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 22. I chose the top five companies with insider selling in dollar terms. Here is a look at the five stocks:
1. Hi-Crush Partners (HCLP) is a pure play, low-cost, domestic producer of premium monocrystalline sand, a specialized mineral that is used as a "proppant" (frac sand) to enhance the recovery rates of hydrocarbons from oil and natural gas wells. The company's reserves consist of "Northern White" sand, a resource existing predominately in Wisconsin and limited portions of the upper Midwest region of the United States, which is highly valued as a preferred proppant because it exceeds all American Petroleum Institute (API) specifications.
The company's first six months ending June 30 financial results include:
|Net income||$22.3 million|
The cash position does not include the $179.5 million raised in the Initial Public Offering on August 15.
The North American proppant market, including raw frac sand, ceramic and resin-coated proppants, was approximately 22 million tons in 2011. Industry estimates for 2011 indicate that the raw frac sand market represented approximately 17 million tons, or 77.2% of the total proppant market by weight. Over the past five years, proppant demand by weight has increased by 28.0% annually, and the market is projected to continue growing by 7.2% per year through 2016, representing an increase of approximately nine million tons in annual proppant demand over that time period. The total North American proppant market size in dollars was $3.7 billion in 2011 and is projected to grow 10.5% annually through 2016, according to The Freedonia Group. The following chart illustrates historical and forecasted proppant demand for certain years from 2001 to 2021.
The stock has traded only since August 16. The company did report very good earnings for the first half of the year and the outlook is promising as well. I am not interested in shorting the stock currently.
2. HomeAway (AWAY) is the worldwide leader in online vacation rentals, with sites representing approximately 735,000 paid listings of vacation rental homes throughout 168 countries. Through HomeAway, owners and property managers offer an extensive selection of vacation homes that provide travelers with memorable experiences and benefits, including more room to relax and added privacy, for less than the cost of traditional hotel accommodations. The company also makes it easy for vacation rental owners and property managers to advertise their properties and manage bookings online. The HomeAway portfolio includes the leading vacation rental websites HomeAway.com, VRBO.com and VacationRentals.com in the United States; HomeAway.co.uk and OwnersDirect.co.uk in the United Kingdom; HomeAway.de in Germany; Abritel.fr and Homelidays.com in France; HomeAway.es and Toprural.es in Spain; AlugueTemporada.com.br in Brazil; and HomeAway.com.au in Australia.
In addition, HomeAway operates BedandBreakfast.com, the most comprehensive global site for finding bed-and-breakfast properties, providing travelers with another source for unique lodging alternatives to chain hotels.
Redpoint Ventures II sold 267,468 shares of the company on August 20-22. Redpoint Ventures II is a 10% owner of the company.
The company reported the second-quarter financial results on July 25 with the following highlights:
|Net income||$2.9 million|
HomeAway management currently expects to achieve the following results for its third quarter ending September 30, 2012, as follows:
Third Quarter 2012
- Total revenue is expected to be in the range of $72.8 to $73.6 million.
- Adjusted EBITDA is expected to be in the range of $22.6 to $22.9 million.
For the year ending December 31, 2012, HomeAway management is adjusting its outlook due to FX as follows:
Full Year 2012
- Total revenue is expected to be in the range of $278.6 to $280.6 million.
- Adjusted EBITDA is expected to be in the range of $79.4 to $80.4 million.
The stock is currently trading at a forward P/E of 37.74. The stock has seen steady insider selling since July 2011. The stock has met its bearish price target of $21 from the Point and Figure chart. I am not currently interested in shorting the stock.
3. Saks Incorporated (SKS) currently operates 45 Saks Fifth Avenue stores, 63 Saks Fifth Avenue OFF 5TH stores, and saks.com. Saks Fifth Avenue is proud to be named a J.D. Power and Associates 2012 Customer Service Champion and is only one of 50 U.S. companies so named.
Inmobiliaria Carso S A De C V sold 1,520,000 shares on August 20-21. Inmobiliaria Carso S A De C V is a 10% owner of the company according to SEC filings.
The company reported the second-quarter financial results on August 14 with the following highlights:
|Net loss||$12.3 million|
The company's assumptions for the balance of 2012 are outlined below:
- Comparable store sales growth in the mid-single digit range for the second half of the fiscal year.
- Comparable store inventory levels are expected to be up in the mid-single digit range throughout the balance of the year.
- Based upon current inventory levels and composition and the company's promotional calendar and permanent markdown cadence, the company expects its year-over-year gross margin rate to increase approximately 25 to 50 basis points in the second half of the fiscal year. Management expects the year-over-year improvement will be concentrated in the fourth quarter, with the third quarter year-over-year gross margin rate expected to be relatively flat.
