for $3.75, generating $6.13 million from the sale. These shares were sold indirectly through a family trust.

P/E: N/A Forward P/E: 7.53 Industry P/E: N/A
P/S: 0.9 Price/Book: 20.73 EV/EBITDA: -7.71
Market Cap: $128.57M Avg. Daily Volume: 264,908 52 Week Range: $1.79 – $5.1
Source: Insider Buys and Sells: Starwood Property Trust, Starwood Hotels & Resorts