October 7th, 2012
by Asif Suria
Insider buying declined for the fourth week in a row with insiders purchasing just $12.04 million of their stock last week compared to $22.92 million in the week prior. Selling also declined with insiders selling $983.98 million worth of stock last week compared to $1.03 billion in the week prior. Insider buying generally declines at the start of each quarter and starts picking back up as we get into earnings season. A large part of insider sales had to do with insiders of Dollar General (DG) selling stock in a secondary offering.
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 81.72. In other words, insiders sold almost 82 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 44.8.
Follow up:The Sell/Buy ratio would have dropped to 49.23 excluding a large $391.18 million sale by a director of Dollar General, which was an indirect sale by Goldman Sachs in a secondary offering. 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. Contango Oil & Gas Company (MCF): $50.8
Shares of this independent oil & gas company were acquired by 3 insiders:
- President and Acting CEO John B. Juneau acquired 46,014 shares, paying $49.53 per share for a total amount of $2.28 million. Mr. Juneau increased his stake by 512.06% to 55,000 shares with this purchase.
- Chief Financial Officer Sergio Castro acquired 500 shares, paying $49.40 per share for a total amount of $24,701. Mr. Castro increased his stake by 16.67% to 3,500 shares with this purchase.
- Vice President and Controller Yaroslava Makalskaya acquired 250 shares, paying $50.77 per share for a total amount of $12,693. Ms. Makalskaya increased her stake by 22.22% to 1,375 shares with this purchase.
Contango has a clever name and just 7 employees as it follows a strategy of outsourcing every aspect of oil and gas exploration and production beyond funding of drilling activities. This allows the company to post unusually high operating margins of nearly 54% (if the numbers on Yahoo! Finance are right). The company has a debt free balance sheet (unusual for an exploration company), $130 million in net cash and trades for 1.67 times book value. Unfortunately revenue and earnings appear to have stalled along with the stock over the last few quarters. This article delves deeper into the company and the comments following the article are especially informative.
You can view the list of recent insider transactions for Contango Oil & Gas Company here.
|P/E: 13.42||Forward P/E: N/A||Industry P/E: 16.76|
|P/S: 4.43||Price/Book: 1.67||EV/EBITDA: 4.48|
|Market Cap: $776.83M||Avg. Daily Volume: 86,495||52 Week Range: $48.83 – $69.75|
2. Opko Health, Inc. (OPK): $4.5
CEO & Chairman Phillip Frost M.D. acquired 502,500 shares of this medical devices and drug development company, paying $4.23 per share for a total amount of $2.13 million.
You can view the list of recent insider transactions for Opko Health, Inc. here.
|P/E: N/A||Forward P/E: N/A||Industry P/E: 22.82|
|P/S: 41.9||Price/Book: 8.65||EV/EBITDA: -55.2|
|Market Cap: $1.34B||Avg. Daily Volume: 975,631||52 Week Range: $4 – $5.85|
3. Tesla Motors, Inc. (TSLA): $28.89
CEO Elon Musk acquired 35,398 shares of this electric car company, paying $28.25 per share for a total amount of $999,994. These shares were acquired through a secondary offering by the company.
You can view the list of recent insider transactions for Tesla Motors, Inc. here.
|P/E: N/A||Forward P/E: 76.03||Industry P/E: 12|
|P/S: 20.15||Price/Book: 49.75||EV/EBITDA: -10.14|
|Market Cap: $3.05B||Avg. Daily Volume: 1,414,620||52 Week Range: $22.64 – $39.95|
4. Limited Brands, Inc. (LTD): $50.56
Director Michael G. Morris acquired 10,110 shares of this retailer that owns several brands such as Victoria’s Secret, Pink and Bath & Body Works, paying $49.43 per share for a total amount of $499,737.
Mr. Morris was appointed Limited’s board on September 20. Since new directors often tend to buy stock, I would not read much into this purchase.
You can view the list of recent insider transactions for Limited Brands, Inc. here.
|P/E: 21.22||Forward P/E: 15.56||Industry P/E: 20.32|
|P/S: 1.41||Price/Book: N/A||EV/EBITDA: 9.14|
|Market Cap: $14.53B||Avg. Daily Volume: 2,545,400||52 Week Range: $37.57 – $52.2|
5. Extreme Networks Inc. (EXTR): $3.49
Director Edward Terino acquired 100,000 shares of this networking products company, paying $3.38 per share for a total amount of $338,110.
Mr. Terino was appointed to Extreme Network’s board of directors last week.
You can view the list of recent insider transactions for Extreme Networks Inc. here.
|P/E: 20.53||Forward P/E: 12.03||Industry P/E: 21.59|
|P/S: 1.07||Price/Book: 1.92||EV/EBITDA: 11.17|
|Market Cap: $329.90M||Avg. Daily Volume: 521,114||52 Week Range: $2.67 – $4.43|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. Discover Financial Services (DFS): $40.39
Shares of this credit card company were sold by 4 insiders:
- Chairman and CEO David W. Nelms sold 237,880 shares for $39.83, generating $9.47 million from the sale.