- As a percent of sales on a year-over-year basis, the company expects approximately 50 to 75 basis points of SG&A expense leverage in the second half of the fiscal year, with the leverage concentrated in the fourth quarter. SG&A dollar increases primarily are expected to arise from incremental variable costs associated with planned sales growth (primarily sales associates' commissions) and investment spending to support the company's omni-channel initiatives and Project Evolution.
- Other Operating Expenses (rentals, depreciation, and taxes other than income taxes) are expected to total $165 million to $167 million for the second half of 2012. Depreciation and amortization, which is included in the above amounts, should total approximately $125 million for the full fiscal year.
- Based on existing debt arrangements, maturities, and interest rates, interest expense should total approximately $19 million for the second half of 2012.
- An effective tax rate of approximately 40.0% to 41.0% for the year.
- A basic common share count of approximately 150 million and a diluted common share count of approximately 194 million for the full fiscal year. Share counts used in earnings per share calculations are expected to fluctuate by quarter during the year based on income levels, convertible debt, and equity awards.
- Net capital expenditures of approximately $110 million to $120 million for the full year.
The stock has met its bullish price objective of $12.25 from the Point and Figure chart. The stock is trading at a forward P/E ratio of 21.09. The stock has seen steady insider selling since October 2011. I have a neutral bias for the stock currently.
4. Allegiant Travel Company (ALGT) is focused on linking travelers in small cities to world-class leisure destinations. Through its subsidiary, Allegiant Air, the company operates a low-cost, high-efficiency, all-jet passenger airline, and offers other travel-related products such as hotel rooms, rental cars, and attraction tickets through its website, allegiant.com. The company was ranked ninth in the 2011 Forbes' Best Small Companies. Allegiant was also recently named one of FORTUNE magazine's "100 Fastest-Growing Companies" for the second consecutive year.
The company reported the second-quarter financial results on August 1 with the following highlights:
|Net income||$25.2 million|
The stock has a bearish price target of $61 from the Point and Figure chart. The stock is trading at a forward P/E of 12.14. The stock has seen steady insider selling since June 2010. The company has been profitable last 38 quarters. There is an opportunity for a small short position with a target at $61. I would place a stop loss at $75.
5. Tangoe (TNGO) is a leading global provider of communications lifecycle management (CLM) software and services to a wide range of global enterprises, including large and medium-sized businesses and other organizations. CLM encompasses the entire lifecycle of an enterprise's communications assets and services, including planning and sourcing, procurement and provisioning, inventory and usage management, mobile device management, invoice processing, expense allocation and accounting and asset decommissioning and disposal. Tangoe's communications management platform is an on-demand suite of software designed to manage and optimize the complex processes and expenses associated with this lifecycle for both fixed and mobile communications assets and services. Tangoe's customers can also manage their communications assets and services by engaging Tangoe's client service group.
- Gary Golding sold 137,148 shares on August 20-22. Gary Golding serves as a director of the company.
- Richard Pontin sold 71,300 shares on August 20-21. Richard Pontin serves as a director of the company.
- Jackie Kimzey sold 36,910 shares on August 20. Jackie Kimzey serves as a director of the company.
- Charles Gamble sold 6,000 shares on August 21-22. Charles Gamble is a founder and Senior Vice President of Customer Account Management.
The company reported the second-quarter financial results on August 8 with the following highlights:
|Net income||$0.3 million|
As of August 8, 2012, Tangoe is providing guidance for its third quarter and raising its full year 2012 guidance both including and excluding the expected positive financial impact from the acquisition of Symphony Teleca's TEM Business:
- Third Quarter 2012 Guidance: Total revenue is expected to be in the range of $39.2 million to $39.7 million. Adjusted EBITDA is expected to be in the range of $5.6 million to $5.8 million. Non-GAAP net income per share is expected to be approximately $0.12 based on approximately 41.4 million weighted-average diluted shares outstanding.
- Full Year 2012 Guidance: Total revenue is expected to be in the range of $151.0 million to $152.5 million. Adjusted EBITDA is expected to be in the range of $22.0 million to $22.4 million. Non-GAAP net income per share is expected to be in the range of $0.45 to $0.46 based on approximately 40.5 million weighted-average diluted shares outstanding.
The stock has a bearish price objective of $15 from the Point and Figure chart. The stock is trading at a forward P/E of 32.02. The stock has seen steady insider selling since August 2011. I believe there is an opportunity for a short entry with a target at $15 and a stop loss at $23.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.