Insider Weekends – June 8, 2012

  • June 9, 2012

Welcome to the two year anniversary edition of Insider Weekends. Insider buying decreased with insiders purchasing $250.5 million of their stock last week compared to $346.3 million in the week prior. Selling inched up a little with insiders selling $385.5 million worth of stock last week compared to $373.3 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 1.54. In other words, insiders sold less than 2 times the amount of stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the week prior when the ratio stood at 1.1. 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 June 8, 2012
Insider Sell Buy Ratio June 8, 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. Scientific Games Corporation (SGMS): $8.88

Director Ronald O. Perelman acquired 805,000 shares of this casino and lottery equipment provider, paying $8.14 per share for a total amount of $6.6 million. These shares were purchased indirectly through various entities that are controlled by Mr. Perelman.

Things appear to be turning around at Scientific Games as losses have narrowed and the company managed to post positive net income in two out of the last four quarters despite continued top line erosion. We wrote the following about the company back in December 2010 following several insider purchases,
Scientific Games stands out for a couple of reasons. The cluster purchase by a number of insiders and the size of these purchase. With this purchase Mr. Perelman picked up nearly 4% of the total outstanding stock and now owns almost 32% of the company. At first I thought this purchase was probably part of a secondary offering or debt conversion but there was nothing in the filing to indicate this was anything other than a regular purchase. Moreover the company has enough cash on the balance sheet to meet short-term liquidity needs.

The stock saw a nice 20% spike on Nov 30 after the former CEO, who served from 1992 to 2008, was brought back in to run the company. These filings came in after hours yesterday and the action on this stock is going to be very interesting to watch today. The company reported a net loss of $40 million in 2009 but given its high non-cash depreciation expenses, operating cash flow in 2009 was actually $220 million, the highest in three years.

A word of caution. While insiders appear to be seeing a golden future ahead, both revenue and earnings have been declining and interest on the $1.34 billion in debt is wiping out most of the operating earnings. While CapEx appears to be unusually low, other investments and expenditures on things like software are putting a major dent into free cash flow generated by the company.

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

P/E: N/A Forward P/E: 15.05 Industry P/E: 12.33
P/S: 0.9 Price/Book: 1.72 EV/EBITDA: 11.06
Market Cap: $823.86M Avg. Daily Volume: 583,073 52 Week Range: $6.5 – $13.08

2. Akamai Technologies, Inc. (AKAM): $30.12

Shares of this internet information provider were acquired by 2 insiders:

  • Chief Scientist Thomson F. Leighton acquired 147,240 shares, paying $27.45 per share for a total amount of $4.04 million. These shares were purchased indirectly through a trust.
  • Director George H. Conrades acquired 29,182 shares, paying $28.80 per share for a total amount of $840,457. These shares were purchased indirectly through a trust.

Akamai has a very strong balance sheet, sports operating margins of over 30%, has  managed to grow revenue despite the loss of the Netflix business to Level 3 Communications (LVLT) and trades for less than 10 times EBITDA. The stock has been under pressure recently after Netflix (NFLX) announced plans to build out its own content delivery network.

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

P/E: 28.66 Forward P/E: 16.19 Industry P/E: 27.77
P/S: 4.33 Price/Book: 2.36 EV/EBITDA: 9.91
Market Cap: $5.40B Avg. Daily Volume: 3,460,000 52 Week Range: $18.25 – $39.14

3. Och-Ziff Capital Management Group LLC (OZM): $7.34

Chief Executive Officer Daniel Och acquired 500,471 shares of this alternative asset management company, paying $6.88 per share for a total amount of $3.4 million. Mr. Och increased his stake by 34.36% to 1,957,071 shares with this purchase.

Och-Ziff was the subject of one of our weekly focus articles that highlight one company with insider buying each week.

You can view the list of recent insider transactions for Och-Ziff Capital Management Group LLC here.

P/E: N/A Forward P/E: 5.36 Industry P/E: 12.32
P/S: 1.65 Price/Book: N/A EV/EBITDA: 5.9
Market Cap: $1.03B Avg. Daily Volume: 954,527 52 Week Range: $6.56 – $14.3

4. McDermott International Inc. (MDR): $10.73

Shares of this offshore oil services provider were acquired by 4 insiders:

  • Director John F. Bookout III acquired 150,000 shares, paying $9.33 per share for a total amount of $1.4 million. Mr. Bookout increased his stake by 332.43% to 195,122 shares with this purchase.
  • President and CEO Stephen Marcum Johnson acquired 102,368 shares, paying $9.64 per share for a total amount of $986,613. Mr. Johnson increased his stake by 32.80% to 414,460 shares with this purchase.
  • Senior VP, General Counsel & Corporate Secretary Liane K. Hinrichs acquired 15,000 shares, paying $9.60 per share for a total amount of $144,034. Ms. Hinrichs increased her stake by 12.46% to 135,404 shares with this purchase.
  • Director Bradley D. McWilliams acquired 10,000 shares, paying $9.59 per share for a total amount of $95,859. Mr. McWilliams increased his stake by 12.36% to 90,892 shares with this purchase.

