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Welcome to edition eighty seven of Insider Weekends. Insider buying increased with insiders purchasing $35.1 million of their stock last week compared to $30.96 million in the week prior. Selling spiked higher with insiders selling $1.2 billion worth of stock last week compared to $716.8 million in the week prior. Once again we excluded a $15 million insider purchase of Icahn Enterprises (IEP) by Carl Icahn because it was related to participation in a rights offering and not an open market purchase.

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 35.1. In other words, insiders sold more than 35 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the week prior when the ratio stood at 23.15.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 February 3, 2012:

Insider Sell Buy Ratio February 3, 2012

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. Hess Corporation (HES): $60.38

Chairman of the Board and CEO John B. Hess acquired 91,250 shares of this integrated energy company, paying $54.79 per share for a total amount of $4.9 million. Mr. Hess increased his stake by 29.40% to 401,588 shares with this purchase.

This was a sizable purchase and follows a $10 million purchase by Mr. Hess in September. We wrote the following about that purchase,

This is an interesting purchase because Hess used to show up on my radar because of the large insider sales by Mr. Hess when the stock was trading above $80 in February and March of this year as you can see from this page. The stock has been in decline since the last week of July when it reported second quarter results that were strong but still missed analyst estimated.

Earnings in the second quarter rose 61.9% to $1.78 per share on $9.81 billion in revenue, which was up 26.8% year-over-year. The company trades close to book value and has an extremely low EV/EBITDA of 3.44. Unfortunately CapEx is unusually high, generating very little free cash flow. This filing came out during regular trading hours and the stock buoyed up about 3%. We are seeing several insider purchases in the energy sector across exploration, drilling and services companies.

You can view the list of recent insider transactions for Hess Corporation here.

P/E: 12.05Forward P/E: 7.49Industry P/E: 10.45
P/S: 0.5Price/Book: 1.05EV/EBITDA: 3.96
Market Cap: $20.38BAvg. Daily Volume: 3,959,94052 Week Range: $46.66 – $87.4

2. Biglari Holdings (BH): $411.24

Chairman and CEO Sardar Biglari, acquired 3,000 shares of this restaurant chain and holding company, paying $399.94 per share for a total amount of $1.2 million. Mr. Biglari, increased his stake by 47.90% to 9,263 shares with this purchase.

We have covered purchases of both Biglari Holdings and Cracker Barrel (CBRL) several times in the past. We wrote the following about Mr. Biglari last March following his insider purchases of Biglari Holdings,

Young Mr. Biglari has been considered by some as the next Warren Buffett following his purchase of The Steak n Shake restaurant chain and penchant for activist value investing. He has also come under criticism by many in the value investing community on account of his compensation package and his decision to reverse split the stock, resulting in a stock that now has a triple digit price.

This article titled “The Restaurant Investor” (PDF) does a great job of introducing Mr. Biglari while this open letter to Mr. Biglari covers some of the criticism. As you can see from this page, he was actively buying shares last August when the stock was trading below $300.

You can view the list of recent insider transactions for Biglari Holdings here.

P/E: 16.22Forward P/E: 14.18Industry P/E: 20.33
P/S: 0.68Price/Book: 1.65EV/EBITDA: 6.3
Market Cap: $504.59MAvg. Daily Volume: 6,71852 Week Range: $279.86 – $461

3. Dominion Resources (D): $50.38

Shares of this electric utility were acquired by 4 insiders:

  • Director Dr. Peter W. Brown acquired 5,000 shares, paying $49.49 per share for a total amount of $247,460. Mr. Brown increased his stake by 9.61% to 57,006 shares with this purchase.
  • President and CEO Thomas F. Farrell II acquired 5,000 shares, paying $49.50 per share for a total amount of $247,492. Mr. Farrell increased his stake by 0.57% to 881,224 shares with this purchase.
  • EVP and Chief Financial Off. Mark F. McGettrick acquired 5,000 shares, paying $49.48 per share for a total amount of $247,400. Mr. McGettrick increased his stake by 2.59% to 198,281 shares with this purchase.
  • Director Mark J. Kington acquired 2,800 shares, paying $49.66 per share for a total amount of $139,049. Mr. Kington increased his stake by 8.52% to 35,649 shares with this purchase.

This cluster of insider purchases failed to inspire interest from investors as the stock was up marginally following these filings. The company has over $19 billion in net debt on its balance sheet, sports a dividend yield of 4.2% and trades for 9.6 times EBITDA.

You can view the list of recent insider transactions for Dominion Resources here.

P/E: 19.3Forward P/E: 14.6Industry P/E: 15.09
P/S: 1.92Price/Book: 2.47EV/EBITDA: 9.58
Market Cap: $28.70BAvg. Daily Volume: 2,762,37052 Week Range: $42.91 – $53.68

4. Federated Investors (FII): $18.92

Director Michael J. Farrell acquired 47,500 shares of this asset management company, paying $17.16 per share for a total amount of $815,112.

