Welcome to edition sixty two of Insider Weekends. Insider buying increased significantly with insiders purchasing $225.6 million of their stock last week when compared to $69.8 million in the week prior. This is the highest level of insider purchasing we have seen since we started tracking insider activity last April. Selling on the other hand decreased with insiders selling $287.3 million worth of stock compared to $1.25 billion in the week prior.
We first highlighted this heightened level of insider purchasing to subscribers of Insider Trade Reports more than a week ago and several media outlets picked up on it later in the week, including Time.com that managed to get its hand on one of my daily reports and published the article “Insider Trading: Look Who’s Buying on Wall Street“. There have also been several articles claiming that insider activity in not necessarily a good predictor of future performance and I will be the first one to admit that not all insider purchases are created equal. Critics point to November 2008 when insider purchasing peaked for the year 2008 but the market as a whole continued to decline until March 2009. In retrospect, November 2008 was a great time to purchase equities and we highlighted just how cheap certain small cap stocks such as Towerstream (TWER) had become in a post titled "Towerstream Trading Below Cash".
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 down to 1.27. In other words, insiders sold nearly the same amount of stock as they purchased. The Sell/Buy ratio this week compares favorably with the week prior when the ratio stood at 17.9. 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.
I have adjusted the chart below to show the correlation of the Sell/Buy ratio with the S&P 500 from the start of the year. The huge spike in the ratio last Fall, which was driven by fear of potential changes to capital gains taxes in 2011, made the recent movements harder to discern.
click on image to enlarge
Note: As mentioned in the first post in this series, titled "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. Cintas Corporation (CTAS): $29.83
Chief Executive Officer Scott D. Farmer acquired 650,000 shares of this provider of corporate uniforms and other business services, paying $27.46 per share for a total amount of $17.8 million. These shares were purchased indirectly through a limited liability partnership over which Mr. Farmer has sole voting and dispositive power.
This is the largest single insider purchase by a CEO since the $20.9 million purchase by the CEO of Blyth (BTH) we mentioned on July 13th. Blyth went on to gain 22% over the next three trading days following that purchase. Cintas was up 7.5% on Thursday, August 11, 2011, especially gaining momentum after this filing came out around 2:20 PM in the afternoon. It remains to be seen if the stock will see the same follow through that Blyth experienced last month. The company is growing both its top and bottom line, sports decent operating margins of 11.56% and appears to be reasonably valued with a forward P/E of 13.14 and an EV/EBITDA ratio of 7.91.
You can view the list of recent insider transactions for Cintas Corporation here.
|P/E: 17.83||Forward P/E: 13.14||Industry P/E: 18.38|
|P/S: 1.01||Price/Book: 1.75||EV/EBITDA: 7.91|
|Market Cap: $3.91B||Avg. Daily Volume: 1,536,740||52 Week Range: $24.99 – $34.54|
2. Cathay General Bancorp (CATY): $13.5
EVP Anthony M. Tang acquired 1,000,000 shares of this regional bank, paying $10.89 per share for a total amount of $10.9 million. These shares were purchased indirectly by Mr. Tang’s spouse. Following these purchases, Mr. Tang’s spouse now owns nearly three times as much stock as he does directly.
You can view the list of recent insider transactions for Cathay General Bancorp here.
|P/E: 13.68||Forward P/E: 8.04||Industry P/E: 15.09|
|P/S: 2.97||Price/Book: 0.73||EV/EBITDA: N/A|
|Market Cap: $898.05M||Avg. Daily Volume: 515,160||52 Week Range: $9.32 – $18.98|
3. JPMorgan Chase & Co. (JPM): $35.91
Shares of this global financial services firm were acquired by 3 insiders:
- Director James S. Crown acquired 194,109 shares, paying $35.02 per share for a total amount of $6.8 million. 176,609 of these shares were purchased indirectly by a fund, 14,000 shares were purchased indirectly by trusts and 3,500 shares were purchased indirectly by Mr. Crown’s spouse.
- Director Laban Jackson acquired 1,292 shares, paying $35.40 per share for a total amount of $45,737. These shares were purchased indirectly through a self-directed Keogh (retirement) plan.
- Chief Investment Officer Ina R. Drew acquired 492 shares, paying $992.50 per share for a total amount of $488,310. This was not a purchase of common stock and Ms. Drew purchased fixed-to-floating rate non-cumulative preferred stock.
You can view the list of recent insider transactions for JPMorgan Chase & Co. here.
|P/E: 7.67||Forward P/E: 6.32||Industry P/E: 9.56|
|P/S: 1.54||Price/Book: 0.82||EV/EBITDA: N/A|
|Market Cap: $140.01B||Avg. Daily Volume: 38,487,200||52 Week Range: $33.69 – $48.36|
4. Halozyme Therapeutics, Inc. (HALO): $6.67
Shares of this biotech company were acquired by 3 insiders:
- Director Randal J. Kirk acquired 1,000,000 shares, paying $5.95 per share for a total amount of $5.9 million. These shares were purchased indirectly through Kapital Joe, LLC. Randal J. Kirk, a Virginia biotech investor with an estimated net worth of over $2 billion, controls Kapital Joe, LLC.
