Analyzing Friday's Noteworthy Insider Buys And Sells

by: GuruFundPicks

Insiders reported that on Friday December the 16th, they bought and sold stock in over 290 separate transactions in 183 different companies. These transactions have to be reported within two days of the trade, so the transactions occurred sometime after the middle of the week. We culled through these 290 or so insider buys and sells (based on SEC Forms 3, 4, and 5 filings), as part of our daily and weekly coverage of insider trades, and present here the most notable trades reported Friday.

Endocyte Inc. (ECYT): Endocyte develops targeted therapies using small molecule drug conjugates for the treatment of cancer and inflammatory diseases. Insiders currently hold 5.7 million or 15.9% of outstanding shares. On Friday, three insiders reported that they purchased a total of 146,000 shares for $0.49 million, with the majority (125,000 shares) purchased by Director Douglas Bailey, and the rest purchased by Director John Aplin (20,000 shares) and Chief Science Officer Philip Low (1,000 shares). Endocyte shares are among this week’s strongest movers to the downside, down 72% this week so far, after the company announced on Tuesday the results of supplemental analyses of its phase 2b PRECEDENT trial that failed to show a survival advantage.

Molycorp Inc. (MCP): Molycorp is engaged in the mining and processing of rare earth ores at the mountain pass facility near the CA/NV border. The rare earths are critical inputs in existing and emerging applications, including: Clean energy technologies, such as hybrid and electric vehicles and wind power turbines; multiple high-tech uses, including fiber optics, lasers and hard disk drives; numerous defense applications, such as guidance and control systems and global positioning systems; and advanced water treatment technology for use in industrial, military and outdoor recreation applications. Insiders currently hold 7.9 million or 9.7% of outstanding shares. On Friday, CEO Mark Smith reported that he purchased 5,000 shares for $0.14 million, increasing his holdings in the company to 0.94 million shares (direct and indirect). Although a small purchase, it is significant in that insider buying is very uncommon at Molycorp. In the last year, the only other insider purchase was a 4,200 share purchase by CEO Smith in August. Molycorp shares have been weak recently, down by over two-thirds from the almost-$80 high in April this year. This despite impressive quarter results as both revenues and earnings are rising strongly, and are expected to more than double from $1.56 in 2011 to $3.17 in 2012 while the stock trades at a very attractive 8-9 forward P/E.

Abbott Laboratories (ABT): Abbott Labs is a developer of pharmaceuticals, diagnostic systems, nutritional supplements and vascular, ophthalmic and eye care products. Insiders currently hold 6.1 million or 0.4% of outstanding shares. On Friday, three insiders reported selling a total of 138,583 shares for $7.5 million. This included SVP Robert Hance exercising options and selling the resulting shares (77,885 shares), and ending the week with 128,496 shares (direct); SVP Mary Szela (53,201 shares) also exercising options and selling the resulting shares, and ending the week with 119,342 shares (direct); and SVP Scott White selling 7,497 shares, and ending the week with 65,174 shares. These sales are significant due to the number of insiders selling, the amounts, the fact that in most cases the shares sold represent a significant portion of the insider’s holdings in the company, and also given that insiders sold only an additional 241,650 shares in the last three months.

Abbott Labs is a consistent grower, with annual earnings up every year recently even through the 2008/09 recession. It sports a healthy dividend yield of 3.5%, and trades at a discount 11 forward P/E and 3.4 P/B compared to averages of 11.8 and 4.2 for the large cap pharmaceuticals group. Furthermore, earnings growth is projected in the high single to low double digits versus the 5%-6% average for the group. Also, the stock is approaching its 2007 highs in the $60 range while earnings are 70%-80% higher than they were then. The stock based on its dividend yield, and earnings growth and stability, has the characteristics that a wide cadre of investors would find attractive.

