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Insider buying dropped, with insiders purchasing $54.3 million of their stock last week when compared to $108.7 million in the week prior. On the other hand, selling increased, with insiders selling $304.4 million worth of stock compared to $285.1 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 increased to 5.6. In other words, insiders sold almost six times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the week prior, when the ratio stood at just 2.6. 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 30, 2011

Insider Sell Buy Ratio September 30, 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. Federal-Mogul Corp. (FDML): $14.75

Director Carl C. Icahn acquired 229,146 shares of this auto parts manufacturer, paying $15.09 per share for a total amount of $3.5 million.

After picking up $8.2 million of Federal Mogul in August, Mr. Icahn continues his purchases this month. Following his purchases in August we wrote,

“A few months ago, Mr. Icahn, who owns a majority stake in Federal-Mogul, was planning on selling his stake when the stock was trading at about $24. With the recent drop in the stock price, the company is trading just below book value and it is interesting to see him turn around and start buying stock on the open market.

The company emerged out of bankruptcy in 2008 and has been performing quite well with both top and bottom line growth over the last several quarters. The company has a forward PE of just 5.67 but margins are slim, inventory has been growing and the company has $1.85 billion in net debt on the balance sheet.”

You can view the list of recent insider transactions for Federal-Mogul Corp. here.

P/E: 6.89 Forward P/E: 5.85 Industry P/E: 9.21
P/S: 0.23 Price/Book: 1.02 EV/EBITDA: 5.19
Market Cap: $1.46B Avg. Daily Volume: 202,106 52 Week Range: $14.11 – $27.2

2. R.R. Donnelley & Sons Company (RRD): $14.12

Director Thomas S. Johnson acquired 206,200 shares of this printing products and services company, paying $14.49 per share for a total amount of $2.9 million. Mr. Johnson increased his stake by 272.66% to 281,825 shares with this purchase.

This is the first insider purchase at RR Donnelley in over a year, and a sizable one. Mr. Johnson was previously the Chairman and CEO of GreenPoint Financial, and has been a director of RR Donnelley since 1990. The company trades at a reasonable valuation of just 5 times EBITDA but the $3.7 billion in net debt on the balance sheet could be a cause for concern.

You can view the list of recent insider transactions for R.R. Donnelley & Sons Company here.

P/E: 23.07 Forward P/E: 6.79 Industry P/E: 18.36
P/S: 0.26 Price/Book: 1.54 EV/EBITDA: 5.1
Market Cap: $2.65B Avg. Daily Volume: 3,523,290 52 Week Range: $13.16 – $21.34

3. American Railcar Industries (ARII): $15.38

Director Carl C. Icahn acquired 55,500 shares of this railcar manufacturer, paying $15.24 per share for a total amount of $845,820. These shares were purchased indirectly through Icahn Enterprises Holdings L.P.

You can view the list of recent insider transactions for American Railcar Industries here.

P/E: N/A Forward P/E: 11.92 Industry P/E: 15.25
P/S: 0.98 Price/Book: 1.15 EV/EBITDA: 14.45
Market Cap: $328.39M Avg. Daily Volume: 95,231 52 Week Range: $13.68 – $28.74

4. Layne Christensen Co. (LAYN): $23.1

Chief Operating Officer Jeffrey J. Reynolds acquired 37,800 shares of this drilling and construction services company, paying $21.22 per share for a total amount of $802,095. Mr. Reynolds increased his stake by 9.39% to 440,375 shares with this purchase.

This purchase follows the purchase by President Rene Robichaud we mentioned last week. Mr. Reynolds joined the company as a director and Senior VP following the acquisition of water services company Reynolds, Inc. by Layne Christensen.

Following the purchase last week we wrote,

“This is an interesting company that is seeing both top and bottom line growth and at the same time hit a fresh 52 week low yesterday. 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.”

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

P/E: 11.21 Forward P/E: 11.21 Industry P/E: 12.36
P/S: 0.42 Price/Book: 0.88 EV/EBITDA: 4.74
Market Cap: $449.53M Avg. Daily Volume: 148,032 52 Week Range: $20.54 – $38

5. Smithfield Foods Inc. (SFD): $19.5

Shares of this meat products company were acquired by 3 insiders:

  • Executive Vice President Joseph W. Luter IV acquired 15,000 shares, paying $18.36 per share for a total amount of $275,400. Mr. Luter increased his stake by 7.98% to 202,994 shares with this purchase.
  • Pres. & COO, Pork Group George H. Richter acquired 12,500 shares, paying $18.07 per share for a total amount of $225,875.
  • Director John T. Schwieters acquired 5,000 shares, paying $18.00 per share for a total amount of $90,000. Mr. Schwieters increased his stake by 18.87% to 31,500 shares with this purchase.

