Insider Weekends – March 2, 2012

Welcome to edition ninety one of Insider Weekends. Insider buying decreased slightly with insiders purchasing $39.1 million of their stock last week compared to $40.5 million in the week prior. Selling on the other hand increased sharply with insiders selling $2.07 billion worth of stock last week compared to $1.35 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 increased to 52.9. In other words, insiders sold nearly 53 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the week prior when the ratio stood at 33.3 and is the highest since last October. 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. Nielsen Holdings N.V. (NLSN): $29.5

Director Robert C. Pozen acquired 152,755 shares of this information and measurement company, paying $27.84 per share for a total amount of $4.3 million. Mr. Pozen increased his stake by 591.32% to 178,588 shares with this purchase.

Mr. Pozen also picked up 17,545 shares last August for $28.39 and the CFO bought 1,000 shares as well. Several other insiders have exercised options without turning around and selling them immediately as you can see from this page. Nielsen and its parent company VNU were acquired by a group of private equity firms in 2006 and the company filed to go public in 2010. Given its private equity round-trip, the company has a lot of debt on its balance sheet and very slim profit margins. However both revenue and earnings are on the upswing and free cash flow is high due to high depreciation and low CapEx. The company generated over half a billion in FCF last year and appears to be on track to do equally well, if not better, this year. At over 13 times EBITDA and two times book value, the stock is not a screaming buy.

You can view the list of recent insider transactions for Nielsen Holdings N.V. here.

2. BlackRock, Inc. (BLK): $198.25

Vice Chairman Kendrick R. Wilson acquired 11,580 shares of this asset management company, paying $198.46 per share for a total amount of $2.3 million. Mr. Wilson increased his stake by 14.84% to 89,600 shares with this purchase.

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

3. Continental Materials Corporation (CUO): $13.3

Shares of this construction and HVAC products company were acquired by 5 insiders:

• Chairman of the Board James G. Gidwitz acquired 94,715 shares, paying $12.06 per share for a total amount of $1.1 million.
• Director William Douglas Andrews acquired 2,750 shares, paying $12.89 per share for a total amount of $35,457. Mr. Andrews increased his stake by 12.22% to 25,245 shares with this purchase.

These shares were purchased indirectly through a general partnership.

With management and other company insiders already owning a majority of shares, I would not be surprised to see them take this company with a $20.6 million market cap private. Average daily volume is extremely low, making it challenging to pick up a sizable position without moving the stock price. For the most part, the numbers look terrible and the company has a lot of debt but cash flow has been positive on account of high depreciation and low CapEx. The company also trades for less than half its book value.

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

4. Walter Energy, Inc. (WLT): $62.99

Sr VP – General Counsel & Secretary Earl H. Doppelt acquired 15,000 shares of this metallurgical coal company, paying $65.52 per share for a total amount of $982,800. Mr. Doppelt increased his stake by 245.66% to 21,106 shares with this purchase.

Walter Energy lost nearly half its value last Summer after the resignation of its CEO and reporting Q2 2011 results below expectations. The stock has not recovered since and is currently trading for less than 8 times EBITDA despite sporting profit margins of 13.63%.

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

5. Superior Energy Services, Inc. (SPN): $30.04

Shares of this oil services company were acquired by 2 insiders:

• Director Peter D. Kinnear acquired 10,000 shares, paying $29.69 per share for a total amount of $296,914.
• Chief Executive Officer David D. Dunlap acquired 10,000 shares, paying $30.43 per share for a total amount of $304,269. Mr. Dunlap increased his stake by 5.88% to 180,188 shares with this purchase.

Mr. Kinnear joined Superior’s board in December 2011 and since new directors usually tend to buy shares, I would not read much into this purchase.

You can view the list of recent insider transactions for Superior Energy Services, Inc. here.

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

Notable Insider Sales:

1. Public Storage (PSA): $133.4

Shares of this diversified REIT were sold by 3 insiders:

• Director Tamara Hughes Gustavson sold 430,000 shares for $133.85, generating $57.6 million from the sale.
• Director Wayne B. Hughes sold 529,363 “units” for $13.64, generating $7.2 million from the sale. These units were sold indirectly from a 401 (k) plan. According to the filing, these are “401 (k) plan units that represent interests in common stock or equity stock; based on plan information as of February 29, 2012. There is not a one to one correlation between units and shares.”
• Sr. V.P. & Chief Legal Officer Steven M. Glick sold 5,000 shares for $134.77, generating $673,862 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 Public Storage here.

2. Green Mountain Coffee Roasters (GMCR): $68.29

Shares of this specialty coffee company were sold by 4 insiders:

• Chairman of the Board Robert P. Stiller sold 500,000 shares for $66.68, generating $33.3 million from the sale.
• CEO Lawrence J. Blanford sold 54,002 shares for $66.43, generating $3.6 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• Director William D. Davis sold 35,000 shares for $66.37, generating $2.3 million from the sale.
• Director Hinda Miller sold 26,500 shares for $70.06, generating $1.9 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• Director Jules A. Del Vecchio sold 20,000 shares for $66.9, generating $1.3 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.

Voluntary Disclosure: I have a hedged short position in GMCR.

You can view the list of recent insider transactions for Green Mountain Coffee Roasters, here.

3. Cabela’s Inc (CAB): $35.17

Shares of this outdoor sporting goods retailer were sold by 2 insiders:

• Director Michael R. McCarthy sold 380,045 shares for $35.48, generating $13.5 million from the sale. These shares were sold indirectly by MGL Holdings, LLC.
• Vice Chairman Dennis Highby sold 12,123 shares for $36.00, generating $436,428 from the sale.

You can view the list of recent insider transactions for Cabela’s Inc here.

4. Lumber Liquidators Holdings (LL): $21.84

Shares of this hardware flooring company were sold by 2 insiders:

• Chairman of the Board; Founder Thomas D. Sullivan sold 580,713 shares for $21.87, generating $12.7 million from the sale.
• SVP, Direct Marketing & Advertising Marco Pescara sold 4,400 shares for $21.91, generating $96,395 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 Lumber Liquidators Holdings, In here.

5. Cameron International Corporation (CAM): $55.44

Shares of this oil and gas equipment provider were sold by 2 insiders:

• Director Sheldon R. Erikson sold 200,000 shares for $56.38, generating $11.3 million from the sale.
• Director Bruce W. Wilkinson sold 5,000 shares for $56.88, generating $284,400 from the sale.

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

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