Analyzing Noteworthy Insider Trades On Tuesday

by: GuruFundPicks

We present here three noteworthy insider buys and nine noteworthy insider sells (ex-basic materials, energy, healthcare, and technology sectors that are covered in a prior article) from Tuesday's (May 1st, 2012) over 320 separate SEC Form 4 (insider trading) filings, 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.

Rock-Tenn Co. (RKT): RKT is a leading manufacturers of containerboard, recycled paperboard, bleached paperboard, packaging products, and merchandising displays in the U.S., Canada, Mexico, Chile, Argentina, Puerto Rico, and China. On Tuesday, CFO Steven Voorhees filed SEC Form 4 indicating that he exercised options and sold the resulting 40,000 shares for $2.5 million, ending with 0.18 million shares after the sale. In comparison, insiders sold only an additional 7,000 shares in the past year.

RKT reported its Q2 (March) quarter last week, on Wednesday, reporting revenues in-line and beating analyst earnings estimates (97c v/s 87c). Its shares had taken a dip earlier in the middle of March, when it announced downside guidance to its Q2, projecting EPS at 85c-90c v/s then analyst estimates of $1.16. With last week's beat of those numbers, it can be reasonably expected that shares will recover some of the last ground since mid-March, when shares traded in the low-$70s, well above current prices in the $61 range. RKT shares trade at 8-9 forward P/E and 1.3 P/B compared to averages of 12.0 and 1.8 for its peers in the paper & related products group.

Coca-Cola Co. (NYSE:KO): KO manufactures non-alcoholic beverage concentrates and syrups sold to bottlers and fountain wholesalers. On Tuesday, three insiders filed SEC Forms 4, with two of them indicating that they purchased a total of 270,507 shares for $20.8 million, and the third insider (EVP Alexander Cummings) indicating that he exercised options and sold the resulting 85,000 shares for $6.5 million, pursuant to a 10b5-1 plan. Most of the buying was by Director Barry Diller, who purchased 264,000 shares, ending with 2.0 million shares and an additional 37.0 million "Phantom Stock Units" that is economically equivalent to one share of common stock. In comparison, insiders purchased 0.38 million shares, and they sold 1.1 million shares, in the past year.

KO shares recently hit 13-year highs, up about 10% YTD, and trading at a premium 17.2 forward P/E compared to the 16.5 average for the soft beverage group, but more importantly perhaps they also trade at a premium to arch-rival PepsiCo Inc. (NYSE:PEP), whose shares trade at a more discounted 15.1 forward P/E, while earnings growth at KO is projected at an 8.1% annual rate over the next two years from $3.84 in 2011 to $4.49 in 2013, versus the 0.5% earnings growth rate projected at arch-rival PEP. Furthermore, KO has an attractive 2.7% annual dividend yield compared to the 1.1% average for its peers in the soft beverages group, but less than the 3.1% at arch-rival PEP.

On top of these, additional large insider sales on Tuesday (ex-basic materials, energy, healthcare and technology sectors) included:

  • a $7.3 million sale by COO Bennett Morgan at Polaris Industries Inc. (NYSE:PII), that manufactures all-terrain recreational and utility vehicles, snowmobiles, and replacement parts and related accessories;
  • a $5.3 million sale by President Joanne Bauer at Kimberly-Clark Corp. (NYSE:KMB), that manufactures disposable diapers, baby wipes, facial and bathroom tissue, paper towels and various commercial hygiene products;
  • a $4.2 million sale by two insiders at aerospace/defense company Transdigm Group Inc. (NYSE:TDG);
  • a $3.9 million sale by Sr. Vice Chairman Joseph Guyaux at PNC Financial Services Group (NYSE:PNC), that operates as a diversified financial services company, offering retail banking, corporate and institutional banking, asset management and residential mortgage banking services, via 2,470 branches in PA, NJ, DE, Washington D.C., and 10 other states;
  • a $3.7 million sale by Director Robert Salerno at Avis Budget Group Inc. (NASDAQ:CAR), a leading provider of car and truck rentals, and ancillary services to businesses and consumers worldwide;
  • a $3.0 million sale by two insiders at Fortune Brands Home & Security Inc. (NYSE:FBHS), that provides home and security products in the U.S. for use in residential home repair, remodeling, new construction, and security and storage applications;
  • a $2.6 million sale by five insiders at famed American motorcycle manufacturer Harley-Davidson Inc. (NYSE:HOG); and
  • a $1.8 million sale by Director George Battle at online travel services booking company Expedia Inc. (NASDAQ:EXPE).

Furthermore, insiders also reported noteworthy buys on Tuesday (again, ex-basic materials, energy, healthcare and technology sectors) in:

  • Popular Inc. (NASDAQ:BPOP), that is a holding company for Popular de Puerto Rico, that operates 194 branches in Puerto Rico, the Caribbean and the U.S., in which Director William Teuber purchased 100,000 shares for $0.18 million, compared to 0.54 million shares purchased by insiders in the past two years; and
  • CME Group Inc. (NASDAQ:CME), that is the parent company of the Chicago Mercantile Exchange, and operates the CME, CBOT, NYMEX and COMEX futures exchanges worldwide, in which Director Larry Gerdes purchased 2,000 shares for $0.55 million, in comparison to 2,710 shares purchased by insiders in the past year.

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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