Insider Buys and Sells: Jefferies Group

by: Asif Suria

Welcome to edition sixty eight of Insider Weekends. Insider buying increased with insiders purchasing $108.7 million of their stock last week when compared to $47.5 million in the week prior. Selling on the other hand decreased with insiders selling $285.1 million worth of stock compared to $663.3 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 down to 2.6. In other words, insiders sold almost three times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the week prior when the ratio stood at 13.96. 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 September 23, 2011:

Insider Sell Buy Ratio September 23, 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): $12.93

Director Joseph S. Steinberg acquired 2 million shares of this investment bank, paying $12.58 per share for a total amount of $25.2 million. These shares were purchased indirectly through Leucadia National Corporation. Mr. Steinberg is a significant shareholder, director and President of Leucadia.

This was essentially a sale of 2 million shares by the CEO that were picked up by Leucadia, which already owns 26% of the company. The New York Times has an article that covers the details of the transaction. We have mentioned Leucadia’s purchases of Jefferies stock in the past and it is interesting to see them add to their position at these low prices.

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

P/E: 8.78 Forward P/E: 8.74 Industry P/E: 12.66
P/S: 0.97 Price/Book: 0.87 EV/EBITDA: N/A
Market Cap: $2.88B Avg. Daily Volume: 1,903,060 52 Week Range: $11.46 – $27.12
Click to enlarge

2. Smithfield Foods Inc. (NYSE:SFD): $18.2

Shares of this meat products company were acquired by 5 insiders:

  • Director Joseph W. Luter acquired 200,000 shares, paying $19.09 per share for a total amount of $3.8 million. Mr. Luter increased his stake by 46.27% to 632,200 shares with this purchase.
  • Director David C. Nelson acquired 25,000 shares, paying $18.46 per share for a total amount of $461,605.
  • President and C.E.O. C Larry Pope acquired 10,000 shares, paying $18.74 per share for a total amount of $187,400. Mr. Pope increased his stake by 1.56% to 650,400 shares with this purchase.
  • Director Carol T. Crawford acquired 5,000 shares, paying $18.07 per share for a total amount of $90,350. Ms. Crawford increased her stake by 208.33% to 7,400 shares with this purchase. 3,000 of these shares were purchased indirectly by the IRA of the reporting person’s spouse.
  • Director Richard T. Crowder acquired 750 shares, paying $18.64 per share for a total amount of $13,979. Mr. Crowder increased his stake by 100.00% to 1,500 shares with this purchase.

The timing of Mr. Pope’s previous purchase in October of last year at $14.98 was impeccable as the stock hit a 52 week low of $14.82 and did not look back until recently. Valuation is low but you can also find several other food companies trading at below 5 times EBITDA or low PEs because margins are generally low in this business. Another concern with Smithfields Foods is the nearly $2 billion in debt the company carries on its balance sheet.

In contrast competitor Hormel (NYSE:HRL) has better margins, a stronger balance sheet with no net debt and is also growing faster. This explains why Hormel is also significantly more expensive. For a third option consider Seaboard Corp (NYSEMKT:SEB), which has a meat products division but has a more diversified line of businesses and sports some of the same attractive attributes as Hormel but at a cheaper valuation. The fact that each share costs nearly $2,000 may make the company less attractive to some retail investors.

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

P/E: 5.78 Forward P/E: 7.62 Industry P/E: 15.91
P/S: 0.24 Price/Book: 0.86 EV/EBITDA: 4.08
Market Cap: $2.97B Avg. Daily Volume: 2,655,770 52 Week Range: $14.82 – $24.93
Click to enlarge

3. ascena retail group inc. (NASDAQ:ASNA): $26.29

Director Elliot S. Jaffe acquired 100,000 shares of this teen and women’s apparel retailer, paying $24.85 per share for a total amount of $2.5 million. These shares were purchased indirectly on behalf of the Jaffe Family Foundation.

You can view the list of recent insider transactions for ascena retail group inc. here.

P/E: 11.48 Forward P/E: 8.91 Industry P/E: 15.41
P/S: 0.67 Price/Book: 1.7 EV/EBITDA: 4.3
Market Cap: $2.05B Avg. Daily Volume: 684,540 52 Week Range: $22.27 – $35.25
Click to enlarge

4. Layne Christensen Co. (LAYN): $21.35

President Rene J. Robichaud acquired 42,131 shares of this drilling and construction services company, paying $23.75 per share for a total amount of $1 million. Mr. Robichaud increased his stake by 49.98% to 126,430 shares with this purchase.

This is an interesting company that is seeing both top and bottom line growth and at the same time trades very close to its 52 week low. Whether the company’s low valuation has to do with its low margins or the recent investigation and firing of three executives related to inapporpriate payments to foreign officials is not entirely clear. This is the first insider purchase at Layne Christensen this year. Mr. Robichaud was appointed President of the company earlier this month and will assume the role of CEO at the end of January when the current CEO retires. I stumbled upon Mr. Robichaud’s story on the Harvard Business School website and it is worth checking out to get some color on the new CEO.

You can view the list of recent insider transactions for Layne Christensen Co. here.

