Insider Weekends – May 20, 2011

Welcome to edition fifty of Insider Weekends. Insider buying increased with insiders purchasing $42.03 million of their stock last week when compared to $30.07 million in the week prior. Selling also increased with insiders selling $2.35 billion worth of stock compared to $2 billion in the week prior.

Sell/Buy Ratio:

The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week dropped to 55.8. In other words, insiders sold nearly 56 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the week prior when the ratio stood at 66.8. We are calculating an adjusted ratio by removing transactions by funds and companies and trying as best as possible only to retain information about insiders and 10% owners who are not funds or companies.

Note: As mentioned in the first post in this series Introduction to Insider Weekends, certain industries have their preferred metrics such as same store sales for retailers, funds from operations (FFO) for REITs and revenue per available room (RevPAR) for hotels that provide a better basis for comparison than simple valuation metrics. However metrics like Price/Earnings, Price/Sales and Enterprise Value/EBITDA included below should provide a good starting point for analyzing the majority of stocks.

Notable Insider Buys:

1. STEC, Inc. (STEC): $16.42

Chief Executive Officer Manouch Moshayedi acquired 238,019 shares of this solid state drives and flash memory manufacturer, paying $14.68 per share for a total amount of $3.5 million. These shares were purchased indirectly by a trust.

STEC saw a tremendous run-up in its stock price during the first three quarters of 2009 after rapid acceleration in its revenue and net income. Sales had increased sharply due to demand for its drives in enterprise storage products from its biggest customer EMC. However in November 2009 the company indicated that EMC had excess inventory of SSDs and was scaling back its orders. The stock immediately lost more than 75% of its value, dropping from over $40 to around $10. It was interesting to watch a stock go from a high growth high valuation stock to a potential value stock in a matter of months. Revenue did decline in 2010 but appears to have picked up once again in the second half of the year and the company once again saw sequential quarter growth in Q1 2011.

The market appears to like this insider purchase as the stock posted a gain of 11.5% on Friday.

You can view the list of recent insider transactions for STEC, Inc. here.

2. Akamai Technologies Inc. (AKAM): $34.2

Co-founder and Chief Scientist Thomson Leighton acquired 50,000 shares of this internet content accelerator, paying $32.66 per share for a total amount of $1.6 million. These shares were purchased indirectly by a trust.

Yet another well known name for accelerating the delivery of internet content, the stock has been under pressure recently and now trades close to its 52 week low. The stock dropped in the fourth quarter of 2010 after Netflix decided to start using competitor Level 3 instead of Akamai. Q1 2011 revenue and earnings were both up on a year-over-year basis but dropped on a sequential quarter basis. Second quarter revenue estimates of $270 to $280 million fell short of analyst estimates of $280. 7 million. Akamai still appears to be a good business with 17% operating margins and a very solid balance sheet with near term concerns about its growth rate.

You can view the list of recent insider transactions for Akamai Technologies Inc. here.

3. Getty Realty Corp. (GTY): $25.27

Director Leo Liebowitz acquired 50,000 shares of this gas and convenience stores REIT, paying $24.48 per share for a total amount of $1.2 million. Mr. Liebowitz increased his stake by 2.52% to 2,034,606 shares with this purchase.

Mr. Liebowitz is the founder and Chairman of Getty Realty and served as its CEO from 1985 through May 2010. The 7.6% yield for a non-mortgage REIT looks very attractive. Several insiders have exercised options over the last few months without turning around and selling them immediately. This is a company worth exploring further.

You can view the list of recent insider transactions for Getty Realty Corp. here.

4. Avnet Inc. (AVT): $36.51

Director James A. Lawrence acquired 28,000 shares of this electronic components and technology company, paying $35.99 per share for a total amount of $1.01 million. Mr. Lawrence increased his stake by 1176.47% to 30,380 shares with this purchase.

Mr. Lawrence was reappointed to the board of directors last week. He previously served on the board of Avnet from 1998 to 2008 before relocating to Europe. Since new directors generally tend to buy stock, I would not read much into this purchase. All other recent insider transactions were direct or options related sales.

You can view the list of recent insider transactions for Avnet Inc. here.

5. Sara Lee Corp. (SLE): $19.6

Executive Chairman Jan Bennink acquired 51,400 shares of this processed & packaged goods company, paying $19.42 per share for a total amount of $997,946. Mr. Bennink increased his stake by 18.32% to 331,935 shares with this purchase.

Sara Lee has made our list several times in the past but mostly on account of huge insider sales. It did make our list of buys in March following a $2.18 million purchase by Mr. Bennink.

You can view the list of recent insider transactions for Sara Lee Corp. here.

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Microsoft Corporation (MSFT): $24.49

Founder and director Bill Gates sold 10 million shares of Microsoft for $24.92, generating $249.2 million from the sale.

You can view the list of recent insider transactions for Microsoft Corporation here.

2. Perrigo Co. (PRGO): $85.5

Director Moshe Arkin sold 287,557 shares of this pharmaceutical company for $86.83, generating $24.9 million from the sale. These shares were sold indirectly by Nichsei Arkin Ltd.

You can view the list of recent insider transactions for Perrigo Co. here.

3. CARBO Ceramics Inc. (CRR): $150.94

Director William C. Morris sold 97,100 shares of this Oil & Gas Equipment & Services company for $152.74, generating $14.8 million from the sale. 46,410 of these shares were sold indirectly by certain charitable foundations of which Mr. Morris is an officer.

You can view the list of recent insider transactions for CARBO Ceramics Inc. here.

4. Tutor Perini Corporation (TPC): $19.86

Chairman & CEO Ronald N. Tutor sold 650,000 shares of this construction services company for $21.18, generating $13.7 million from the sale. These shares were sold indirectly through a trust.

You can view the list of recent insider transactions for Tutor Perini Corporation here.

5. WebMD Health Corp. (WBMD): $49.19

Shares of this health information services provider were sold by 4 insiders:

• Director Herman Sarkowsky sold 57,534 shares for $49.69, generating $2.9 million from the sale. 1,500 of these shares were given as gifts to family members and 9,000 shares were sold indirectly By SPF Holdings.
• EVP and CTO William Edward Pence sold 39,493 shares for $49.39, generating $1.9 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• Director Kevin M. Cameron sold 30,000 shares for $50.35, generating $1.5 millionfrom the sale.
• Director Joseph E. Smith sold 8,888 shares for $50.37, generating $447,689 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.

You can view the list of recent insider transactions for WebMD Health Corp. here.

You can view the full list of sales from this Insider Sales page.