- Vice President and CFO Kurt A. Gustafson acquired 8,000 shares, paying $5.88 per share for a total amount of $47,010.
- CEO, President Gregory Ian Frost acquired 6,000 shares, paying $5.84 per share for a total amount of $35,040. Mr. Frost increased his stake by 0.17% to 3,536,866 shares with this purchase.
You can view the list of recent insider transactions for Halozyme Therapeutics, Inc. here.
|P/E: N/A||Forward P/E: N/A||Industry P/E: 18.67|
|P/S: 17.05||Price/Book: 32.1||EV/EBITDA: -16.46|
|Market Cap: $655.04M||Avg. Daily Volume: 447,898||52 Week Range: $5.54 – $8.31|
5. ZIOPHARM Oncology, Inc. (ZIOP): $5.03
Director Randal J. Kirk acquired 846,522 shares of this biotech company, paying $4.78 per share for a total amount of $4.04 million.
These shares were purchased indirectly by Kapital Joe, LLC.
At first glance this purchase looked like a private placement or an additional investment into a company that has for the most part been a pre-revenue company. The company has several cancer drugs in its pipeline including one in final stage trials but continues to bleed cash every quarter as is usually the case with biotechs with drugs under development. However Ziopharm also has over $130 million in cash on its balance sheet and may not require additional capital until early 2013.
This does appear to be an open market purchase by Mr. Kirk. The Forbes article, titled “The Next Big Move For The Smartest Biotech Investor” provides an interesting overview of Mr. Kirk and his interest in Ziopharm.
You can view the list of recent insider transactions for ZIOPHARM Oncology, Inc. here.
|P/E: N/A||Forward P/E: N/A||Industry P/E: N/A|
|P/S: 1||Price/Book: 4.09||EV/EBITDA: -5.64|
|Market Cap: $342.36M||Avg. Daily Volume: 599,245||52 Week Range: $3.45 – $7.85|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. First Solar, Inc. (FSLR): $104.13
Director Michael J. Ahearn sold 689,016 shares of this solar energy company for $99.68, generating $68.7 million from the sale. These shares were sold indirectly through a family foundation and a trust.
You can view the list of recent insider transactions for First Solar, Inc. here.
|P/E: 17.75||Forward P/E: 9.61||Industry P/E: 11.58|
|P/S: 3.55||Price/Book: 2.42||EV/EBITDA: 11.27|
|Market Cap: $8.99B||Avg. Daily Volume: 1,797,900||52 Week Range: $103.6 – $175.45|
2. EXCO Resources Inc. (XCO): $14.54
Chairman and CEO Douglas H. Miller sold 2,428,843 shares of this oil and natural gas company for $13.52, generating $32.8 million from the sale.
You can view the list of recent insider transactions for EXCO Resources Inc. here.
|P/E: 32.67||Forward P/E: 12.43||Industry P/E: 21.72|
|P/S: 4.92||Price/Book: 1.89||EV/EBITDA: 10.67|
|Market Cap: $3.11B||Avg. Daily Volume: 3,857,520||52 Week Range: $12.09 – $21.04|
3. Tutor Perini Corporation (TPC): $13.96
Chairman & CEO Ronald N. Tutor sold 450,000 shares of this construction services company for $12.26, generating $5.5 million from the sale. These shares were sold indirectly through a trust.
You can view the list of recent insider transactions for Tutor Perini Corporation here.
|P/E: 8.73||Forward P/E: 5.82||Industry P/E: 14.29|
|P/S: 0.23||Price/Book: 0.49||EV/EBITDA: 5.17|
|Market Cap: $660.11M||Avg. Daily Volume: 420,539||52 Week Range: $11.71 – $26.87|
4. priceline.com Incorporated (PCLN): $503.11
Director Ralph Bahna sold 10,000 shares of this online travel company for $516.62, generating $5.2 million from the sale.
You can view the list of recent insider transactions for priceline.com Incorporated here.
|P/E: 35.67||Forward P/E: 17.27||Industry P/E: 13.45|
|P/S: 6.83||Price/Book: 12.51||EV/EBITDA: 22.16|
|Market Cap: $25.04B||Avg. Daily Volume: 1,136,030||52 Week Range: $283.11 – $561.88|
5. Western Gas Partners LP (WES): $34.98
Director James R. Crane sold 129,400 shares of this oil and natural gas company for $33.90, generating $4.4 million from the sale.
You can view the list of recent insider transactions for Western Gas Partners LP here.
|P/E: 19.69||Forward P/E: 17.56||Industry P/E: 19.32|
|P/S: 5.17||Price/Book: 2.3||EV/EBITDA: 14.5|
|Market Cap: $2.76B||Avg. Daily Volume: 157,440||52 Week Range: $23.25 – $37.48|
Disclosure: See author's portfolio holdings here.