Insider Weekends – December 16, 2011

Welcome to edition eighty of Insider Weekends. Insider buying increased with insiders purchasing $49.7 million of their stock last week compared to $20.6 million in the week prior. Selling also increased with insiders selling $951.5 million worth of stock last week compared to $926.4 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 dropped to 19.1. In other words, insiders sold more than 19 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the week prior when the ratio stood at 44.9.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. Furiex Pharmaceuticals, Inc. (FURX): $16.79

Director Fredric N. Eshelman acquired 114,667 shares of this drug development collaboration company, paying $16.95 per share for a total amount of $1.9 million. Mr. Eshelman increased his stake by 6.21% to 1,960,291 shares with this purchase.

Insiders of Furiex Pharmaceuticals have been very active since early November with 5 different insiders including the CFO picking up shares. The largest of these purchases have been by Dr. Eshelman, who has picked up 592,008 shares for nearly $10 million. Dr. Eshelman is Furiex’s founding chairman. We wrote the following about Furiex last week,

“The company has $54.81 million in net cash on its balance sheet representing $5.55 per share in cash. However this cash position is likely to deplete in about 6 quarters based on the current cash burn rate of $10.89 million a quarter.

Like most early stage drug development companies, Furiex has very high R&D expenses and very little revenue, leading to a string of losses. One could speculate that insiders are buying because one or more of the three drugs the company currently has under development are showing promise. The company could also receive milestone payments from drug company Takeda Pharmaceutical if its orally ingested diabetes drug Nesina receives FDA approval in early 2012. This drug received regulatory approval in Japan in the second quarter of 2010. I generally stay away from early stage drug development companies and will pass on Furiex despite the cluster of insider purchases.”

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

2. United Therapeutics Corporation (UTHR): $43.24

CEO Martine A. Rothblatt acquired 38,522 shares of this biotech company, paying $41.98 per share for a total amount of $1.6 million. These shares were purchased indirectly through various trusts.

This week feels like Deja vu as two of the top three stocks from last week also made the cut this week. We wrote favorably about United Therapeutics last week and the insider purchases by the CEO have continued. Here is what we wrote about the company, “It is good to finally come across a healthcare company with insider buying that is trading at a reasonable valuation (7 times EBITDA), has a great balance sheet with $377 million in net cash, great profit margins of 24% and a growing top line. The company saw its stock drop sharply in August following a disappointing trial of its experimental lung-disorder drug. The company held a special call to discuss this development and to reiterate that even without this drug, the company is maintaining its revenue guidance of $750 million, $875 million and $1 billion for 2011, 2012 and 2013, respectively, give or take 5%.”

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

3. Kennedy-Wilson Holdings, Inc. (KW): $10.77

Shares of this real estate investment and services company were acquired by 2 insiders:

• Director Stanley R. Zax acquired 75,000 shares, paying $10.62 per share for a total amount of $796,294. Mr. Zax increased his stake by 300.00% to 100,000 shares with this purchase.
• Chief Executive Officer William J. Mcmorrow acquired 10,000 shares, paying $10.83 per share for a total amount of $108,328. Mr. Mcmorrow increased his stake by 1.86% to 546,595 shares with this purchase.

Kennedy-Wilson acquires real estate properties as well as provides real estate related services like property management and construction management. The company has over $12 billion in assets under management spread out over the United States, Europe and Japan. One other director picked up 8,400 shares in June but most other transactions this year have been option exercises or sales as you can see from this page.

You can view the list of recent insider transactions for Kennedy-Wilson Holdings, Inc. here.

4. NII Holdings Inc. (NIHD): $19.88

President , Nextel Brazil Sergio Chaia acquired 38,770 shares of this wireless communications company, paying $21.02 per share for a total amount of $815,056. Mr. Chaia increased his stake by 112.53% to 73,224 shares with this purchase.

Even as Sprint (S) rolls out its capital intensive network update plan to upgrade its network and get rid of the legacy iDen network it inherited as a result of its ill-fated acquisition of Nextel, the Nextel brand continues to live on in Latin America through NII Holdings (NIHD). The company provides wireless, push-to-talk two way radio service in Mexico, Brazil, Argentina, Peru, and Chile.

This is the first insider purchase at NII Holdings and comes even as the stock hit a new 52 week low today after losing more than half of its value since the start of the year. The company has done a great job growing revenue over the last three years as well as on a sequential quarter basis over the last four quarters. The stock trades at a very reasonable valuation of 3.08 times EBITDA and 1.7 times tangible book value and is worth exploring further.

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

5. Snyder’s-Lance, Inc. (LNCE): $22.36

Director Michael A. Warehime acquired 33,750 shares of this packaged snacks manufacturer, paying $21.14 per share for a total amount of $713,476. Mr. Warehime increased his stake by 0.38% to 8,854,674 shares with this purchase.

You can view the list of recent insider transactions for Snyder’s-Lance, Inc. here.

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

Notable Insider Sales:

1. Virgin Media, Inc. (VMED): $20.95

Director James Mooney sold 1,200,000 shares of this entertainment and communications services provider for $21.28, generating $25.5 million from the sale.

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

2. EXCO Resources Inc. (XCO): $9.79

Director Boone Pickens sold 1,350,000 shares of this oil and natural gas company for $10.40, generating $14.05 million from the sale.

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

3. MicroStrategy Inc. (MSTR): $108.68

Shares of this business software & services company were sold by 2 insiders:

• Chairman, President and CEO Michael J. Saylor sold 50,952 shares for $120.34, generating $6.1 million from the sale. These shares were sold indirectly by Alcantara LLC.
• EVP, Technology and CTO Jeffrey A. Bedell sold 12,500 shares for $121.03, generating $1.5 million 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 MicroStrategy Inc. here.

4. Hansen Natural Corporation (HANS): $95.89

Vice Chairman and President Hilton H. Schlosberg sold 72,430 shares of this beverage company for $95.67, generating $6.9 million from the sale. These shares were sold indirectly by Hilrod Holdings.

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

5. Simon Property Group Inc. (SPG): $123.34

Chairman Emeritus of the Board Herbert Simon sold 50,000 shares of this mall REIT for $123.78, generating $6.2 million from the sale. These shares were sold indirectly through a trust.

You can view the list of recent insider transactions for Simon Property Group Inc. here.

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