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Insider Weekends – December 12, 2014

  • December 14, 2014

Welcome to edition 234 of Insider Weekends. In a week where we saw the Dow post its biggest weekly decline since 2011, insider buying more than quadrupled with insiders buying $190.94 million of stock compared to $44.02 million in the week prior. Part of this buying was driven by insiders from the energy sector as we saw in our previous report and the other part was driven by certain value-oriented and biotech funds adding to their positions. Selling declined with insiders selling $1.34 billion of stock last week compared to $1.47 billion in the week prior.

Some of the fund related purchases include the biotech-focused Baker Brothers adding to their position in Seattle Genetics (SGEN) to the tune of $42.29 million, Jeffrey Ubben of San Francisco based value-oriented fund ValueAct Capital pitching in an additional $35 million to add to his position in Valeant Pharmaceuticals (VRX) and Carl Icahn’s ex-prodigy Mark Rachesky adding to his position in large tire manufacturer Titan International (TWI).

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 7.02. In other words, insiders sold 7 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 33.47. 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.

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