- President and COO Roger C. Hochschild sold 100,000 shares for $39.80, generating $3.98 million from the sale.
- Executive Vice President Harit Talwar sold 67,456 shares for $39.76, generating $2.68 million from the sale.
- Executive Vice President Diane E. Offereins sold 67,159 shares for $39.67, generating $2.66 million from the sale.
With the exception of Mr. Hochschild, all other insiders sold shares immediately after exercising options.
You can view the list of recent insider transactions for Discover Financial Services here.
|P/E: 9.32||Forward P/E: 9.39||Industry P/E: 13.39|
|P/S: 3.09||Price/Book: 2.24||EV/EBITDA: N/A|
|Market Cap: $20.48B||Avg. Daily Volume: 3,938,430||52 Week Range: $21.98 – $40.81|
2. Accenture plc (ACN): $70.74
Shares of this management and technology consulting company were sold by 4 insiders:
- Executive Chairman William D. Green sold 90,000 shares for $69.99, generating $6.3 million from the sale.
- Group Chief Executive – Technology Martin I. Cole sold 33,000 shares for $69.84, generating $2.3 million from the sale.
- Director Robert I. Lipp sold 10,000 shares for $69.81, generating $698,131 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
- Chief Financial Officer Pamela J. Craig sold 3,000 shares for $69.83, generating $209,486 from the sale. These shares were sold indirectly from a family trust.
You can view the list of recent insider transactions for Accenture plc here.
|P/E: 18.41||Forward P/E: 15.25||Industry P/E: 15.73|
|P/S: 1.63||Price/Book: 10.95||EV/EBITDA: 8.59|
|Market Cap: $45.00B||Avg. Daily Volume: 2,896,330||52 Week Range: $51.08 – $71.79|
3. Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA): $99.77
Shares of this Personal Services company were sold by 2 insiders:
- Director Robert F. DiRomualdo sold 66,030 shares for $99.14, generating $6.55 million from the sale. These shares were sold indirectly by Naples Ventures LLC.
- SVP, General Counsel & Secr. Robert S. Guttman sold 17,332 shares for $98.47, generating $1.71 million from the sale. 10,000 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 Ulta Salon, Cosmetics & Fragrance, Inc. here.
|P/E: 44.58||Forward P/E: 30.23||Industry P/E: 18.1|
|P/S: 3.21||Price/Book: 9.78||EV/EBITDA: 19.44|
|Market Cap: $6.31B||Avg. Daily Volume: 727,265||52 Week Range: $62.94 – $103.52|
4. PVH Corp. (PVH): $95.5
Shares of this apparel company were sold by 2 insiders:
- CEO of Tommy Hilfiger Fred Gehring sold 43,825 shares for $93.40, generating $4.09 million from the sale. These shares were sold indirectly by Elmira 5 B.V.
- COO of Tommy Hilfiger Ludovicus Rudolph Onnink sold 8,833 shares for $93.40, generating $824,975 from the sale. These shares were sold indirectly by Elmira 5 B.V.
You can view the list of recent insider transactions for PVH Corp. here.
|P/E: 18.72||Forward P/E: 13.23||Industry P/E: 15.07|
|P/S: 1.14||Price/Book: 2.52||EV/EBITDA: 10.44|
|Market Cap: $6.74B||Avg. Daily Volume: 850,872||52 Week Range: $62.56 – $96.94|
5. Ellie Mae, Inc. (ELLI): $26.49
Shares of this mortgage software company were sold by 5 insiders:
- Chief Executive Officer Sigmund Anderman sold 125,000 shares for $27.05, generating $3.38 million from the sale.
- Director Carl Buccellato sold 20,000 shares for $26.19, generating $523,800 from the sale.
- Chief Operating Officer Jonathan Corr sold 16,011 shares for $26.88, generating $430,358 from the sale.
- Chief Financial Officer Edgar Luce sold 10,000 shares for $26.95, generating $269,542 from the sale.
- EVP, CTO Limin Hu sold 6,667 shares for $27.12, generating $180,841 from the sale.
With the exception of Mr. Buccellato and Mr. Hu, all other insiders sold shares immediately after exercising options. Mr. Anderman and Mr. Hu are co-founders of the company.
You can view the list of recent insider transactions for Ellie Mae, Inc. here.
|P/E: 53.73||Forward P/E: 33.53||Industry P/E: 23.21|
|P/S: 8.9||Price/Book: 6.56||EV/EBITDA: 39.4|
|Market Cap: $667.28M||Avg. Daily Volume: 607,640||52 Week Range: $4.76 – $30.4|
You can view the full list of sales from this Insider Sales page.
Other posts by Asif Suria
About the Author
Asif Suria is the founder and editor of Insider Trade Reports, a service that provides daily reports on insider activity and rates the top insider purchases and sales using a proprietary model. He also maintains a Merger Arbitrage tool that displays real-time spreads and covers mergers and acquisitions on a weekly basis.