Forest Labs Inc. (FRX): Forest Labs develops, manufactures, and sells both branded and generic forms of ethical drug products which require a physician’s prescription, as well as non-prescription pharmaceutical products that are sold over-the-counter (OTC). Its principal products include Lexapro for major depressive disorder, Namenda for Alzheimer’s disease, Bystolic for hypertension, Savella for fibromyalgia, and Teflaro for community-acquired bacterial pneumonia. On Friday, SVP of Sales Jerome Lynch sold 14,000 shares for $0.4 million, ending the week with 63,700 shares. This is in addition to the 24,898 shares sold by two other insiders, COO Elaine Hochberg and CFO Francis Perier, for $0.8 million on Thursday, so that insiders sold a total of 38,898 shares for $1.2 million. This is significant due to the amounts, the number of insiders selling, given that the last time insiders sold was in June, and that over the past year insiders sold only a total of 54,519 shares (buying none).

Forest Labs has been weak recently, down almost 30% from the $40 highs in June, and it trades at 24 forward P/E and 1.5 P/B compared to averages of 31.8 and 6.2, respectively, for its peers in the drug manufacturers group, while earnings are projected to collapse from $4.40 in 2011 to $3.65 in 2012 and $1.19 in 2013.

AVI Biopharma Inc. (AVII): AVI BioPharma is focused on the discovery and development of novel RNA-based therapeutics for rare and infectious diseases, as well as other select disease targets. Applying pioneering technologies developed and optimized by AVI, the company is able to target a broad range of diseases and disorders through distinct RNA-based mechanisms of action. Unlike other RNA-based approaches, AVI's technologies can be used to directly target both messenger RNA (mRNA) and precursor messenger RNA (pre-mRNA) to either down-regulate (inhibit) or up-regulate (promote) the expression of targeted genes or proteins. AVI has built a pipeline of potentially transformative therapeutic agents, including treatments for Duchenne muscular dystrophy. Insiders currently hold 34.8% of the outstanding shares. On Friday, CEO Christopher Garabedian reported that he purchased 300,000 shares for $0.17 million, ending the week with 430,000 shares. Insider buying is uncommon at AVI Biopharma. In the past year, insiders purchased a total of 570,000 shares, including 250,000 in April. AVI Biopharma shares are down strongly this year, by two-thirds year-to-date, and currently trade at their lows. The stock fell most recently after it received news in mid-October that it did not qualify for a Department of Defense (DOD) contract award for the clinical development of its influenza drug candidate, AVI-7100, for post-exposure prophylaxis.

Novellus Systems Inc. (NVLS-OLD): Novellus manufactures thin dielectric and metal film deposition equipment, as well as equipment used in surface preparation and ultraviolet thermal processing systems. Insiders currently hold 0.9 million or 1.0% of outstanding shares. On Friday, three insiders sold a total of 140,040 shares for $5.9 million. This included CEO Richard Hill, CFO John Hertz and Director William Spivey who sold 121,708, 15,000 and 3,332 shares respectively. On Thursday, Novellus entered into a definitive merger agreement to be acquired by Lam Research Corp. (LRCX) at a near 20% premium.

Pandora Media Inc. (P): Pandora is a premier provider of internet radio in the U.S., offering listeners a streaming music based on analysis of user listening behavior. Its services are offered on traditional computers, and on smartphones such as Android phones, Blackberries and the iPhone. Insiders currently hold 21.7 million or 13.6% of outstanding shares. On Friday, Chief Revenue Officer John Trimble exercised options and sold the resulting 25,000 shares for $0.26 million under a 10b5-1 plan, and ended the week with no shares (but with 310,000 derivative securities) in the company. Pandora shares have been very weak since its IPO, and currently trade near their lows, so the insider sell in this context is notable in that it may signify that at least some insiders do not see value in Pandora shares even at these levels.

On top of these, some additional large trades included a $2.9 million purchase by Director Joseph Landy in Chinese pharmaceuticals company China Biologic Products (CBPO); a $2.0 million purchase by insiders CEO John Weinzierl and Chief Accounting Officer Patrick Nguyen at U.S. oil & gas exploration and production company Memorial Productions Partners LP (MEMP); a $9.0 million sale by four insiders, including CEO Ronald Clarke at payment products and services provider Fleetcor Technologies Inc. (FLT); a $19.2 million sale by five insiders, including CEO Anthony Zingale at social business cloud software company Jive Software Inc. (JIVE); and a $4.7 million sale by CEO Glenn Britt at Time Warner Cable Inc. (TWC).

Credit: Fundamental data in this article were based on SEC filings, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and The information and data is believed to be accurate, but no guarantees or representations are made.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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