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

P/E: 6.19 Forward P/E: 8.12 Industry P/E: 15.91
P/S: 0.25 Price/Book: 0.9 EV/EBITDA: 4.26
Market Cap: $3.19B Avg. Daily Volume: 2,545,450 52 Week Range: $14.82 – $24.93

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

Notable Insider Sales:

1. Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA): $62.23

Shares of this beauty products retailer were sold by 3 insiders:

  • Director Herve Defforey sold 50,000 shares for $67.07, generating $3.4 million from the sale. These shares were sold indirectly by Swiss private bank Pictet & Cie on behalf of Herve Defforey.
  • SVP, General Counsel & Secretary Robert S. Guttman sold 30,735 shares for $69.58, generating $2.1 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Director Dennis K. Eck sold 16,031 shares for $69.35, generating $1.1 million from the sale.

You can view the list of recent insider transactions for Ulta Salon, Cosmetics & Fragrance, Inc. here.

P/E: 42.42 Forward P/E: 28.81 Industry P/E: 12.88
P/S: 2.55 Price/Book: 8.46 EV/EBITDA: 16.78
Market Cap: $3.82B Avg. Daily Volume: 921,586 52 Week Range: $27.76 – $74

2. QUALCOMM Incorporated (QCOM): $48.63

Director Irwin M. Jacobs sold 95,322 shares of this wireless equipment manufacturer for $51.26, generating $4.9 million from the sale. These shares were sold indirectly through a trust.

You can view the list of recent insider transactions for QUALCOMM Incorporated here.

P/E: 19.92 Forward P/E: 13.89 Industry P/E: 13.25
P/S: 6.1 Price/Book: 3.2 EV/EBITDA: 13.27
Market Cap: $81.69B Avg. Daily Volume: 17,503,400 52 Week Range: $42.45 – $59.84

3. Microsemi Corp. (MSCC): $15.98

Shares of this semiconductor company were sold by 6 insiders:

  • President, CEO & Director James J. Peterson sold 132,667 shares for $17.16, generating $2.3 million from the sale.
  • EVP & Chief Financial Officer John W. Hohener sold 37,667 shares for $17.21, generating $648,198 from the sale.
  • Executive Vice President & COO Ralph Brandi sold 35,000 shares for $17.64, generating $617,389 from the sale.
  • EVP & Chief Strategy Officer Steven G. Litchfield sold 33,000 shares for $17.23, generating $568,471 from the sale.
  • Senior VP of Human Resources John M. Holtrust sold 27,333 shares for $17.28, generating $472,404 from the sale.
  • Executive VP Worldwide Mktg Russell R. Garcia sold 11,667 shares for $17.64, generating $205,802 from the sale.

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

P/E: 70.4 Forward P/E: 6.98 Industry P/E: 15.2
P/S: 1.91 Price/Book: 1.72 EV/EBITDA: 8.32
Market Cap: $1.39B Avg. Daily Volume: 687,622 52 Week Range: $14.49 – $24.96

4. Stryker Corp. (SYK): $47.13

Director Ronda E. Stryker sold 54,000 shares of this medical devices company for $47.86, generating $2.6 million from the sale. These shares were sold indirectly through a trust.

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

P/E: 14.91 Forward P/E: 11.44 Industry P/E: 16.45
P/S: 2.39 Price/Book: 2.41 EV/EBITDA: 6.99
Market Cap: $18.30B Avg. Daily Volume: 2,716,120 52 Week Range: $43.73 – $65.21

5. Douglas Emmett Inc (DEI): $17.1

Chairman of the Board Dan A. Emmett sold 140,000 shares of this office and apartment REIT for $17.64, generating $2.5 million from the sale. These shares were sold indirectly through a trust.

You can view the list of recent insider transactions for Douglas Emmett Inc here.

P/E: N/A Forward P/E: 12.48 Industry P/E: 13.46
P/S: 3.89 Price/Book: 1.21 EV/EBITDA: 16.34
Market Cap: $2.18B Avg. Daily Volume: 2,144,270 52 Week Range: $15.53 – $21.08

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

Disclosure: See author's portfolio holdings here.

Source: Insider Buys And Sells: Federal-Mogul, Ulta Salon