Insider Weekends – January 13, 2012

Welcome to edition eighty four of Insider Weekends. Insider buying increased with insiders purchasing $88.3 million of their stock last week compared to $33.1 million in the week prior. Selling also increased with insiders selling $368.3 million worth of stock last week compared to $344.5 million in the week prior.

Just as we discussed last week, a majority of this insider buying was driven by 10% owners and hence those purchases are not included in the top 5 insider purchases below. Carl Icahn purchased shares of WebMD (WBMD) following a sharp drop in the stock last week, Sardar Biglari continued adding to his Cracker Barrel (CBRL) position with a $17.5 million purchase and Eddie Lampert picked up $5.93 million worth of Sears Holdings (SHLD) in a direct purchase.

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 4.2. In other words, insiders sold more than 4 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the week prior when the ratio stood at 10.4.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 Introduction to Insider Weekends, 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. Progress Software Corp. (PRGS): $18.68

Director Philip M. Pead acquired 28,000 shares of this application software company, paying $18.42 per share for a total amount of $515,861. Mr. Pead increased his stake by 193.48% to 42,472 shares with this purchase.

Mr. Pead is the Chairman of the Board of Directors at Allscripts Health Solutions (MDRX) and joined the board of Progress Software in July, 2011. The company has seen both its revenue and earnings decline in recent quarters but trades at an attractive valuation of 6 times EBITDA and sports operating margins of 17.5%.

You can view the list of recent insider transactions for Progress Software Corp. here.

2. Opko Health, Inc. (OPK): $5.05

CEO & Chairman Phillip Frost M.D. acquired 52,500 shares of this medical appliances & equipment company, paying $4.95 per share for a total amount of $259,704. These shares were purchased indirectly through Frost Gamma Investments Trust.

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

3. Unilife Corporation (UNIS): $3.77

Chief Executive Officer Alan Shortall acquired 67,125 shares of this syringe and healthcare equipment manufacturer, paying $3.84 per share for a total amount of $257,431. Mr. Shortall increased his stake by 1.26% to 5,411,893 shares with this purchase.

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

4. Winmark Corp. (WINA): $58.02

Chairman & CEO John L. Morgan acquired 2,802 shares of this retail franchise company, paying $57.08 per share for a total amount of $159,938. Mr. Morgan increased his stake by 0.17% to 1,659,801 shares with this purchase.

Winmark is a very well managed company (ROE of 52%) that sports high operating margins of 48%, has a strong balance sheet with $17.2 million in net cash and investments (quick ratio of 2.06), has posted double digit earnings growth and trades for less than 12 times EBITDA. The articled titled “Winmark Still Hitting the Mark” provide a short history of the company and is well worth a read.

Following the run-up in the stock over the last year, it now trades for a hefty 9 times book value and free cash flow is either low or negative due to high CapEx. The company  has been a favorite of mine since I picked it up last January following insider purchases when the stock was trading under $34. I took profits by selling half the position three weeks ago when the stock had appreciated more than 70% from my purchase price. We wrote the following about the company last January,

“Insider purchases at Winmark Corporation, parent of Play It Again Sports and other retail franchises, continue with three insiders picking up shares over a one month period as you can see from this page. Average daily volume for this stock is low so starting or exiting a position may be challenging.”

Voluntary Disclosure: I have a long position in Winmark.

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

5. Commercial Metals Company (CMC): $13.22

Shares of this scrap metal recycling company were acquired by 3 insiders:

• Director Rhys J. Best acquired 5,000 shares, paying $13.55 per share for a total amount of $67,738. Mr. Best increased his stake by 100.00% to 10,000 shares with this purchase.
• Senior VP & CFO Barbara Smith acquired 4,000 shares, paying $14.48 per share for a total amount of $57,902.
• Senior VP, General Counsel & Corporate Secretary Ann J. Bruder acquired 500 shares, paying $14.89 per share for a total amount of $7,444. Ms. Bruder increased her stake by 9.09% to 6,000 shares with this purchase.

You can view the list of recent insider transactions for Commercial Metals Company here.

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

Notable Insider Sales:

1. Kadant Inc. (KAI): $23.14

Shares of this paper making equipment manufacturer were sold by 2 insiders:

• Director William A. Rainville sold 200,000 shares for $22.29, generating $4.5 million from the sale.
• Executive Vice President, COO Eric T. Langevin sold 7,500 shares for $22.02, generating $165,150 from the sale.

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

2. Helen of Troy Limited (HELE): $31.65

Chairman, CEO & President Gerald J. Rubin sold 134,791 shares of this consumer products company for $32.20, generating $4.3 million from the sale.

You can view the list of recent insider transactions for Helen of Troy Limited here.

3. Grand Canyon Education, Inc. (LOPE): $18.07

Shares of this for-profit education company were sold by 2 insiders:

• Executive Chairman Brent D. Richardson sold 107,000 shares for $16.31, generating $1.7 million from the sale. These shares were sold indirectly by Exeter Capital, LLC.
• General Counsel Christopher C. Richardson sold 89,000 shares for $16.27, generating $1.4 million from the sale. These shares were sold indirectly by C&H Capital LLC.

You can view the list of recent insider transactions for Grand Canyon Education, Inc. here.

4. Rackspace Hosting, Inc. (RAX): $43.35

Shares of this server and cloud hosting company were sold by 2 insiders:

• President, Cloud Lew Moorman sold 74,750 shares for $41.72, generating $3.1 million from the sale.
• Sr. V.P., GC, and Secretary Alan Schoenbaum sold 52 shares for $42.06, generating $2,187 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 Rackspace Hosting, Inc. here.

5. Novellus Systems, Inc. (NVLS): $42.63

Shares of this semiconductor company were sold by 3 insiders:

• CEO Richard Hill sold 33,407 shares for $44.00, generating $1.5 million from the sale.
• EVP, Semiconductor Sys. Prods. Fusen Ernie Chen sold 25,000 shares for $43.39, generating $1.1 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• VP and Chief Financial Officer John Hertz sold 7,500 shares for $43.00, generating $322,500 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 Novellus Systems, Inc. here.

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