A study titled "Predictive and Statistical Properties of Insider Trading" by James H. Lorie and Victor Niederhoffer reached the following conclusion:
This study indicates that proper and prompt analysis of data on insider trading can be profitable, although almost all previously published studies have reached the contrary conclusion. When insiders accumulate a stock intensively, the stock can be expected to outperform the market during the next six months. Insiders tend to buy more often than usual before large price increases and to sell more than usual before price decreases.
Based on the findings of this encouraging insider trading study I screened for companies where at least one insider made a sell transaction filed on August 17. I chose the top 5 companies with insider selling in dollar terms. Here is a look at the five stocks:
1. Kinder Morgan (KMI) is the largest midstream and the fourth largest energy company in North America with a combined enterprise value of approximately $100 billion. It owns an interest in or operates approximately 75,000 miles of pipelines and 180 terminals. Its pipelines transport natural gas, gasoline, crude oil, CO2 and other products, and its terminals store petroleum products and chemicals and handle such products as ethanol, coal, petroleum coke and steel. Kinder Morgan owns the general partner interest of Kinder Morgan Energy Partners (KMP) and El Paso Pipeline Partners (EPB), along with limited partner interests in KMP, Kinder Morgan Management (KMR) and EPB.
The company reported the second-quarter financial results on July 18 with the following highlights:
|Net loss||$125 million|
|Quarterly cash dividend||$0.35 per share|
KMI expects to declare dividends of at least $1.40 per share for 2012, well above its 2012 budget of $1.35 per share, and an increase of approximately 17 percent over its 2011 declared dividend of $1.20 per share.
As a result of the acquisition of El Paso and KMI's normal expected annual growth, KMI continues to expect its dividend per share to grow at an average annual rate of around 12.5 percent through 2015 from its budgeted 2011 dividend of $1.16 per share.
The stock has a 4.09% dividend yield and is trading at a forward P/E of 22.81. The stock is currently trading above its 200 day moving average. The stock has seen more insider selling than buying this year. I am not interested in shorting the stock currently.
2. Dunkin' Brands Group (DNKN) is one of the world's leading franchisors of quick service restaurants (QSR) serving hot and cold coffee and baked goods, as well as hard-serve ice cream. At the end of the second quarter 2012, Dunkin' Brands' nearly 100 percent franchised business model included more than 10,000 Dunkin' Donuts restaurants and nearly 7,000 Baskin-Robbins restaurants. For the full-year 2011, the company had franchisee-reported sales of approximately $8.3 billion.
The company reported the second-quarter financial results on July 26 with the following highlights:
|Net income||$18.5 million|
As described below, the company is increasing certain targets and reaffirming others that it has previously provided regarding its 2012 performance.
- The company continues to expect Dunkin' Donuts U.S. comparable store sales growth to be in the range of 4 to 5 percent and Baskin-Robbins U.S. comparable store sales growth to be in the range of 2 to 4 percent.
- The company is increasing its global growth target to between 600 to 700 net new units. It continues to expect that Dunkin' Donuts U.S. will add between 260 and 280 net new restaurants and now expects Baskin-Robbins U.S. will close between 40 and 60 restaurants net (previously the range was 60 to 80 net closures). Internationally, the company targets opening 400 to 450 net new units across the two brands, an increase from 350 to 450.
- The company continues to expect revenue growth of between 7 and 8 percent with adjusted operating income growth of between 12 and 14 percent. The targets for revenue and adjusted operating income growth are based on a 52-week year in 2011.
- The company is increasing its range for adjusted earnings per share to $1.22 to $1.25 which would represent 30 to 33 percent growth over its $0.94 adjusted earnings per share in 2011 and is an increase from the previous target of $1.21 to $1.24.
The stock has a $64 price target from the Point and Figure chart. The stock has seen heavy insider selling this year. The stock is currently trading at a forward P/E of 20.88. I am not interested in shorting the stock as long as it is trading above its 200 day moving average.
3. Performant Financial Corporation (PFMT) is a leading provider of technology-enabled recovery and related analytics services in the United States. Performant was founded in 1976 and is currently headquartered in Livermore, California. Performant generally provides its services on an outsourced basis, where the company handles many or all aspects of its clients' recovery processes. The company's clients typically operate in complex and regulated environments and outsource their recovery needs in order to reduce losses on billions of dollars.
Through the company's refined "asset-light" outsourced services platform, the company is able to identify and recover delinquent or defaulted assets and improper payments across various public and private sectors. The company has built long-term relationships with participants in the student loan industry, including a 22-year relationship with the U.S. Department of Education. Within the healthcare market, the company is currently one of four prime Medicare Recovery Audit Contractors in the United States for the Centers for Medicare and Medicaid Services.
- Pcp Managers sold 5,927,260 shares on August 15 trough the Initial Public Offering.
- Lisa Im sold 318,253 shares on August 15 trough the Initial Public Offering. Lisa Im is the Chief Executive Officer of Performant Financial Corporation.
