Insider Weekends – September 7, 2012

Welcome to edition 118 of Insider Weekends. Insider buying increased sharply with insiders purchasing $167.72 million of their stock last week compared to $30.22 million in the week prior. Selling also increased with insiders selling $1.07 billion worth of stock last week compared to $673.36 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 dropped down to 6.36. In other words, insiders sold more than 6 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 22.3. 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. Sears Holdings Corporation (SHLD): $58.18

Director Edward S. Lampert acquired 2,399,824 shares of this department stores chain, paying $52.75 per share for a total amount of $126.6 million.

This appears to be a private sale from Sears to Mr. Lampert and funds associated with him. The purchase is interesting for a number of reasons. Sears debt hit distressed levels last December and the company appeared to be in a lot of trouble especially after lending company CIT Group stopped lending to Sears’ supppliers. Mr. Lampert sold a ton of Autozone stock in December and January and turned around to buy over $145 million worth of Sears Holding stock in January of this year (including a $5 million direct purchase) as you can see from this page.

This sparked off a huge rally in the stock, making it one of the best performing stocks of 2012 early in the year. While things are not as dire now as they were last December, the company continues to struggle. With a gain of over 85% year-to-date, it will take a whole lot more than additonal insider buying by Mr. Lampert to move the stock higher in a sustainable fashion.

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

2. Francesca’s Holdings Corporation (FRAN): $27.87

President Neill P. Davis acquired 25,000 shares of this retail chain, paying $28.37 per share for a total amount of $709,250. Mr. Davis increased his stake by 62.50% to 65,000 shares with this purchase.

You can view the list of recent insider transactions for Francesca’s Holdings Corporation here.

3. Applied Materials Inc. (AMAT): $11.86

Director Gerhard H. Parker acquired 50,000 shares of this semiconductor equipment and services provider, paying $11.53 per share for a total amount of $576,500. Mr. Parker increased his stake by 41.64% to 170,089 shares with this purchase.

You can view the list of recent insider transactions for Applied Materials Inc. here.

4. Tower International, Inc. (TOWR): $7.5

President & CEO Mark Malcolm acquired 74,451 shares of this auto parts manufacturer, paying $7.18 per share for a total amount of $534,445. Mr. Malcolm increased his stake by 20.82% to 432,061 shares with this purchase.

Tower International, like most other auto parts manufacturers, sports low margins and a lot of debt on the balance sheet. The stock is cheap trading at just 3 times EBITDA and the company has been growing revenue consistently but what little operating cash flow it generates is more than used up by capital expenditures.

Voluntary Disclosure: I hold a long position in Tower International in my long-term portfolio.

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

5. Thomas Properties Group Inc. (TPGI): $5.59

Chairman, President & CEO James A. Thomas acquired 87,500 shares of this property management company, paying $5.45 per share for a total amount of $476,539. These shares were purchased indirectly by a partnerhsip controlled by Mr. Thomas.

You can view the list of recent insider transactions for Thomas Properties Group Inc. here.

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

Notable Insider Sales:

1. Credit Acceptance Corp. (CACC): $90

Shares of this credit services company were sold by 2 insiders:

• Chairman Donald A. Foss sold 240,000 shares for $91.02, generating $21.8 million from the sale. 120,000 of these shares were sold indirectly through a trust.
• Director Glenda J. Flanagan sold 10,000 shares for $100.29, generating $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 Credit Acceptance Corp. here.

2. Garmin Ltd. (GRMN): $41.52

Chief Executive Officer Min H. Kao sold 474,000 shares of this GPS manufacturer for $40.57, generating $19.2 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.

3. Verisk Analytics, Inc. (VRSK): $48.9

Shares of this business intelligence and risk management services provider were sold by 2 insiders:

• Director John F. Lehman sold 236,687 shares for $48.11, generating $11.4 million from the sale. These shares were sold indirectly through a trust.
• Chairman and CEO Frank J. Coyne sold 100,000 shares for $47.78, generating $4.8 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 Verisk Analytics, Inc. here.

4. Camden Property Trust (CPT): $69.45

Shares of this apartment real estate investment trust (REIT) were sold by 2 insiders:

• Chairman and CEO Richard J. Campo sold 69,927 shares for $69.53, generating $4.9 million from the sale.
• President D Keith Oden sold 69,927 shares for $69.53, generating $4.9 million from the sale.

These sales are identical but there was nothing in the filings to indicate they were duplicate sales and hence we decided to include both of them.

You can view the list of recent insider transactions for Camden Property Trust here.

5. Amazon.com Inc. (AMZN): $259.14

Shares of Amazon were sold by 3 insiders:

• Chairman, CEO and President Jeff Bezos sold 16,783 shares for $250.00, generating $4.2 million from the sale.
• Senior Vice President and CFO Thomas J. Szkutak sold 10,000 shares for $250.00, generating $2.5 million from the sale.
• Director Tom A. Alberg sold 4,506 shares for $249.66, generating $1.1 million from the sale.

You can view the list of recent insider transactions for Amazon.com Inc. here.

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