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

P/E: 19.37 Forward P/E: 9.02 Industry P/E: 11.95
P/S: 0.75 Price/Book: 1.43 EV/EBITDA: 5.28
Market Cap: $2.53B Avg. Daily Volume: 3,730,670 52 Week Range: $9.04 – $21.69

5. Furiex Pharmaceuticals, Inc. (FURX): $18.68

Director Fredric N. Eshelman acquired 120,394 shares of this drug development collaboration company, paying $19.92 per share for a total amount of $2.4 million. Mr. Eshelman increased his stake by 4.88% to 2,588,035 shares with this purchase.

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

P/E: N/A Forward P/E: N/A Industry P/E: 19.47
P/S: 27.89 Price/Book: 2.85 EV/EBITDA: -3.84
Market Cap: $185.85M Avg. Daily Volume: 95,141 52 Week Range: $12.16 – $25

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

Notable Insider Sales:

1. PVH Corp. (PVH): $79.96

Shares of this apparel company were sold by 2 insiders:

  • CEO of Tommy Hilfiger Fred Gehring sold 116,863 shares for $80.53, generating $9.4 million from the sale. These shares were sold indirectly by Elmira 5 B.V.
  • COO of Tommy Hilfiger Ludovicus Rudolf Onnink sold 23,551 shares for $80.53, generating $1.9 million from the sale. These shares were sold indirectly by Elmira 5 B.V.

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

P/E: 16.53 Forward P/E: 11.21 Industry P/E: 13.4
P/S: 0.91 Price/Book: 1.91 EV/EBITDA: 9.51
Market Cap: $5.48B Avg. Daily Volume: 1,219,390 52 Week Range: $51.15 – $93.06

2. Western Refining, Inc. (WNR): $19.71

Chairman of BOD, Executive Chair Paul L. Foster sold 300,000 shares of this crude oil refining company for $18.85, generating $5.7 million from the sale. 100,000 of these shares were sold indirectly by Franklin Mountain Investments Limited Partnership.

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

P/E: 27.22 Forward P/E: 5.81 Industry P/E: 11.01
P/S: 0.19 Price/Book: 2.29 EV/EBITDA: 2.76
Market Cap: $1.77B Avg. Daily Volume: 2,199,820 52 Week Range: $11.17 – $21.75

3. Skyworks Solutions Inc. (SWKS): $27.96

Shares of this semiconductor company were sold by 6 insiders:

  • V. P., Chief Financial Officer Donald W. Palette sold 93,761 shares for $28.51, generating $2.7 million from the sale. 72,500 of these shares were sold as a result of exercising options immediately prior to the sale.
  • EVP & GM, High Performance Ana Liam Griffin sold 46,038 shares for $28.03, generating $1.3 million from the sale.
  • President and CEO David J. Aldrich sold 35,000 shares for $27.83, generating $974,050 from the sale.
  • VP, Human Resources George Levan sold 11,650 shares for $27.88, generating $324,802 from the sale.
  • VP, General Counsel & Secretary Mark V. Tremallo sold 9,587 shares for $28.51, generating $273,325 from the sale.
  • Director Moiz Beguwala sold 3,000 shares for $28.00, generating $84,000 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 Skyworks Solutions Inc. here.

P/E: 25.65 Forward P/E: 13.07 Industry P/E: 19.09
P/S: 3.43 Price/Book: 3.03 EV/EBITDA: 12.84
Market Cap: $5.30B Avg. Daily Volume: 4,650,460 52 Week Range: $13.72 – $29.09

4. Duff & Phelps Corporation (DUF): $13.99

Director Jeffrey Lovell sold 271,402 shares of this independent financial advisory and investment banking services provider for $14.25, generating $3.9 million from the sale. These shares were sold indirectly by Lovell Minnick Partners LLC.

You can view the list of recent insider transactions for Duff & Phelps Corporation here.

P/E: 22.64 Forward P/E: 12.27 Industry P/E: 12.32
P/S: 1.33 Price/Book: 1.63 EV/EBITDA: 7.51
Market Cap: $539.51M Avg. Daily Volume: 164,995 52 Week Range: $9.29 – $16.5

5. Chicago Bridge & Iron Company N.V. (CBI): $35.95

President and CEO Philip K. Asherman sold 92,380 shares of this provider of engineering and construction services for $35.05, generating $3.2 million from the sale. 17,380 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 Chicago Bridge & Iron Company N.V. here.

P/E: 13.56 Forward P/E: 10.33 Industry P/E: 10.25
P/S: 0.73 Price/Book: 2.96 EV/EBITDA: 6.57
Market Cap: $3.49B Avg. Daily Volume: 1,076,800 52 Week Range: $23.88 – $47.74

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