- Jon Shaver sold 209,477 shares on August 15 trough the Initial Public Offering. Jon Shaver is the Chairman of Board of Directors of Performant.
- Harold Leach sold 65,652 shares on August 15 trough the Initial Public Offering. Harold Leach is the Chief Operating Officer of Performant and is a recognized operations strategy leader within the financial asset recovery industry.
- Jeffrey Stein sold 17,434 shares on August 15 trough the Initial Public Offering. Jeffrey Stein serves as a director of the company.
- Hakan Orvell sold 39,058 shares on August 15 trough the Initial Public Offering. Hakan Orvell has served as the company's Chief Financial Officer since November 2006.
- Bruce Calvin sold 16,671 shares on August 15 trough the Initial Public Offering. Bruce Calvin is the Senior Vice President of Corporate Services.
The company reported the first six months ending June 30 financial results with the following highlights:
|Net income||$8.6 million|
The company became public on August 10. The company sold 1,924,000 shares through the IPO. The company has 45,148,986 shares outstanding which gives a $494 million market cap for the company. The stock has a P/S ratio of 2.5. I have currently a neutral bias for the stock.
4. CBS Corporation (CBS) is a mass media company that creates and distributes industry-leading content across a variety of platforms to audiences around the world. The company has businesses with origins that date back to the dawn of the broadcasting age as well as new ventures that operate on the leading edge of media. CBS owns the most-watched television network in the U.S. and one of the world's largest libraries of entertainment content, making its brand - "the Eye" - one of the most recognized in business. The company's operations span virtually every field of media and entertainment, including cable, publishing, radio, local TV, film, outdoor advertising, and interactive and socially responsible media. CBS's businesses include CBS Television Network, The CW (a joint venture between CBS Corporation and Warner Bros. Entertainment), Showtime Networks, CBS Sports Network, Smithsonian Networks, Simon & Schuster, CBS Television Stations, CBS Radio, CBS Outdoor, CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS Interactive, CBS Consumer Products, CBS Home Entertainment, CBS Films and CBS EcoMedia.
- Leslie Moonves sold 250,000 shares on August 15. Leslie Moonves is president and chief executive officer of CBS Corporation.
- Louis Briskman sold 160,000 shares on August 15. Louis Briskman serves as the Executive Vice President and General Counsel of CBS Corporation.
The company reported the second-quarter financial results on August 2 with the following highlights:
|Net income||$427 million|
Leslie Moonves, President and Chief Executive Officer, CBS Corporation commented on August 2:
The good news is, there's so much more to come, and there are several important events just ahead. The U.S. presidential election will be a major factor in our second half results, and the London Olympics will give a considerable lift to our Outdoor business. And as we head into 2013, we will benefit from the Super Bowl, CBS's success in the upfront marketplace, as well as from a number of hit shows that will be sold into syndication. Plus, we are containing our costs and reducing our interest expense, and as a sign of the confidence we have in our future, we recently announced a significant increase in the amount of capital we are returning to our shareholders both through our ongoing dividend and accelerated share buyback program. For all of these reasons, we're confident 2012 will be a record year, and we will produce exceptional results in 2013 and beyond as well.
The stock has a $66.5 price target from the Point and Figure chart. The stock is currently trading at a forward P/E of 12.5. The stock has seen heavy insider selling since February 2012. I am not currently interested in shorting the stock.
5. Western Refining (WNR) is an independent refining and marketing company headquartered in El Paso, Texas. Western operates refineries in El Paso and Gallup, New Mexico. Western's asset portfolio also includes stand-alone refined products terminals in Albuquerque and Bloomfield, New Mexico, asphalt terminals in Albuquerque, El Paso, and Phoenix and Tucson, Arizona, retail service stations and convenience stores in Arizona, Colorado, New Mexico, and Texas, a fleet of crude oil and finished product truck transports, and wholesale petroleum products operations in Arizona, California, Colorado, Maryland, Nevada, New Mexico, Texas, and Virginia.
- Jeff Stevens sold 380,000 shares on August 16-17. Jeff Stevens serves as President and Chief Executive Officer of the company.
- Brian Hogan sold 10,000 shares on August 17. Brian Hogan serves as a director of the company.
The company reported the second-quarter financial results on August 2 with the following highlights:
|Net income||$239 million|
Third Quarter 2012 Guidance
El Paso Refinery
|Crude Throughput (bpd)||116,000-120,000|
|Total Throughput (bpd)||125,000-129,000|
|Operating Expenses ($/Bbl)||$4.15|
|Crude Throughput (bpd)||18,000-21,000|
|Total Throughput (bpd)||20,000-23,000|
|Operating Expenses ($/Bbl)||$8.50|
|Expense Interest||$18.2 million|
|Depreciation and Amortization||$23.0 million|
|2012 Full Year Capital Expenditures||$162.1 million|
The stock is trading at a forward P/E of 7.51. The stock has seen heavy insider selling since July 2011. The stock is trading well above its 200 day moving average. I am not currently interested in shorting the stock.