Insider Weekends – September 14, 2012

Welcome to edition 119 of Insider Weekends. Insider buying decreased with insiders purchasing $74.12 million of their stock last week compared to $167.72 million in the week prior. Selling increased with insiders selling $1.53 billion worth of stock last week compared to $1.07 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 20.69. In other words, insiders sold more than 20 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 6.36. 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. AGCO Corporation (AGCO): $47.16

Director Mallika Srinivasan acquired 217,545 shares of this agricultural equipment manufacturer, paying $44.77 per share for a total amount of $9.7 million. These shares were purchased through a trading plan entered into by Tractors and Farm Equipment Limited (TAFE).

Ms. Srinivasan is the Chairman and CEO of India based TAFE.

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

2. Opko Health, Inc. (OPK): $4.45

CEO & Chairman Phillip Frost M.D. acquired 260,000 shares of this medical devices and drug development company, paying $4.40 per share for a total amount of $1.1 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.

3. Hot Topic Inc. (HOTT): $9.12

Director Matthew A. Drapkin acquired 51,553 shares of this teen retail chain, paying $9.12 per share for a total amount of $469,980. These shares were purchased indirectly through Becker Drapkin Partners L.P.

We normally exclude insider purchases by fund managers but decided to make an exception with Hot Topic. This mall-based retailer that caters to the fickle tastes of teens managed to weather the last downturn in relatively good shape, trades for less than 5 times EBITDA and has a strong balance sheet with $64 million in net cash and investments. Comparable same store sales were up 3.9% year-over-year with Hot Topic stores posting a 3.9% gain and its Torrid brand of stores posting a 4% gain.

You can view the list of recent insider transactions for Hot Topic Inc. here.

4. Prospect Capital Corporation (PRY): $25.109

Chief Operating Officer Grier M. Eliasek acquired 36,030 shares of this business development company, paying $25.10 per share for a total amount of $904,393. This purchase is not a stock purchase but purchase of 6.95% senior notes that are due in 2022. However we decided to highlight this purchase because it follows the 23,500 share purchase by the CFO that we reported on Monday, September 10, 2012.

You can view the list of recent insider transactions for Prospect Capital Corporation here.

5. Layne Christensen Co. (LAYN): $20.72

Director Nelson Obus acquired 50,000 shares of this water management, construction and drilling company, paying $18.05 per share for a total amount of $902,500.

We normally tend to exclude insider purchases by fund managers but decided to make yet another exception this week. Mr. Obus co-manages the Wynnefield Partners Small Cap Value fund, which is an activist fund that invests in undervalued small cap companies. Layne Christensen does appear to be a value stock trading below book value and for less than 6 times EBITDA. Unfortunately free cash flow has been negative for the company and I will have to dig deeper to understand why Wynnefield Partners likes the company.

You can view the list of recent insider transactions for Layne Christensen Co. here.

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

Notable Insider Sales:

1. Garmin Ltd. (GRMN): $42.45

Chief Executive Officer Min H. Kao sold 466,000 shares of this GPS manufacturer for $41.38, generating $19.3 million from the sale. These shares were sold indirectly by Mr. Kao’s children.

You can view the list of recent insider transactions for Garmin Ltd. here.

2. Salesforce.com, Inc (CRM): $159.43

Director Craig Ramsey sold 105,582 shares of this Software as a Service (SaaS) provider for $152.09, generating $16.1 million from the sale. 35,582 of these shares were sold indirectly by Mr. Ramsey’s wife.

You can view the list of recent insider transactions for salesforce.com, inc here.

3. The Men’s Wearhouse, Inc. (MW): $37.34

Shares of this apparel chain were sold by 5 insiders:

• President and CEO Douglas Scott Ewert sold 293,172 shares for $37.34, generating $10.9 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• Senior Vice President James E. Zimmer sold 240,000 shares for $37.23, generating $8.9 million from the sale. These shares were sold indirectly through a trust.
• Executive Vice President and CAO Diana M. Wilson sold 43,156 shares for $37.42, generating $1.6 million from the sale.
• Executive Vice President Charles Bresler sold 18,992 shares for $37.60, generating $714,190 from the sale.
• EVP, Chief Legal Officer, ER Carole L. Souvenir sold 5,250 shares for $37.19, generating $195,252 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 The Men’s Wearhouse, Inc. here.

4. BankUnited, Inc. (BKU): $24.94

Shares of this regional bank were sold by 2 insiders:

• Chief Lending Officer John Bohlsen sold 199,793 shares for $24.49, generating $4.9 million from the sale.
• Director Richard S. Lefrak sold 134,966 shares for $24.85, generating $3.4 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 BankUnited, Inc. here.

5. Fidelity National Financial, Inc. (FNF): $19.87

Shares of this insurance company were sold by 2 insiders:

• Director Frank P. Willey sold 350,000 shares for $19.87, generating $6.95 million from the sale.
• President Raymond R. Quirk sold 57,999 shares for $19.65, generating $1.1 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 Fidelity National Financial, Inc. here.

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