Insider Weekends – May 25, 2012

  • May 27, 2012

Welcome to edition 103 of Insider Weekends. Insider buying decreased with insiders purchasing $68.2 million of their stock last week compared to $148.9 million in the week prior. Selling increased with insiders selling $2.2 billion worth of stock last week compared to $1.3 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 went up to 32.7. In other words, insiders sold nearly 33 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the week prior when the ratio stood at 8.8.

A big part of these insider sales was $1.77 billion in IPO related selling by Facebook’s (FB) CEO Mark Zuckerberg and early investor Peter Thiel. Taking these sales out would bring the ratio down to just 6.77 but since we normally retain IPO and secondary offerings related sales, we decided to retain these Facebook sales.

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.

Insider Sell Buy Ratio May 25, 2012
Insider Sell Buy Ratio May 25, 2012

Note: As mentioned in the first post in this series, 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. CVR Energy, Inc. (CVI): $26.56

Director Carl C. Icahn acquired 653,000 shares of this petroleum refiner, paying $29.08 per share for a total amount of $18.9 million. These shares were purchased indirectly by Carl Icahn through subsidiaries.

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

P/E: 8.45Forward P/E: 6.25Industry P/E: 10
P/S: 0.4Price/Book: 2.05EV/EBITDA: 4.22
Market Cap: $2.31BAvg. Daily Volume: 2,242,27052 Week Range: $16.62 – $31.71

2. BlackRock, Inc. (BLK): $171.36

Shares of this asset management company were acquired by 2 insiders:

  • Director James Grosfeld acquired 50,000 shares, paying $160.00 per share for a total amount of $8 million. Mr. Grosfeld increased his stake by 32.42% to 204,208 shares with this purchase.
  • Director Murry Gerber acquired 3,000 shares, paying $160.00 per share for a total amount of $480,000. Mr. Gerber increased his stake by 8.77% to 37,196 shares with this purchase.
We covered insider purchases at BlackRock in March as well as last November, when we wrote the following, “BlackRock is one of the largest investment management companies in the world with $3.45 trillion in assets under management as of September 2010. The company also owns the iShares brand of ETFs that it acquired from Barclays (BCS) in mid-2009. The commission free ETF trades offered by Fidelity for iShares ETF was soon followed by other brokerages and TD Ameritrade now offers 100 commission free trades on ETFs from multiple providers including iShares.

BlackRock showed up on my radar after a July purchase of 41,000 shares by $152.37. Clearly the increase in price since then did not stop Mr. Grosfeld from increasing his position. The company has a dividend yield of 2.3% and has a reputation for being one of the best asset management companies. With offices in 24 countries, unless we see a global decline across all asset classes, BlackRock appears to be on firm ground.

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

P/E: 13.57Forward P/E: 11.5Industry P/E: 12.63
P/S: 3.38Price/Book: 1.21EV/EBITDA: 9.34
Market Cap: $30.74BAvg. Daily Volume: 1,155,20052 Week Range: $137 – $209.37

3. Furiex Pharmaceuticals, Inc. (FURX): $19.1

Director Fredric N. Eshelman acquired 109,400 shares of this drug development collaboration company, paying $16.94 per share for a total amount of $1.9 million. Mr. Eshelman increased his stake by 5.00% to 2,297,435 shares with this purchase.

We wrote the following about Furiex in early December, “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.

P/E: N/AForward P/E: N/AIndustry P/E: 20.04
P/S: 26.76Price/Book: 2.74EV/EBITDA: -3.86
Market Cap: $190.03MAvg. Daily Volume: 99,84852 Week Range: $12.16 – $25

4. Best Buy Co. Inc. (BBY): $19.17

CEO – Interim George Lawrence Mikan acquired 100,000 shares of Best Buy, paying $18.24 per share for a total amount of $1.8 million. Mr. Mikan increased his stake by 1666.67% to 106,000 shares with this purchase.

Best Buy appears to be going the way of Circuit City based on how the stock is performing over the last year. In fact the only time the stock was so low was back in November 2008 and in April 2003. Even at the March 9, 2009 lows of the last bear market, the stock was trading close to $30. Given that the company is trading at just 2 times trailing EBITDA, some consider it a value stock while others are perceiving it as a value trap.

I am personally on the fence on this one, leaning towards the value trap side. There are plenty of cheap stocks out there and I think a company like Dell (DELL) trading at less than 4 times EBITDA has more levers to pull to turn around the company than Best Buy.

Mr. Mikan has served on Best Buy’s board of directors since 2008 and took over the role of interim CEO after former CEO Brian Dunn was forced to resign following an internal investigation into his personal conduct with a female subordinate. The company is closing down stores and Q1 adjusted earnings of 72 cents per share were well above analyst estimates of 59 cents despite a 5.3% drop in same store sales. Earnings were higher in large part due to an extra week in the quarter, lower tax rate and lower share count on account of share buybacks.

