Insider Trading 26 December 2014: Insiders Have Outperformed the Market

December 28th, 2014
in contributors

by Asif Suria

We have been publishing these posts continuously for over 4.5 years and it has been a great learning experience. While insiders as a group have outperformed the market more often than not, they are also often early and sometimes completely wrong. One key advantage we have found of following this strategy is that it brings companies to our attention that would have otherwise not been on our radar. We hope this this information has been useful to you and are planning on launching an updated version of the site in 2015 that will add additional features and expand the scope of the data we provide.

Follow up:


Insider buying declined sharply with insiders buying $83.07 million of stock in this holiday-shortened week compared to $256.35 million in the week prior. Selling also declined with insiders selling $628.05 million of stock last week compared to $2.59 billion 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 to 7.56. In other words, insiders sold more than 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 10.1. 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.

Insider Sell Buy Ratio December 26, 2014

Insider Sell Buy Ratio December 26, 2014

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. Biglari Holdings Inc. (BH): $389.97

Chairman and CEO Sardar Biglari, acquired 5,249 shares of this restaurant holding company, paying $366.76 per share for a total amount of $1.93 million. These shares were acquired indirectly through The Lion Fund.

Biglari Holdings has had a tough year with the stock down 17% year-to-date despite (noncontrolled) holding companies such as Cracker Barrel (CBRL) posting a gain of 26% this year. Biglari Holdings has a nearly 20% stake in Cracker Barrel through the Lion Fund.

We have written about Biglari Holdings several times in the past including back in March 2014 when we wrote,

“Activist hedge fund manager Sardar Biglari has used Biglari Holding to either acquire entire companies like the Steak n Shake restaurant chain or activist positions in companies like Cracker Barrel (CBRL). The Restaurant Investor is a very interesting profile of Sardar Biglari written by Max Olson, the CEO of Max Capital.”

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

P/E: 23.18 Forward P/E: N/A Industry P/E: 18.48
P/S: 0.97 Price/Book: 1.21 EV/EBITDA: 23.49
Market Cap: $805.29M Avg. Daily Volume: 7,938 52 Week Range: $312 – $481.82

 

2. Endurance Specialty Holdings Ltd. (ENH): $60

Chairman & Chief Executive Officer John Charman acquired 17,982 shares of this insurance company, paying $59.42 per share for a total amount of $1.07 million. 11,986 of these shares were purchased indirectly through trusts.

This is the third time this month we have reported on insider purchases of Endurance by Mr. Charman. While the stock has been rising along with his purchases, it still trades below tangible book value. The company derives 42% of its business from regular insurance lines such as agriculture (23%), property and casualty, while the rest of the business is through reinsurance products. It was interesting and a little surprising to see an ad for Endurance in Union Square in San Francisco when I went there this Christmas.

You can view the list of recent insider transactions for Endurance Specialty Holdings Ltd. here.

P/E: 8.96 Forward P/E: 10.24 Industry P/E: N/A
P/S: 1.29 Price/Book: 0.86 EV/EBITDA: 5.76
Market Cap: $2.69B Avg. Daily Volume: 169,119 52 Week Range: $49.58 – $60.31

 

3. Veritiv Corporation (VRTV): $51.16

Shares of this paper and packaging company were acquired by 7 insiders:

  • Director Daniel T. Henry acquired 5,000 shares, paying $49.89 per share for a total amount of $249,450.
  • Chairman & CEO Mary A. Laschinger acquired 2,187 shares, paying $50.55 per share for a total amount of $110,553. Ms. Laschinger increased her stake by 389.15% to 2,749 shares with this purchase.
  • SVP & CFO Stephen Joseph Smith acquired 1,500 shares, paying $50.91 per share for a total amount of $76,365. These shares were purchased indirectly through a trust.
  • SVP Packaging Darin W. Tang acquired 1,000 shares, paying $49.07 per share for a total amount of $49,070.
  • SVP, Strategy/Facility Solutions Joseph B. Myers acquired 1,000 shares, paying $50.40 per share for a total amount of $50,400.
  • SVP & General Counsel Mark W. Hianik acquired 1,000 shares, paying $51.33 per share for a total amount of $51,330.
  • SVP Print Daniel J. Watkoske acquired 1,000 shares, paying $49.97 per share for a total amount of $49,970. Mr. Watkoske increased his stake by 125.63% to 1,796 shares with this purchase.

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

P/E: N/A Forward P/E: 15.23 Industry P/E: N/A
P/S: 0.12 Price/Book: 1.41 EV/EBITDA: 23.06
Market Cap: $818.56M Avg. Daily Volume: 61,676 52 Week Range: $31.94 – $53.21

 

4. Vicon Industries, Inc. (VII): $1.76

Chief Executive Officer Eric Fullerton acquired 230,000 shares of this video management and surveillance systems provider, paying $1.51 per share for a total amount of $346,648.

