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Welcome to edition forty five of Insider Weekends. Insider buying increased with insiders purchasing $151.3 million of their stock last week when compared to $84.92 million in the week prior. As discussed below, $125 million of these purchases is related to the Jefferies secondary offering. Selling also increased with insiders selling $822.65 million worth of stock when compared to $817.87 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 purchases that week. The adjusted ratio for last week dropped to 5.44. In other words, insiders sold more than 5 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the week prior when the ratio stood at 9.63. 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 April 15, 2011:

Insider Sell Buy Ratio April 15, 2011

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. Jefferies Group Inc. (JEF): $23.96

Director Joseph S. Steinberg acquired 5,154,639 shares of this investment bank, paying $24.25 per share for a total amount of $125 million. This was an indirect purchase by Leucadia National Corporation (LUK).

This purchase was part of a $500 million secondary stock offering by Jefferies. I normally exclude purchases related to secondary offerings as well as purchases by corporate entities like Leucadia. However I decided to include this purchase because Leucadia is a publicly traded holding company that is also sometimes referred to a “mini Berkshire Hathaway”. Mr. Steinberg is the President of Leucadia and his Harvard Business School classmate from the class of 1970, Ian Cumming, is the Chairman of the company. Mr. Steinberg and Mr. Cumming both serve on the board of directors of Jefferies. Following this purchase and stock offering, Leucadia will own 27.54% of Jefferies’ outstanding shares.

Besides this purchase, Leucadia has purchased shares of Jefferies several times since last May. Several insiders have exercised options without turning around and selling them immediately. The only insider sale over the last six months was a 9,645 shares sale by the CFO in February as you can see from this page. The CFO sold those shares to raise funds to pay the taxes associated with the vesting of shares.

Jefferies recently agreed to acquire the global commodities group from Prudential Financial for about $430 million.

You can view the list of recent insider transactions for Jefferies Group Inc. here.

P/E: 20.08 Forward P/E: 13.02 Industry P/E: 34.54
P/S: 2.04 Price/Book: 1.86 EV/EBITDA: N/A
Market Cap: $4.82B Avg. Daily Volume: 930,168 52 Week Range: $20.15 – $27.82

2. Hot Topic Inc. (HOTT): $6.52

Director Matthew A. Drapkin acquired 712,900 shares of this troubled teen retailer, paying $5.97 per share for a total amount of $4.25 million.

These shares were acquired indirectly through Dallas-based Becker Drapkin Partners, an activist firm that focuses on small cap stocks. The firm has also invested in San Francisco based mobile apps company Glu Mobile (GLUU) in the past. We purchased shares of Glu Mobile and wrote about the company last March and exited the position a couple of months ago following disappointing fourth quarter results. As you can see from this page, Becker Drapkin has also started reducing their position in Glu Mobile after the stock more than quadrupled over the last year.

Same store sales, a key metric for retailer, continued to drop for Hot Topic with sales at stores open more than a year dropping 5% year-over-year in March. The company also posted an operating loss in the important fourth quarter for retailers. On the positive side, the company has a debt free balance sheet with $75.6 million in cash and investments and Hot Topic has been doing a great job of selling down inventory over the last several quarters.

Operating cash flow and free cash flow were both positive in fiscal 2011 ended January 2011 primarily on higher depreciation expenses. The stock does appear to be cheap selling for just 0.4 times sales and sports a dividend yield of 4.4%. Unless the company manages to arrest its sales decline, I would not count on this dividend as it does not appear to be sustainable.

You can view the list of recent insider transactions for Hot Topic Inc. here.

P/E: N/A Forward P/E: 34.32 Industry P/E: 19.6
P/S: 0.4 Price/Book: 1.3 EV/EBITDA: 7.54
Market Cap: $291.10M Avg. Daily Volume: 519,700 52 Week Range: $4.58 – $8.64

3. Baldwin & Lyons Inc. (BWINA): $21.50

Shares of this property and casualty insurance company were acquired by 2 insiders:

  • Director Steven Shapiro acquired 22,335 shares, paying $21.97 per share for a total amount of $490,700.
  • Director Nathan Shapiro acquired 3,958 shares, paying $21.50 per share for a total amount of $85,097. Mr. Shapiro increased his stake by 2.77% to 146,645 shares with this purchase.

You can view the list of recent insider transactions for Baldwin & Lyons Inc. here.

P/E: 12.72 Forward P/E: N/A Industry P/E: N/A
P/S: 1.28 Price/Book: 0.86 EV/EBITDA: 10.13
Market Cap: $318.72 Avg. Daily Volume: 1,232 52 Week Range: $19.71 – $25.75

4. The Howard Hughes Corporation (HHC): $62.79

Shares of this real estate investment and development company were acquired by 2 insiders:

  • Director Scot Sellers acquired 5,000 shares, paying $61.32 per share for a total amount of $306,600. Mr. Sellers increased his stake by 44.05% to 16,352 shares with this purchase.
  • Director Allen J. Model acquired 500 shares, paying $63.85 per share for a total amount of $31,925. Mr. Model increased his stake by 10.39% to 5,311 shares with this purchase.

