Analyzing Wednesday's Noteworthy Insider Trades

by: GuruFundPicks

We present here three noteworthy buys and eleven noteworthy sells from Wednesday's (March 14th, 2012) SEC Form 4 (insider trading) filings (ex-consumer & retail sectors that were covered in a separate article), as part of our daily and weekly coverage of insider trades. These were selected by a review of over 455 separate SEC Form 4 transactions filed by insiders on Wednesday. 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 the end of this article):

Western Digital Corp. (NASDAQ:WDC): WDC manufactures hard disk drives for the enterprise, desktop, mobile computing and consumer electronics markets. On Wednesday, three insiders filed SEC Forms 4 indicating that they sold 0.11 million shares for $4.4 million, the only sale in the past year. The largest seller was EVP James Welsh that exercised options to acquire 59,255 shares and sold those and an additional 6,524 shares for $2.6 million, ending with just under 50,000 shares (not including derivative holdings).

WDC just closed last week on its acquisition of Viviti Technologies Ltd, the former hard disk drive division of Hitachi, and in its latest Q4, it missed on earnings but strongly beat revenues and raised Q3 (March) guidance. Its shares are up strongly since the report, partly on the strength of the guidance, but partly also based on the improving fundamentals in the hard disk drive business, as evidenced by an outstanding Q4 report from its peer and chief domestic rival Seagate Technology (NASDAQ:STX). Both companies are benefiting from improved pricing for their products in the aftermath of the flooding in Thailand last year that wiped out much of the capacity. Currently, WDC shares trade at 4-5 forward P/E and 1.6 P/B, while earnings are projected to be up strong from $3.28 in 2011 to $8.71 in 2013 at an average annual growth rate of 63.0%. In comparison, rival STX trades at 3 forward P/E, while earnings are projected to rocket up at an 165.5% annual rate from $1.24 in 2011 to $6.24 in 2012 and $8.74 in 2013.

InvenSense Inc. (NYSE:INVN): INVN is a provider of micro-electro-mechanical systems gyroscopes for motion processing solutions in consumers electronics, including video game devices, handsets and tablet devices, digital still and video cameras, digital television and set-top box remote controls, 3D mice, portable navigation devices, and household consumer and industrial devices. On Wednesday, Chairman & CEO Steven Nasiri filed SEC Form 4 indicating that he sold 1.3 million shares for $19.3 million, ending with 8.1 million shares after the sale.

INVN shares have rallied strongly, more than doubling since its IPO in November of last year at $8. In the most recent Q4, the company beat analyst earnings (13c v/s 11c) and revenue estimates ($41 million v/s $39 million), and its shares currently trade at 9.4 P/B and 10.7 PSR (price-to-sales ratio) compared to averages of 1.3 and 4.4 for its peers in the miscellaneous electronic components group.

Concho Resources Inc. (NYSE:CXO): CXO is an independent oil & natural gas company, engaged in the acquisition, development and exploration of oil and natural gas in southeast NM and west TX. On Wednesday, two insiders filed SEC Forms 4 indicating that they sold 144,837 shares for $14.4 million. The largest seller was SVP Jack Harper, who acquired options and sold the resulting 127,317 shares for $12.7 million. This is in addition to the insider sale of 14,937 shares for $1.5 million that was reported on Tuesday. In comparison, insiders sold 0.31 million shares in the past year. CXO reported a mixed Q4 at the end of last month, missing analyst earnings estimates ($1.15 v/s $1.19) and beating revenue estimates ($478 million v/s $452 million). Its shares currently trade at 14-15 forward P/E and 3.4 P/B compared to averages of 17.4 and 5.3 for its peers in the U.S. oil & gas exploration & production group.

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

  • an $11.8 million sale by CEO John Wren at Omnicom Group (NYSE:OMC), that provides advertising, customer relationship management, public relations and communications services worldwide;
  • a $6.5 million sale by Vice Chairman Mark Grier at Prudential Financial Inc. (NYSE:PRU), that is one of the largest financial services institutions in the U.S., offering life insurance, annuities, mutual funds and retirement products in the U.S., Europe, Asia and Latin America;
  • a $2.1 million sale by two insiders, pursuant to 10b5-1 plans, at LinkedIn Corp. (LNKD), that operates an online professional network via its proprietary social networking platform that enables members to create, manage and share their professional identities online, build and engage with their professional network, access shared knowledge and insights, and find business opportunities;
  • a $1.8 million sale by EVP Fusen Chen at Novellus Systems Inc. (NASDAQ:NVLS-OLD), a manufacturer of thin dielectric and metal film deposition equipment, as well as equipment used in surface preparation and ultraviolet thermal processing systems;
  • a $1.7 million sale by CEO Mario Molina at Molina Healthcare Inc. (NYSE:MOH), a provider of managed healthcare services to 1.6 million members via government-sponsored programs for low-income families;
  • a $1.7 million sale by three insiders at real estate information marketplace Zillow Inc. (NASDAQ:Z), with 10,400 of the 55,592 shares sold under a 10b5-1 plan;
  • a $1.2 million sale by three insiders at Realpage Inc. (NASDAQ:RP), a provider of on-demand property management solutions for the rental housing industry in North America; and
  • a $1.2 million sale by two insiders, pursuant to 10b5-1 plans, at electric and gas utility Wisconsin Energy Corp. (NYSE:WEC), that provides services in WI and MI.

Furthermore, insiders also reported noteworthy buys on Wednesday in:

  • Armour Residential REIT (NYSE:ARR), a REIT primarily investing in hybrid adjustable-rate, adjustable-rate and fixed-rate residential mortgage-backed securities, in which two insiders purchased 85,000 shares for $0.56 million, compared to 0.29 million shares purchased by ARR insiders in the past year;
  • ION Geophysical Corp. (NYSE:IO), a provider of seismic products and services to the oil and natural gas industry worldwide, in which Director James Lapeyre purchased 40,000 shares for $0.25 million, in comparison to 0.23 million shares purchased by IO insiders in the past year; and
  • Rare Element Resources (NYSEMKT:REE), a Canadian company engaged in the acquisition and exploration of gold and rare-earth elements in North America, in which COO Jaye Pickarts purchased 4,100 shares for $24,760, in comparison to 54,323 shares purchased by REE insiders in the past year.

General Discussion on Insider Trading

The reports in this series identify last week's insider trades of noteworthy significance by sector or industry group, either by virtue of their timing, their size, the number of insiders buying or selling, based on who is buying or selling, or by the trend of their buys and sales over the long-term. The rest of the series by sector and by week can be accessed from our author page.

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.

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.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.