20,000 of these shares were purchased indirectly by the Farrell Family Partnership and 7,500 shares were purchased indirectly through a trust.

This is the first insider purchase we have seen at Federated in well over a year. Mr. Farrell has served on the board of Federated since 1998. The company has $369.7 billion in assets under management (AUM) and trades for just 0.51% of AUM, which is significantly below its peers. One of the reasons for this is that a majority of the mutual funds offered by the company are either money market funds or bond funds. The stock sports a 5.3% dividend yield with a 66% payout ratio. Unfortunately revenue and earnings have been declining on account of shrinking AUM. The company also faces risk from two SEC rule changes that may negatively impact the money market fund providers.

You can view the list of recent insider transactions for Federated Investors here.

P/E: 13.05Forward P/E: 10.75Industry P/E: 13.12
P/S: 2.05Price/Book: 3.37EV/EBITDA: 6.95
Market Cap: $1.90BAvg. Daily Volume: 2,157,74052 Week Range: $14.36 – $28.23

5. Starbucks Corporation (SBUX): $48.32

Director Myron E. Ullman III acquired 10,000 shares of Starbucks, paying $47.68 per share for a total amount of $476,835. Mr. Ullman increased his stake by 50.00% to 30,000 shares with this purchase.

You can view the list of recent insider transactions for Starbucks Corporation here.

P/E: 28.93Forward P/E: 21.38Industry P/E: 28.65
P/S: 2.92Price/Book: 8.1EV/EBITDA: 16.07
Market Cap: $36.02BAvg. Daily Volume: 5,851,71052 Week Range: $31.17 – $48.62

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

Notable Insider Sales:

1. Microsoft Corporation (MSFT): $30.24

Shares of Microsoft were sold by 2 insiders:

  • Founder Bill Gates sold 10 million shares for $29.43, generating $294.3 million from the sale.
  • President, Server and Tools Satya Nadella sold 20,000 shares for $29.76, generating $595,200 from the sale.

You can view the list of recent insider transactions for Microsoft Corporation here.

P/E: 10.96Forward P/E: 10.11Industry P/E: 25.7
P/S: 3.49Price/Book: 3.92EV/EBITDA: 7.2
Market Cap: $253.74BAvg. Daily Volume: 54,663,70052 Week Range: $23.65 – $30.4

2. Ross Stores (ROST): $51.76

Vice Chairman and CEO Michael Balmuth sold 322,584 shares of this discount retail chain for $50.59, generating $16.3 million from the sale.

You can view the list of recent insider transactions for Ross Stores here.

P/E: 19.16Forward P/E: 15.93Industry P/E: 16.22
P/S: 1.4Price/Book: 8.09EV/EBITDA: 9.74
Market Cap: $11.83BAvg. Daily Volume: 2,052,41052 Week Range: $33.5 – $52.71

3. Seagate Technology (STX): $26.415

Chairman, President and CEO Stephen J. Luczo sold 687,442 shares of this data storage company for $20.80, generating $14.3 million from the sale. These shares were sold indirectly through a trust.

You can view the list of recent insider transactions for Seagate Technology here.

P/E: 24.12Forward P/E: 3.19Industry P/E: 18.97
P/S: 0.98Price/Book: 4.46EV/EBITDA: 7.43
Market Cap: $11.09BAvg. Daily Volume: 11,421,00052 Week Range: $9.05 – $26.68

4. Helen of Troy Limited (HELE): $34.1

Chairman, CEO & President Gerald J. Rubin sold 227,698 shares of this consumer products company for $32.86, generating $7.5 million from the sale.

You can view the list of recent insider transactions for Helen of Troy Limited here.

P/E: 10.21Forward P/E: 8.74Industry P/E: 13.35
P/S: 0.95Price/Book: 1.4EV/EBITDA: 8.09
Market Cap: $1.08BAvg. Daily Volume: 166,33152 Week Range: $23.83 – $36.75

5. A.O. Smith Corporation (AOS): $45.08

Shares of this producer of water heaters were sold by 2 insiders:

  • Chairman and CEO Paul W. Jones sold 104,751 shares for $43.60, generating $4.6 million from the sale. 22,369 of these shares were sold as a result of exercising options immediately prior to the sale.
  • Senior Vice President – CD Steve W. Rettler sold 13,350 shares for $42.40, generating $566,034 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 A.O. Smith Corporation here.

P/E: 6.87Forward P/E: 13.58Industry P/E: 15.01
P/S: 1.19Price/Book: 1.87EV/EBITDA: 10.34
Market Cap: $2.09BAvg. Daily Volume: 521,32452 Week Range: $29.81 – $45.24

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: Hess, Microsoft