Insider Weekends – August 10, 2012

Welcome to edition 114 of Insider Weekends. Insider buying increased with insiders purchasing $54.1 million of their stock last week compared to $43.8 million in the week prior. Selling declined with insiders selling $1.1 billion worth of stock last week compared to $1.68 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 dropped to 20.5. In other words, insiders sold more than 20 times as much stock as they purchased. The Sell/Buy ratio this week was lower compared to last week when the ratio stood at 38.4. 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, 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. Dole Food Company Inc. (DOLE): $12.6

Chairman David H. Murdock acquired 1,201,100 shares of this fresh fruits and vegetables producer, paying $12.30 per share for a total amount of $14.8 million. These shares were purchased indirectly through a trust.

This is the fourth time in two weeks that Mr. Murdock has purchased shares. Over this two week period, he picked up $24.87 million worth of stock at an average price of $11.86.

You can view the list of recent insider transactions for Dole Food Company Inc. here.

2. Zipcar, Inc. (ZIP): $8.08

Director Stephen M. Case acquired 265,976 shares of this car sharing and hourly car rental company, paying $7.69 per share for a total amount of $2.05 million. These shares were purchased indirectly through a trust.

This insider purchase is personally interesting as I was checking out both the company as well as its cars just last week following a 36% plunge in its stock from $10.63 to $6.75 in a single day. The company went public last April at $18 per share and opened 66% higher on its first day of trading at $30.

Quite clearly enthusiasm for the company has cooled off a lot since then. Red hot revenue growth over the last three years appears to have petered out with the company reporting a 15% year-over-year increase in second quarter revenue to $71 million. The company reported a narrower loss of $422,000 when compared to $5.6 million in Q2 2011. However both the top line and bottom line numbers missed analyst expectations. Q3 revenue forecast of $74 to $77 million was also below expectations. While operating cash flow is positive, free cash flow is negative because the company is purchasing a lot of equipment (cars). As a result, their cash on hand has declined to $62.66 million and debt increased to over $120 million.

Zipcar is an interesting growth story in a new segment but the company is still trying to figure out its business model. The company trades for 2.7 times tangible book value and 1.2 times sales. It could prove to be a good acquisition target for one of the major car rental companies like Hertz (HTZ) that has been trying to acquire rival Dollar Thrifty (DTG) for almost two years.

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

3. Opko Health, Inc. (OPK): $4.25

CEO & Chairman Phillip Frost M.D. acquired 342,500 shares of this medical devices and drug development company, paying $4.27 per share for a total amount of $1.5 million. These shares were purchased indirectly by Frost Gamma Investments Trust.

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

4. KKR Financial Holdings LLC (KFN): $9.25

Director Paul Hazen acquired 110,000 shares of this subsidiary of private equity firm KKR, paying $9.16 per share for a total amount of $1 million. Mr. Hazen increased his stake by 18.73% to 697,306 shares with this purchase.

You can view the list of recent insider transactions for KKR Financial Holdings LLC here.

5. Facebook, Inc. (FB): $21.807

Director Reed Hastings acquired 47,846 shares of Facebook, paying $21.03 per share for a total amount of $1 million.

Reed Hastings, the CEO of Netflix, was the first insider at Facebook to buy shares on the open market. The stock has been dropping steadily since its IPO at $38/share in May. Trading at over 10 times sales and 33 times EBITDA, I would rather watch this show play out from the sidelines.

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

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

Notable Insider Sales:

1. Targa Resources Corp. (TRGP): $44.26

Shares of this natural gas production and pipeline company were sold by 2 insiders:

• President-Finance & Administration Jeffrey J. McParland sold 257,874 shares for $44.67, generating $11.5 million from the sale. These shares were sold indirectly through a trust.
• Senior VP, CFO and Treasurer Matthew J. Meloy sold 4,000 shares for $44.32, generating $177,286 from the sale.

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

2. Align Technology Inc. (ALGN): $34.44

Director Joseph Lacob sold 300,000 shares of this medical device company for $34.97, generating $10.5 million from the sale. These shares were sold indirectly through a trust.

You can view the list of recent insider transactions for Align Technology Inc. here.

3. MSC Industrial Direct Co. Inc. (MSM): $68.14

Shares of this industrial products distributor were sold by 3 insiders:

• President and COO Erik Gershwind sold 75,000 shares for $70.15, generating $5.3 million from the sale. 50,000 of these shares were sold following the conversion of Class B shares to Class A shares.
• Director Mitchell Jacobson sold 50,000 shares for $70.50, generating $3.5 million from the sale.
• EVP, Global Supply Chain Ops Douglas E. Jones sold 18,000 shares for $70.02, 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 MSC Industrial Direct Co. Inc. here.

4. Western Refining, Inc. (WNR): $26.08

Shares of this crude oil refining company were sold by 4 insiders:

• VP, Asst. Treasurer Scott D. Weaver sold 105,941 shares for $26.02, generating $2.8 million from the sale.
• Director Frederick L. Francis sold 100,000 shares for $25.22, generating $2.5 million from the sale.
• Director Ralph A. Schmidt sold 100,000 shares for $26.20, generating $2,619,890 from the sale.
• Chief Accounting Officer William R. Jewell sold 20,000 shares for $25.28, generating $505,640 from the sale.

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

5. Philip Morris International, Inc. (PM): $92.21

Shares of this tobacco products company were sold by 3 insiders:

• Chairman and CEO Louis C. Camilleri sold 50,000 shares for $92.71, generating $4.6 million from the sale.
• Chief Operating Officer Andre Calantzopoulos sold 25,000 shares for $92.00, generating $2.3 million from the sale.
• VP Finance & Treasurer Marco Kuepfer sold 7,487 shares for $92.90, generating $695,544 from the sale.

You can view the list of recent insider transactions for Philip Morris International, Inc. here.

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