Insiders made noteworthy buys (see definition below) in one telecom equipment company this past week (June 11th to 15th, 2012), and sold five telecom and internet group companies. These, along with insider buys and sells last week in other sectors and groups (discussed in prior articles on the consumer sector, the retail sector, and the healthcare sector) were selected based on a review of over 1,300 separate SEC Form 4 (insider trading) filings last week, as part of our daily and weekly coverage of insider trades.
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 (for more info on how to interpret insider trades, please refer to our instablog discussion on insider trading):
Brocade Communications Systems Inc. (BRCD): BRCD is a network solutions provider that helps organizations worldwide transition smoothly to a virtualized world where applications as information can reside anywhere, by providing data center networking and storage area networking solutions. On Thursday, CEO Michael Klayko filed SEC Form 4 indicating that he purchased 60,000 shares for $0.27 million, ending with 0.41 million shares in direct and 0.80 million shares in indirect holdings. In comparison, insiders purchased 110,000 shares in the past two years.
In BRCD's latest Q2 (April) reported four weeks ago, revenues came in-line and it beat analyst earnings estimates (15c v/s 12c), also projecting in-line revenue and earnings for Q3. Its shares have held up well amid the mayhem last month, trading at an attractive 8 forward P/E and 0.9 P/B compared to averages of 17.3 and 2.9 for its peers in the computer networking group, while earnings are projected to rise from 50c in 2011 to 60c in 2013.
While the valuation is attractive on an absolute basis, the company needs to generate baseline and top-line growth for shares to break-out well above the $6 range, far greater than the mid-to-high single-digit growth rates currently projected going forward. Among analysts, the consensus is about neutral on average, as of the 30 analysts that cover the company, 20 rate it at buy/strong buy, six at buy/strong buy and the remaining four rate it at underperform, with a mean price target of $6.
In addition to BRCD, insiders also reported noteworthy sells this past week in the following telecom and internet companies:
- a $48.3 million sale by two insiders at Google (GOOG), the Internet's premier search engine company;
- a $7.0 million sale by four insiders at Qualcomm Inc. (QCOM), a designer of CDMA-based, RF and power management ICs for system software used in wireless handsets, modem cards and networks;
- a $5.5 million sale by four insiders at LinkedIn Corp. (LNKD), that operates an online professional network via its proprietary social networking platform;
- a $2.9 million sale by two insiders in American Tower Corp. (AMT), that operates cellular towers used by wireless service providers and TV and radio broadcast companies; and
- a $1.9 million sell by EVP Thomas Tauke at Verizon Communications (VZ), a diversified communications service provider formed by the merger of Bell Atlantic and GTE, provides local exchange, network access, data, wireless and information services in the U.S. and over 150 countries.
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.
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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