You can view the list of recent insider transactions for Best Buy Co. Inc. here.

P/E: N/AForward P/E: 5.1Industry P/E: 8.85
P/S: 0.13Price/Book: 1.72EV/EBITDA: 2.3
Market Cap: $6.56BAvg. Daily Volume: 8,316,93052 Week Range: $17.53 – $32.85

5. W&T Offshore Inc. (WTI): $15.62

Chairman & CEO Tracy W. Krohn acquired 100,000 shares of this oil & gas drilling & exploration company, paying $15.32 per share for a total amount of $1.5 million. Mr. Krohn increased his stake by 0.26% to 39,306,962 shares with this purchase.

You can view the list of recent insider transactions for W&T Offshore Inc. here.

P/E: 7.5Forward P/E: 9.64Industry P/E: 10.04
P/S: 1.15Price/Book: 2.11EV/EBITDA: 2.76
Market Cap: $1.16BAvg. Daily Volume: 767,70852 Week Range: $11.87 – $29.27

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

Notable Insider Sales:

1. Intuit Inc. (INTU): $56.45

Shares of this accounting and tax software company were sold by 2 insiders:

  • Chairman of Executive Comm. Scott D. Cook sold 200,000 shares for $54.62, generating $10.9 million from the sale.
  • EVP, Small Business Group Kiran M. Patel sold 140,000 shares for $54.49, generating $7.6 million from the sale. 125,000 of 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 Intuit Inc. here.

P/E: 23.62Forward P/E: 16.8Industry P/E: 27.14
P/S: 4.01Price/Book: 5.87EV/EBITDA: 10.99
Market Cap: $16.65BAvg. Daily Volume: 2,269,23052 Week Range: $39.87 – $62.33

2. Public Storage (PSA): $133.29

Shares of this REIT were sold by 2 insiders:

  • Chairman Emeritus Wayne B Hughes et al sold 123,328 shares for $132.9, generating $16.4 million from the sale. These shares were sold indirectly through a trust.
  • Senior VP David F. Doll sold 10,000 shares for $131.29, generating $1.3 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 Public Storage here.

P/E: 42.23Forward P/E: 19.4Industry P/E: 14.4
P/S: 12.66Price/Book: 4.42EV/EBITDA: 21.81
Market Cap: $22.86BAvg. Daily Volume: 805,96252 Week Range: $101.77 – $146.49

3. Liquidity Services, Inc. (LQDT): $62.82

Shares of this online auction company were sold by 2 insiders:

  • Chairman of the Board and CEO William P. Angrick sold 87,424 shares for $63.04, generating $5.5 million from the sale. These shares were sold indirectly through a trust.
  • Director Jaime Mateus-Tique sold 37,000 shares for $62.93, generating $2.3 million from the sale. These shares were sold indirectly through a trust.

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

P/E: 66.41Forward P/E: 30.2Industry P/E: 21.62
P/S: 4.95Price/Book: 8.16EV/EBITDA: 25.08
Market Cap: $1.96BAvg. Daily Volume: 476,08352 Week Range: $19.89 – $66.57

4. Western Refining, Inc. (WNR): $19.76

Shares of this crude oil refining company were sold by 3 insiders:

  • Chairman of BOD, Executive Chair Paul L. Foster sold 300,000 shares for $19.55, generating $5.9 million from the sale. 100,000 of these shares were sold indirectly by Franklin Mountain Investments Limited Partnership.
  • Director William D. Sanders sold 28,000 shares for $19.25, generating $539,000 from the sale.
  • President-Refining & Marketing Mark J. Smith sold 10,000 shares for $19.00, generating $190,000 from the sale.

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

P/E: 27.29Forward P/E: 5.85Industry P/E: 10
P/S: 0.2Price/Book: 2.33EV/EBITDA: 2.8
Market Cap: $1.78BAvg. Daily Volume: 2,368,93052 Week Range: $11.17 – $21.75

5. SBA Communications Corp. (SBAC): $52.27

Chief Executive Officer & President Jeffrey Stoops sold 100,000 shares of this operator of wireless communication towers for $50.72, generating $5.1 million from the sale.

You can view the list of recent insider transactions for SBA Communications Corp. here.

P/E: N/AForward P/E: N/AIndustry P/E: 12.5
P/S: 8.78Price/Book: 23.38EV/EBITDA: 20.65
Market Cap: $6.34BAvg. Daily Volume: 1,729,78052 Week Range: $32.36 – $55.85

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