P/E: 10.36 Forward P/E: 10.22 Industry P/E: 12.36
P/S: 0.38 Price/Book: 0.8 EV/EBITDA: 4.44
Market Cap: $419.12M Avg. Daily Volume: 133,652 52 Week Range: $20.54 – $38
Click to enlarge

5. NuStar GP Holdings, LLC (NYSE:NSH): $32.69

Director William E. Greehey acquired 30,200 shares of this oil storage and pipeline company, paying $32.67 per share for a total amount of $986,580. Mr. Greehey increased his stake by 0.40% to 7,534,816 shares with this purchase.

While these purchases are not as large as Mr. Greehey’s multi-million dollar purchases in August, the consistent purchases did catch my eye. Mr. Greehey served as the CEO of Valero Energy (NYSE:VLO) from its inception in 1980 through 2006. He currently serves as the Chairman of both NuStar Energy L.P as well as its general partner NuStar GP Holdings, LLC.

NuStar was spun off from Valero Energy in 2007 and is now a Fortune 500 company. The company made Fortune’s list of top 100 companies to work for in 2010 and 2011. The limited partner NuStar Energy L.P. (NYSE:NS) sports a distribution of 8% and the general partner NuStar GP Holdings (NSH) sports a distribution of 6%.

You can view the list of recent insider transactions for NuStar GP Holdings, LLC here.

P/E: 21.37 Forward P/E: 17.86 Industry P/E: 19.86
P/S: 20.57 Price/Book: 2.64 EV/EBITDA: N/A
Market Cap: $1.39B Avg. Daily Volume: 88,754 52 Week Range: $30.66 – $39.98
Click to enlarge

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

Notable Insider Sales:

1. Jefferies Group Inc. (JEF): $12.93

Chairman and CEO Richard B. Handler sold 2 million shares of this investment bank for $12.58, generating $25.2 million from the sale. The same number of shares were purchased at the same cost by Leucadia as mentioned above.

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

P/E: 8.78 Forward P/E: 8.74 Industry P/E: 12.66
P/S: 0.97 Price/Book: 0.87 EV/EBITDA: N/A
Market Cap: $2.88B Avg. Daily Volume: 1,903,060 52 Week Range: $11.46 – $27.12
Click to enlarge

2. Acme Packet, Inc. (NASDAQ:APKT): $44.92

Shares of this network equipment company were sold by 4 insiders:

  • Chief Technology Officer Patrick J. Melampy sold 60,000 shares for $49.24, generating $2.95 million from the sale.
  • Secretary & Asst Treasurer Robert G. Ory sold 30,000 shares for $51.01, generating $1.5 million from the sale. These shares were sold indirectly through a trust.
  • VP Sales & Business Develop Dino Dipalma sold 12,000 shares for $51.30, generating $615,615 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • VP Manufacturing Ops John F. Shields sold 5,000 shares for $50.06, generating $250,300 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.

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

P/E: 60.05 Forward P/E: 29.17 Industry P/E: 13.25
P/S: 10.35 Price/Book: 7.31 EV/EBITDA: 29.16
Market Cap: $2.97B Avg. Daily Volume: 2,545,790 52 Week Range: $33.07 – $84.5
Click to enlarge

3. DGSE Companies Inc. (NYSEMKT:DGSE): $8.49

CEO and Chairman L S. Smith sold 600,000 shares of this jewelry and gold coins dealer for $6.00, generating $3.6 million from the sale.

You can view the list of recent insider transactions for DGSE Companies Inc. here.

P/E: 84.9 Forward P/E: N/A Industry P/E: 13.29
P/S: 0.84 Price/Book: 4.32 EV/EBITDA: 43.42
Market Cap: $86.20M Avg. Daily Volume: 38,017 52 Week Range: $3.42 – $10.53
Click to enlarge

4. Limited Brands, Inc. (LTD): $40.37

Shares of this apparel chain were sold by 2 insiders:

  • Director William R. Loomis Jr. sold 56,390 shares for $40.09, generating $2.3 million from the sale. 50,000 of these shares were sold indirectly through an IRA, 4,106 shares were sold indirectly through a trust and 2,284 shares were sold indirectly through a profit sharing plan.
  • EVP of HR Jane L. Ramsey sold 28,994 shares for $40.00, generating $1.2 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.

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

P/E: 14.49 Forward P/E: 14.12 Industry P/E: 15.41
P/S: 1.15 Price/Book: 18.86 EV/EBITDA: 8.73
Market Cap: $12.04B Avg. Daily Volume: 4,230,820 52 Week Range: $25.99 – $42.75
Click to enlarge

5. O’Reilly Automotive Inc. (NASDAQ:ORLY): $69.14

Director Lawrence P. Oreilly sold 31,000 shares of this auto parts retailer for $70.94, generating $2.2 million from the sale.

You can view the list of recent insider transactions for O’Reilly Automotive Inc. here.

P/E: 21.49 Forward P/E: 16.9 Industry P/E: N/A
P/S: 1.67 Price/Book: 2.96 EV/EBITDA: 10.14
Market Cap: $9.40B Avg. Daily Volume: 1,810,430 52 Week Range: $52.4 – $72
Click to enlarge

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