Last week (May 14th-18th, 2012), insiders made noteworthy buys (see definition below) in two plunging telecom services stocks, and noteworthy buys and sells in several other tech companies.
Insider buys, especially unusually large ones, in such stocks that are beaten down and trading near their lows, may give bulls comfort that the long-term fundamentals may be intact and that a turn may be underway in the next couple of quarters. On the other hand, sales at depressed prices after the plunge may lend even further credence to the bear thesis. Similarly, noteworthy buys in surging stocks may give investors some confidence that knowledgeable insiders are finding value at such elevated prices after a strong surge.
The transactions in this article were selected based on a review of over 2,200 separate SEC Form 4 (insider trading) filings last week. The filings are noteworthy based on the dollar amount sold, the number of insiders buying or selling, and based on whether the overall buying or selling represents a strong pick-up based on historical buying and selling in the stock:
Frontier Communications Corp. (FTR): FTR provides regulated and unregulated voice, data, and video services to residential, business and wholesale customers in the U.S. On Friday, six insiders filed SEC Forms 4 indicating that they purchased 137,200 shares for $0.45 million, with the largest buyers being Director Myron Wick (65,000 shares) and EVP Cecilia McKenney (35,000 shares). In comparison, insiders purchased 0.31 million shares in the past two years.
At a 12.4% dividend yield, FTR is among the highest dividend-paying stocks in the market. But that hefty dividend so far has come at a tremendous cost to shareholders. Its shares have been in a persistent downtrend since peaking at near $10 early last year, closing Friday at $3.22 near multi-decade lows, and down about 63% YTD. The company is suffering under a heavy debt burden, and is also struggling to expand out of its commoditized wire-line voice business into more profitable IP-based video and other services.
In the latest Q1 (March) that it reported the week before last on Monday, revenues came in-line and it missed analyst earnings estimates by a penny (5 cents v/s 6 cents). Its shares have reacted sharply to the downside following the miss, dropping even further into all-time low territory, and currently trading at 14-15 forward P/E and 0.8 P/B compared with averages of 16.3 and 4.1 for its peers in the regional wire-line group, while earnings are projected to fall slightly from 25 cents in 2011 to 22 cents in 2013.
Windstream Corp. (WIN): WIN provides communications and technology solutions in the U.S., including IP-based voice and data services, multi-protocol label switching networking, data center and managed services, hosting services, and communications systems to business and government agencies. In addition, it also provides high-speed Internet, voice, and digital television services to residential customers primarily located in rural areas. Last week, six insiders filed SEC Forms 4 indicating that they purchased 56,754 shares for $0.55 million. This is in addition to the purchase of 85,500 shares for $0.85 million that we reported just last week, so that in total insiders have purchased 0.14 million shares in the past two weeks. In comparison, insiders purchased 0.26 million shares in the past two years.
In contrast to its peer FTR (above), WIN shares were performing relatively well since peaking in early 2011, that is, until the plunge at the end of the week before last. The company reported its Q4 (March) on Thursday morning before the market opened, indicating that it missed analyst revenue and earnings estimates (13c v/s 14c), mostly on account of a fall in wholesale revenues. Its shares have fallen over 16% since that report six trading days ago, and currently trade at 16-17 forward P/E and 3.9 P/B compared to averages of 16.3 and 4.1 for its peers in the regional wire-line group, while earnings are projected to fall from 79c in 2011 to 52c in 2012 and then rebound to 58c in 2013. Also, the company pays a rich 10.7% dividend, among the highest in the group.
In addition, insiders also reported noteworthy buys last week in the tech sector in two more stocks, with the first one also being a telecom stock plunging to its lows (in addition to the two above):
NII Holdings Inc. (NIHD), that provides wireless communications services under the Nextel brand name to businesses and individuals in Mexico, Brazil, Argentina, Peru, and Chile, in which EVP Gary Begeman purchased 7,500 shares for $94,875, in comparison to 48,675 shares purchased by insiders in the past two years; and
Triquint Semiconductor (TQNT), that manufactures a broad range of high-performance RF, analog and mixed-signal ICs, in which two insiders purchased 21,500 shares for $0.11 million, in comparison to 95,333 shares purchased by insiders in the last two years.
On top of these, insiders also reported noteworthy sales last week in the tech sector stocks in:
BMC Software Inc. (BMC), that provides software to the largest global corporations and the smallest businesses in over 120 countries to manage their business services and applications across distributed, mainframe, virtual and cloud environments, in which three insiders sold 91,925 shares for $4.1 million, in comparison to 0.45 million shares sold by insiders in the past year;
Riverbed Technology Inc. (RVBD), a provider of products and services that improve applications and accessibility of data over wide area networks or WANs, in which three insiders sold 0.23 million shares for $3.8 million, in comparison to 2.7 million sold in the past year;
Skyworks Solutions Inc. (SWKS), the industry's leading wireless semiconductor company that is focused on radio frequency (RF) and semiconductor solutions for mobile communications applications, in which two insiders sold 103,000 shares for $2.6 million, in comparison to 0.60 million shares sold by insiders in the past year;
Centurylink (CTL), an integrated communications company that provides a range of communications services, including voice, Internet, data and video services in the continental U.S., in which EVP Dennis Huber sold 39,012 shares for $1.5 million, in comparison to 0.43 million shares sold by insiders in the past year; and
Micron Technology (MU), a leading manufacturer of semiconductor memory solution, including DRAM, NAND and NOR flash memory, phase change memory, and image sensors, in which VP Mario Licciardello sold 125,504 shares for $0.8 million, the only insider trade in the past year.
Credit: Fundamental data in this article and company descriptions are based on SEC filings, Zacks Investment Research, Yahoo, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
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.
(A prior article on last week's noteworthy buys in biotech and other healthcare stocks can be accessed by clicking on the above hyperlink, and another on insiders trades in basic materials and energy can be accessed from our our author page.)
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.