A number of insiders including Mr. Sellers have been acquiring shares since the company was spun off from mall owner General Growth Properties (GGP) last November. The stock took a hit earlier this week after reporting disappointing fourth quarter results. The Howard Hughes Corporation owns a number of unique properties including the South Sea Seaport shopping center in Manhattan.

You can view the list of recent insider transactions for The Howard Hughes Corporation here.

P/E: N/A Forward P/E: N/A Industry P/E: 27.26
P/S: 16.86 Price/Book: 1.1 EV/EBITDA: 287.58
Market Cap: $2.38B Avg. Daily Volume: 164,243 52 Week Range: $31 – $73.79

5. Valhi, Inc. (VHI): $29

Chairman of the Board Harold C. Simmons acquired 10,915 shares of this Synthetics company, paying $28.84 per share for a total amount of $314,806.

These shares were indirectly purchased by Contran Corporation. Harold Simmons is the Chairman of Contran Corporation. We have mentioned Valhi and Mr. Simmons several times in the past. Back in February following a purchase of NL Industries (NL) by Mr. Simmons, we wrote,

Mr. Simmons has been buying NL stock since last July and the stock has doubled since his first purchase at $6.51. Mr. Simmons is also Chairman of the Board of titanium dioxide manufacturer Kronos Worldwide (KRO), Valhi, Inc (VHI) and Titanium Metals Corporation (TIE). Incidentally he has been buying stock of all four companies on the open market over the last two years.”

You can view the list of recent insider transactions for Valhi, Inc. here.

P/E: 69.05 Forward P/E: N/A Industry P/E: 40.06
P/S: 2.05 Price/Book: N/A EV/EBITDA: 24.29
Market Cap: $3.29B Avg. Daily Volume: 23,278 52 Week Range: $11.03 – $30.19

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Leucadia National Corp. (LUK): $35.81

Shares of this holding company were sold by 2 insiders:

  • Chairman of the Board Ian M. Cumming sold 324,030 shares for $35.50, generating $11.5 million from the sale.
  • President Joseph S. Steinberg sold 324,030 shares for $35.50, generating $11.5 million from the sale. These shares were indirectly sold by a family trust.

You can view the list of recent insider transactions for Leucadia National Corp. here.

P/E: 4.56 Forward P/E: N/A Industry P/E: 15.42
P/S: 6.67 Price/Book: 1.24 EV/EBITDA: 15.72
Market Cap: $8.73B Avg. Daily Volume: 900,294 52 Week Range: $18.8 – $39.14

2. Vornado Realty Trust (VNO): $90.77

Shares of this real estate investment trust were sold by 2 insiders:

  • Chairman Steven Roth sold 50,000 shares for $88.29, generating $4.41 million from the sale.
  • Director Russell B. Wight sold 36,000 shares for $88.39, generating $3.18 million from the sale.

You can view the list of recent insider transactions for Vornado Realty Trust here.

P/E: 28.01 Forward P/E: 16.01 Industry P/E: 27.26
P/S: 5.73 Price/Book: 2.97 EV/EBITDA: 18.5
Market Cap: $16.67B Avg. Daily Volume: 1,060,650 52 Week Range: $68.59 – $93.53

3. iRobot Corporation (IRBT): $35.9

Shares of this robot company were sold by 4 insiders:

  • Director Helen Greiner sold 137,200 shares for $35.25, generating $4.84 million from the sale.
  • EVP, CFO & Treasurer John J. Leahy sold 31,250 shares for $35.03, generating $1.09 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Chief Executive Officer Colin M. Angle sold 9,550 shares for $32.74, generating $312,679 from the sale.
  • Director Rodney A. Brooks sold 6,000 shares for $33.39, generating $200,330 from the sale.

You can view the list of recent insider transactions for iRobot Corporation here.

P/E: 37.4 Forward P/E: 28.05 Industry P/E: 30.81
P/S: 2.26 Price/Book: 5.14 EV/EBITDA: 19.81
Market Cap: $934.62M Avg. Daily Volume: 248,457 52 Week Range: $15 – $36

4. Smithfield Foods Inc. (SFD): $23.34

Director Wendell H. Murphy sold 160,915 shares of this meat products company for $23.34, generating $3.76 million from the sale.

You can view the list of recent insider transactions for Smithfield Foods Inc. here.

P/E: 9.31 Forward P/E: 9.6 Industry P/E: 9.8
P/S: 0.32 Price/Book: 1.19 EV/EBITDA: 6.26
Market Cap: $3.88B Avg. Daily Volume: 2,504,160 52 Week Range: $13.34 – $24.93

5. Stryker Corp. (SYK): $60.7

Director Ronda E. Stryker sold 54,000 shares of this medical devices company for $59.91, generating $3.23 million from the sale. These shares were sold indirectly through a revocable trust.

You can view the list of recent insider transactions for Stryker Corp. here.

P/E: 19.03 Forward P/E: 14.8 Industry P/E: 16.61
P/S: 3.2 Price/Book: 3.26 EV/EBITDA: 8.92
Market Cap: $23.75B Avg. Daily Volume: 1,947,760 52 Week Range: $42.74 – $65.21

You can view the full list of sales from this Insider Sales page.

Source: Notable Buys and Sells: Jefferies Group, Leucadia National