Analyzing Noteworthy Insider Buys And Sells On Friday

by: GuruFundPicks

We present here three noteworthy buys and eight noteworthy sells from Friday's SEC Form 4 insider trading filings (ex- the healthcare sector that was covered separately in another article), as part of our daily and weekly coverage of insider trades. These were selected by a review of over 430 separate transactions in over 225 different companies filed by insiders on Friday.

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: Inc. (NYSE:CRM): CRM provides customer and collaboration relationship management software and services to various businesses and industries worldwide. On Friday, five insiders filed SEC Forms 4 indicating that they sold 70,033 shares for $10.1 million, with most of the shares sold acquired by the exercise of options, and an overwhelming majority of the sales conducted pursuant to 10b5-1 plans. The largest sale was by President Hilarie Koplow, who exercised options and sold the resulting 55,940 shares pursuant to a 10b5-1 plan. In comparison, insiders sold 0.49 million shares in the past year.

CRM just released its Q4 last week on Thursday after the market-close, with earnings (43c v/s 40c) and revenues ($632 million v/s $624 million) beating estimates, and guiding revenues above consensus. The stock was up strongly on Friday, up almost 9%, partly based on the Q4 outperformance and partly also on a strong IPO from peer social media engagement and marketing software company Bazaarvoice Inc. (NASDAQ:BV) that went public on Friday. The company was up almost 40% from its offer price of $12. Shares of CRM currently trade at 65-66 forward P/E and 12.0 P/B compared to averages of 36.8 and 4.1 for its peers in the computer software group, while earnings are projected to rise at a 24.8% annual rate from $1.40 in 2012 to $2.18 in 2014.

Dell Inc. (DELL): Dell provides desktop PCs, mobility products, servers and networking products to individuals, businesses and governments. On Friday, President John Swainson filed SEC Form 4 indicating that he purchased 100,000 shares for $1.72 million, a new position for him in the company. Insider buying is rare at Dell-- in fact, the last time insiders bought was in March of last year, when Chairman & CEO Michael Dell purchased 10.44 million shares.

Dell also just reported its earnings last week, on Tuesday after the market-close, missing earnings (51c v/s 52c) and guiding FY13 revenues below and EPS above consensus. A number of brokers downgraded the stock on the earnings miss and weak guidance, and its shares are currently off about 5% after the report, trading at 8 forward P/E and 3.5 P/B compared to averages of 8.4 and 4.2 for its peers in the micro-computer group. Earnings are projected to rise modestly from $2.13 in 2012 to $2.18 in 2014.

The retreat comes after a sharp rally that lifted shares almost 25% YTD (or over $6 billion in market-cap). It remains to be seen if the optimism that drove shares higher, based on the company's planned diversification outside its core PC business into higher margin solutions and services areas, will lead to a sustainable expansion of its baseline P/E multiple that has traditionally traded at a discount to its peers.

Centurylink (NYSE:CTL): CTL is an integrated communications company that provides a range of communications services, including voice, Internet, data, and video services in the continental U.S. On Friday, CEO of Savvis Ops James Ousley filed SEC Form 4 indicating that he exercised options to acquire 246,972 shares and sold 163,478 of the resulting shares for $6.4 million, ending with 0.67 million shares after the sale (not including derivative holdings). In comparison, insiders reported selling 0.74 million shares in the past year. CTL trades at 16-17 forward P/E and 1.2 P/B compared to averages of 25.9 and 1.1 for its peers in the national wireless group.

Windstream Corp. (NASDAQ: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. On Friday, SVP Robert Clancy filed SEC Form 4 indicating that he sold 20,957 shares for $0.25 million, ending with 67,095 shares in direct and 45,037 shares in indirect holdings after the sale. Insider selling is rare at WIN, with the last time insiders sold being in September of 2010, almost 18 months ago.

WIN reported its earnings just last week, on Wednesday morning, with earnings missing estimates (19c v/s 20c), and it guiding FY revenues in-line. The stock is off about 3% since the report, and it currently trades at 16 forward P/E and 7.6 P/B compared to averages of 33.0 and 3.9 for its peers in the regional wireless group.

Google Inc. (NASDAQ:GOOG): GOOG is the Internet's premier search engine. On Friday, Executive Chairman of the Board ,Eric Schmidt, filed SEC Form 4. This indicated that he sold 200,000 shares for $120.8 million, pursuant to a 10b5-1 plan. GOOG currently trades within striking distance of its all-time highs, and at 12-13 forward P/E and 3.3 P/B, a discount compared to averages of 17 and 1.6 for its closes peer Yahoo! Inc. (YHOO), while earnings are projected to grow at a stellar (for a company this size) 17.8% annual rate from $36.06 in 2011 to $50.03 in 2013 compared to the sub-10% annual earnings growth rate for YHOO.

Furthermore, the current P/E also represents a steep discount to its growth rate. We believe that the stock is likely to dip back to the mid- to high- $500s, and we would take advantage of that and buy on dips. The stock has been an excellent long-term performer, up almost six-fold since its IPO in 2004. It is likely that it will continue outperforming the market going forward.

On top of these, some additional large insider sales reported on Friday included:

  • a $37.8 million sale by four insiders, pursuant to 10b5-1 plans, at Intuit Inc. (NASDAQ:INTU), a provider of business and financial management software and services for businesses, accounting professionals and consumers in the U.S., Canada, India, Singapore and the U.K.;
  • a $4.3 million sale by SVP Jon Iwata at International Business Machines (NYSE:IBM);
  • a $1.2 million sale by VP Robert Reay at Linear Technology Corp. (NASDAQ:LLTC), a manufacturer of standard high-performance integrated circuits for industrial, space and military, automotive, telecom, computer and consumer markets; and
  • a $1.0 million sale by Director William Davis at Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR), a distributor of approximately 200 whole bean and ground coffee selections, cocoa, teas and coffees, and probably most famous for its patented single-cup coffee and tea brewing systems for offices and homes sold under the Keurig brand names;

Furthermore, insiders also reported noteworthy buys on Friday in:

  • Realpage Inc. (NASDAQ:RP), a provider of on-demand property management solutions for the rental housing industry in North America, in which Director Scott Ingraham purchased 10,000 shares for $0.2 million; and
  • MEMC Electronic Materials Inc. (WFR), engaged in the development, manufacture and sale of silicon wafers for the semiconductor industry worldwide, in which Director James Williams purchased 60,000 shares for $0.39 million;

Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and 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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