Insider Weekends – September 16, 2011

Welcome to edition sixty seven of Insider Weekends. Insider buying dropped with insiders purchasing $47.5 million of their stock last week when compared to $72.5 million in the week prior. Selling on the other hand increased with insiders selling $663.3 million worth of stock compared to $409.6 million 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 went up to 13.96. In other words, insiders sold almost fourteen times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the week prior when the ratio stood at 5.7. 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. Hess Corporation (HES): $61.61

Chairman of the Board and CEO John B. Hess acquired 174,950 shares of this integrated energy company, paying $57.17 per share for a total amount of $10 million. Mr. Hess increased his stake by 59.23% to 470,334 shares with this purchase.

This is an interesting purchase because Hess used to show up on my radar because of the large insider sales by Mr. Hess when the stock was trading above $80 in February and March of this year as you can see from this page. The stock has been in decline since the last week of July when it reported second quarter results that were strong but still missed analyst estimated.

Earnings in the second quarter rose 61.9% to $1.78 per share on $9.81 billion in revenue, which was up 26.8% year-over-year. The company trades close to book value and has an extremely low EV/EBITDA of 3.44. Unfortunately CapEx is unusually high, generating very little free cash flow. This filing came out during regular trading hours and the stock buoyed up about 3%. We are seeing several insider purchases in the energy sector across exploration, drilling and services companies.

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

2. Continental Resources Inc. (CLR): $56.05

CEO & Chairman Harold Hamm acquired 100,000 shares of this oil and gas exploration company, paying $50.88 per share for a total amount of $5.09 million. Mr. Hamm increased his stake by 0.08% to 123,100,708 shares with this purchase.

While this purchase is large in absolute dollars, given Mr. Hamm holds more than 123 million shares, the size of his purchase relative to his portfolio is small.

Competitor EOG Resources (EOG) was covered in a very interesting Fortune article called EOG ‘s Big Gamble on Shale Oil. Continental Resources is growing faster than EOG and sports better operating margins as well.

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

3. Seacor Holdings Inc. (CKH): $91.93

Chief Executive Officer Oivind Lorentzen acquired 26,000 shares of this offshore oil services and marine transportation company, paying $85.30 per share for a total amount of $2.2 million. Mr. Lorentzen increased his stake by 35.25% to 99,750 shares with this purchase. 10,000 of these shares were purchased in trust for Mr. Lorentzen’s five children.

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

4. Hyatt Hotels Corporation (H): $35.56

Shares of this hotel chain were acquired by 2 insiders:

• President & CEO Mark Samuel Hoplamazian acquired 45,000 shares, paying $31.84 per share for a total amount of $1.4 million. Mr. Hoplamazian increased his stake by 26.13% to 217,237 shares with this purchase.
• Director Byron D. Trott acquired 20,000 shares, paying $32.65 per share for a total amount of $653,000. Mr. Trott increased his stake by 381.53% to 25,242 shares with this purchase.

Several insiders have exercised options of Hyatt without turning around and selling them immediately but these are the first two direct purchases by insiders this year. This is a sizable purchase considering Mr. Hoplamazian’s base salary in 2010 was just under $1 million. Total compensation for 2010 including stock, options and other incentives however amounted to $6.04 million. The stock was up nearly 5% on Thursday in response to the CEO purchase.

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

5. PG & E Corp. (PCG): $42.55

Chairman, CEO, and President Anthony F. Earley Jr. acquired 36,600 shares of this electric and natural gas utility, paying $40.80 per share for a total amount of $1.5 million. Mr. Earley increased his stake by 45.01% to 117,915 shares with this purchase.

It is a little surprising to see such a large insider purchase from this California based utility that I send a check to every month. The company has been under pressure from regulators since the San Bruno natural gas explotion a year ago. The company sports a dividend yield of 4.3% with a payout ratio of 67%. While this is more than double the average yield of the S&P 500, it is still below the average 5.5% yield of the utilities sector.

You can view the list of recent insider transactions for PG & E Corp. here.

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

Notable Insider Sales:

1. Intrepid Potash, Inc. (IPI): $34.14

Shares of this fertilizer company were sold by 2 insiders:

• Executive Chairman of Board Robert P. Jornayvaz sold 250,000 shares for $34.76, generating $8.7 million from the sale. These shares were sold indirectly by Intrepid Production Corporation of which the reporting person is the sole stockholder, sole director and President.
• Director Hugh E. Harvey Jr. sold 250,000 shares for $34.76, generating $8.7 million from the sale. These shares were sold indirectly by Harvey Operating and Production Company.

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

2. Arch Capital Group Ltd. (ACGL): $33.65

Shares of this insurance company were sold by 3 insiders:

• Director John M. Pasquesi sold 436,757 shares for $33.06, generating $14.4 million from the sale.
• Reinsurance. Group Chairman & CEO Marc Grandisson sold 52,500 shares for $33.29, generating $1.7 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• Director Robert F. Works sold 10,000 shares for $33.38, generating $333,805 from the sale.

You can view the list of recent insider transactions for Arch Capital Group Ltd. here.

3. MetroPCS Communications, Inc. (PCS): $10.1

Director Arthur C. Patterson sold 1,250,000 shares of this wireless telecommunications company for $10.41, generating $13.01 million from the sale. 579,620 of these shares were sold indirectly by ACP Family Partnership L.P., 406,400 of these shares were sold indirectly by Ellmore C. Patterson Partners L.P. and 169,650 of these shares were sold indirectly by ACP 2007 Accel-7 GRAT U/A/D.

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

4. Questcor Pharmaceuticals, Inc. (QCOR): $27.27

Shares of this pharmaceutical company were sold by 2 insiders:

• Director Mitchell J. Blutt MD sold 370,000 shares for $26.13, generating $9.7 million from the sale. These shares were sold indirectly by Consonance Capital. Dr. Mitchell Blutt is the CEO of Consonance Capital.
• President & CEO Don M. Bailey sold 30,000 shares for $26.77, generating $803,035 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 Questcor Pharmaceuticals, Inc. here.

5. Hansen Natural Corporation (HANS): $92.11

Shares of this beverage company were sold by 3 insiders:

• Chairman and CEO Rodney C. Sacks sold 100,000 shares for $88.47, generating $8.8 million from the sale. These shares were sold indirectly By Hilrod Holdings, L.P.
• Director Norman Epstein sold 2,167 shares for $86.22, generating $186,839 from the sale.

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

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