Insider Weekends – August 1, 2014

Welcome to edition 215 of Insider Weekends. Insider buying declined last week with insiders buying $60.16 million of stock compared to $88.99 million in the week prior. Selling on the other hand more than doubled with insiders selling $1.34 billion of stock last week compared to $549.37 million in the week prior. It was interesting to see this increase in insider selling against the backdrop of a 2.7% decline in the S&P 500, its biggest single week decline since 2012.

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 22.36. In other words, insiders sold more than 22 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 6.17 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:

There were some interesting purchases on the buy side this week that included purchases by insiders in two companies I have held in my portfolio for several months as mentioned in the top 5 insider purchases below. Beyond these top 5 purchases, other purchases worth exploring include a cluster of insider purchases at regional bank Berkshire Hills Bancorp (BHBL), a 20,000 share purchase for nearly half a million dollars by the CEO of diagnostic testing company Quidel (QDEL), a 9,000 share purchase by the COO of the marine transportation services provider to the offshore drilling industry Gulfmark Offshore (GLF) and purchases by two insiders of Orchid Paper Products (TIS).

1. Titan International Inc. (TWI): $14.85

Shares of this manufacturer of wheels and tires for off-road vehicles were acquired by 2 insiders:

• Director Mark H. Rachesky acquired 490,775 shares, paying $14.54 per share for a total amount of $7.14 million.
• President Paul G. Reitz acquired 15,000 shares, paying $14.32 per share for a total amount of $214,800.

Titan International is a manufacturer of large tires used in farming, construction and mining equipment. The company has faced headwinds in the last couple of years as mining activity and hence demand for its tires has declined. The stock trades close to its 52 week low and is a potential turnaround story.

As mentioned in past reports related to the diesel engine manufacturer Navistar International (NAV) and Lions Gate Entertainment (LGF), Mark Rachesky was the former protege of Carl Icahn and has in recent years invested in both Lions Gate and Navistar alongside Carl Icahn.

Voluntary Disclosure: I hold a long position in Titan International.

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

2. Air Products & Chemicals Inc. (APD): $133.12

Chairman, President and CEO Seifi Ghasemi acquired 25,000 shares of this atmospheric gases and performance materials provider, paying $132.84 per share for a total amount of $3.32 million. Mr. Ghasemi increased his stake by 48.05% to 77,026 shares with this purchase.

You can view the list of recent insider transactions for Air Products & Chemicals Inc. here.

3. Herbalife Ltd. (HLF): $52.57

Shares of this nutritional supplement company were acquired by 3 insiders:

• Chief Operating Officer Richard Goudis acquired 10,700 shares, paying $55.81 per share for a total amount of $597,167. Mr. Goudis increased his stake by 6.85% to 166,969 shares with this purchase.
• President Des Walsh acquired 10,000 shares, paying $55.67 per share for a total amount of $556,700. Mr. Walsh increased his stake by 10.25% to 107,599 shares with this purchase.
• Chief Financial Officer John DeSimone acquired 10,000 shares, paying $55.56 per share for a total amount of $555,600. Mr. Desimone increased his stake by 53.50% to 28,690 shares with this purchase.

Herbalife is currently caught in the cross-fire between longs and passionate short-sellers like Bill Ackman who claim the stock is headed to zero and believe the company is a criminal enterprise. Following Ackman’s latest three hour presentation on the company,  the stock shot up more than 25% only to give back all of those gains and then some after the company reported weak second quarter results last week.

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

4. Campus Crest Communities, Inc. (CCG): $7.81

Executive Vice President Aaron Scott Halfacre acquired 100,000 shares of this real estate investment trust (REIT) that provides campus housing to college students, paying $8.13 per share for a total amount of $813,000.

Voluntary Disclosure: I hold a long position in Campus Crest Communities.

You can view the list of recent insider transactions for Campus Crest Communities, Inc. here.

5. Opko Health, Inc. (OPK): $8.74

CEO & Chairman Phillip Frost M.D. acquired 79,500 shares of this medical devices and drug development company, paying $9.01 per share for a total amount of $716,411. These shares were purchased indirectly by Frost Gamma Investments Trust.

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

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

Notable Insider Sales:

1. Microsoft Corporation (MSFT): $42.86

Shares of Microsoft were sold by 4 insiders:

• Founder Bill Gates sold 15,855,000 shares for $44.01, generating $697.76 million from the sale.
• Chief Operating Officer Brian Kevin Turner sold 64,323 shares for $44.51, generating $2.86 million from the sale.
• Senior Vice President Lisa E. Brummel sold 25,000 shares for $44.26, generating $1.11 million from the sale.
• Chief Accounting Officer Frank H. Brod sold 1,500 shares for $44.03, generating $66,052 from the sale.

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

2. Twitter, Inc. (TWTR): $44.13

Shares of Twitter were sold by 5 insiders:

• Chief Financial Officer Mike Gupta sold 181,675 shares for $44.79, generating $8.14 million from the sale.
• VP, Finance and Accounting Officer Luca Baratta sold 44,000 shares for $44.83, generating $1.97 million from the sale.
• President of Revenue Adam Bain sold 19,448 shares for $45.34, generating $881,759 from the sale.
• Chief Executive Officer Richard Costolo sold 16,698 shares for $45.34, generating $757,087 from the sale.
• General Counsel Vijaya Gadde sold 8,479 shares for $46.90, generating $397,665 from the sale.

Voluntary Disclosure: I hold a long position in Twitter.

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

3. The Ultimate Software Group, Inc. (ULTI): $130.5

Shares of this software-as-a-service (SAAS) provider were sold by 4 insiders:

• Chairman, President and CEO Scott Scherr sold 50,000 shares for $136.04, generating $6.8 million from the sale.
• Vice-Chairman & COO Marc D. Scherr sold 25,000 shares for $136.09, generating $3.4 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• Director Leroy Vander Putten sold 5,000 shares for $136.18, generating $680,889 from the sale.
• Director James A. Fitzpatrick Jr. sold 2,168 shares for $141.18, generating $306,078 from the sale. 776 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 The Ultimate Software Group, Inc. here.

4. Robert Half International Inc. (RHI): $48.67

President & COO Paul F. Gentzkow sold 200,000 shares of this staffing and risk consulting services provider for $50.47, generating $10.09 million from the sale.

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

5. Liberty Media Corporation (LMCA): $46.68

Chairman of the Board John C. Malone sold 199,414 shares of this broadcasting company for $47.64, generating $9.49 million from the sale.

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

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

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