The company is unprofitable, trades for half its book value and just marginally above the net cash on the balance sheet.

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

P/E: N/A Forward P/E: N/A Industry P/E: N/A
P/S: 0.24 Price/Book: 0.49 EV/EBITDA: N/A
Market Cap: $7.96M Avg. Daily Volume: 193,438 52 Week Range: $1.31 – $6.14

 

5. Sonic Foundry, Inc. (SOFO): $7.929

Director Mark D. Burish acquired 35,905 shares of this video management systems provider, paying $8.36 per share for a total amount of $300,166. Mr. Burish increased his stake by 13.01% to 311,931 shares with this purchase.

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

P/E: N/A Forward P/E: 15.25 Industry P/E: N/A
P/S: 0.97 Price/Book: 2.48 EV/EBITDA: -906.54
Market Cap: $35.12M Avg. Daily Volume: 6,875 52 Week Range: $7.22 – $12.7

 

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

Notable Insider Sales:

1. FactSet Research Systems Inc. (FDS): $144.59

Shares of this financial software and services company were sold by 2 insiders:

  • CEO & Chairman Philip A. Hadley sold 100,000 shares for $143.08, generating $14.31 million from the sale. 3,000 of these shares were sold as a result of exercising options immediately prior to the sale.
  • Executive Vice President & COO Peter G. Walsh sold 80,000 shares for $142.12, generating $11.37 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 FactSet Research Systems Inc. here.

P/E: 29.39 Forward P/E: 23.55 Industry P/E: N/A
P/S: 6.56 Price/Book: 11.82 EV/EBITDA: 16.65
Market Cap: $6.04B Avg. Daily Volume: 258,713 52 Week Range: $101.41 – $145.33

 

2. Twitter, Inc. (TWTR): $37.6

Shares of Twitter were sold by 2 insiders:

  • Founder and Director Evan Clark Williams sold 372,000 shares for $38.08, generating $14.17 million from the sale. 349,680 of these shares were sold indirectly through various entities.
  • Vice President of Product Kevin Weil sold 6,030 shares for $37.98, generating $229,048 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 Twitter, Inc. here.

P/E: N/A Forward P/E: 110.59 Industry P/E: 22.59
P/S: 20.16 Price/Book: 6.67 EV/EBITDA: -26.75
Market Cap: $23.51B Avg. Daily Volume: 24,175,000 52 Week Range: $29.51 – $70.43

 

3. ICU Medical, Inc. (ICUI): $83.31

Shares of this medical devices company were sold by 2 insiders:

  • Director George A. Lopez sold 150,000 shares for $83.72, generating $12.56 million from the sale.
  • Director Richard Sherman M.D. sold 3,750 shares for $83.06, generating $311,462 from the sale. These shares were sold as a result of exercising options immediately prior to the sale. 100,000 of these shares were sold indirectly through a partnership.

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

P/E: 40.11 Forward P/E: 30.18 Industry P/E: N/A
P/S: 4.19 Price/Book: 2.61 EV/EBITDA: 14.42
Market Cap: $1.28B Avg. Daily Volume: 163,884 52 Week Range: $54 – $87.5

 

4. Varonis Systems, Inc. (VRNS): $32

Shares of this software solutions provider were sold by 3 insiders:

  • Chief Technology Officer Ohad Korkus sold 150,000 shares for $31.02, generating $4.65 million from the sale.
  • CEO, President, Chairman Yakov Faitelson sold 150,000 shares for $31.02, generating $4.65 million from the sale.
  • SVP of Worldwide Sales James O’Boyle sold 19,664 shares for $29.00, generating $570,255 from the sale. 5,723 of these shares were sold indirectly through a trust.

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

P/E: N/A Forward P/E: N/A Industry P/E: N/A
P/S: 8.44 Price/Book: 8.45 EV/EBITDA: -31.03
Market Cap: $786.11M Avg. Daily Volume: 199,037 52 Week Range: $17.5 – $56.8

 

5. Cintas Corporation (CTAS): $79.82

Shares of this provider of corporate uniforms and other business services were sold by 3 insiders:

  • Director Richard T. Farmer sold 102,870 shares for $79.81, generating $8.2 million from the sale.
  • Sr. VP & CFO William C. Gale sold 12,243 shares for $79.89, generating $978,055 from the sale.
  • President and COO James Phillip Holloman sold 6,981 shares for $78.30, generating $546,612 from the sale.

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

P/E: 23.83 Forward P/E: 22.05 Industry P/E: 479.23
P/S: 2.05 Price/Book: 4.11 EV/EBITDA: 11.47
Market Cap: $9.34B Avg. Daily Volume: 794,011 52 Week Range: $55.35 – $80.35

 

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

Voluntary Disclosure: I hold a long position in Twitter (TWTR).

Connect with me on LinkedIn: http://www.linkedin.com/in/asifsuria









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