Analyzing Monday's Noteworthy Insider Buys And Sells

by: GuruFundPicks

Insiders reported that on Monday December the 19th, they bought and sold stock in over 250 separate transactions in 170 different companies. These transactions have to be reported within two days of the trade, so the transactions occurred sometime after the middle of last week. We culled through these 250 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 Monday (for a general discussion on how to interpret insider trades, please look at the end of this article):

Endocyte Inc. (NASDAQ:ECYT): ECYT 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 Monday, Director Fred Middleton purchased 50,000 shares for $0.16 million. Mr. Middleton is a Managing Director at San Mateo, CA-based venture capital firm Sanderling Ventures that specializes in investing in biotech companies. Insiders have been on a buying spree at ECYT recently, as three insiders reported just last Friday 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). ECYT 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. The heavy insider buying is particularly notable in this context as it may signifies that four insiders through their buying of company shares seem to think that the selling is overdone here, portending that we may be near a bottom.

Pandora Media Inc. (NYSE: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 Monday, CTO Thomas Conrad reported that he exercised options and sold the resulting 38,096 shares for $0.4 million, ending with no shares (but 243,156 derivative securities) as part of a 10b5-1 plan. This comes just after we reported Friday's filing by Chief Revenue Officer John Trimble exercising options and selling the resulting 25,000 shares for $0.26 million under a 10b5-1 plan. Overall, during the past three months, insiders sold only an additional 18,260 shares (buying none). Pandora shares have been very weak since its IPO, and currently trades near its lows, so the multiple insiders selling 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.

Wal-mart Stores (NYSE:WMT): WMT is the world's largest retailer, and operates Wal-mart and Sam's Club stores worldwide under discount, super-center and neighborhood market formats. On Monday, EVP & CIO Rollin Ford exercised options and sold the resulting 38,685 shares (regular sell) for $2.3 million, ending with 103.1 million shares (direct holdings). Along with other recent insider sales by CEO Lee Scott and Vice Chairman Eduardo Castro, insiders at WMT in the last month have sold a total of 208,611 shares for approximately $12.1 million. This is significant in that these are multiple insiders selling, the sales are large, and in that it represents a pickup in selling at WMT given that insiders in the past year sold only an additional 156,512 shares (buying none). Also, WMT shares have been range-bound for over ten years, and currently are trading at the top of that trading, so the sale by multiple insiders indicates that at least some insiders believe that WMT shares could top out here at the top of its range rather than break-out of that range to the upside.

Akron Inc. (NASDAQ:AKRX): AKRX develops diagnostic and therapeutic pharmaceutical products, hospital drugs, and injectable pharmaceuticals in specialty areas such as ophthalmology, rheumatology, anesthesia and antidotes, among others. Insiders currently hold 6.6 million shares or 7.3% of outstanding shares. On Monday, SVP of National Accounts John Sabat reported that he sold 95,751 shares for $1.0 million, ending with 29,137 shares. This is on top of the 50,000 shares that we reported just two weeks that CFO Timothy Dick sold, so that insiders have sold a total 145,751 shares for $1.55 million in the last two weeks. This is significant given the size of the sales, the number of insiders selling, the fact that the sale represented a significant portion of Mr. Sabat's holdings in the company, and in that the sales represent a pick-up given that insider sold only an additional 28,469 shares in the past year (buying 9,000 shares). AKRX shares currently trade at all-time highs, up over twelve-fold from the 2009 lows, and at a premium 29 forward P/E and 6.8 P/B compared to averages of 13.2 and 2.9 respectively for its peers in the generic drugs group.

Fedex Corp. (NYSE:FDX): FDX is a global transportation and logistics enterprise that provides express, ground small-parcel and less-than-truckload deliveries, and office and print services. Insiders currently hold 18.7 million or 6.0% of outstanding shares. On Monday, three insiders sold a total of 79,733 shares for $6.8 million. This included CFO Alan Graf exercising options and selling the resulting 45,000 shares (regular sell), CIO Robert Carter exercising options and selling the resulting 22,233 shares (regular sell), and the CEO of FedEx Express Division David Bronczek selling 12,500 shares (regular sell). Overall, insiders sold only an additional 3,000 shares in the past three months (buying 6,640 shares). FDX shares currently trade at a premium 11 forward P/E, and at 1.7 P/B, compared to averages of 9.1 and 2.3 respectively for its peers in the air freight transportation group, while earnings are projected to rise strongly from $4.93 in 2011 to $7.32 in 2013 at an annual growth rate of 21.9%.

Kodiak Oil & Gas (NYSE:KOG): Denver-based KOG is an independent energy exploration and development company focused on exploring, developing and producing oil and natural gas in the Williston and Greater Green River Basins in the U.S. Rocky Mountains. Insiders currently hold 5.5 million or 2.6% of outstanding shares. On Monday, Director Rodney Knutson reported that he sold 50,000 shares (regular sell) for $0.4 million. Insider selling is not that common at KOG, and the last time insiders sold at KOG was on April 1st, and overall insiders sold 320,000 shares in the past year (buying 26,450). KOG shares trade at 9 forward P/E and 3.5 P/B compared to averages of 22.2 and 5.3 for its peers in the U.S. oil & gas exploration & production group.

McDonalds Corp. (NYSE:MCD): MCD is the world's most well known and among the largest fast food retailers, with over 32,000 company-owned and franchised restaurants in 117 countries. Insiders currently hold 1.3 million shares or 0.1% of outstanding shares. On Monday, Corporate EVP and General Counsel Gloria Santona filed SEC Form 4 indicating that she exercised options and sold the resulting 25,300 shares (regular sell) for $2.5 million, ending with 70,963 shares. Overall, during the past three months, insiders at MCD sold 86,714 shares (buying none). MCD is a consistent outperformer, and it has gone almost straight up after bottoming in 2003, staying strong (relative) throughout the 2008-09 recession. It is up a strong 26.6% YTD, and still trades at a discount 17 forward P/E and 7.5 P/B compared to the averages of 18.2 and 10.4 for the restaurant group, while earnings are projected to keep rising from $4.60 in 2010 to $5.72 in 2012 at a respectable annual growth rate of 11.5%.

Novellus Systems Inc. (NASDAQ:NVLS-OLD): NVLS 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 Monday, CEO Richard Hill reported that he exercised options to acquire 363,483 shares and sold 360,883 of the resulting shares for $15.0 million under a 10b5-1 plan. This is on top of the three insiders selling 140,400 shares for $5.9 million that we reported just Friday. NVLS recently on Thursday entered into a definitive merger agreement to be acquired by Lam Research Corp. (NASDAQ:LRCX) at a near 20% premium.

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.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.