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posted on 17 April 2016

Insider Trading 15 April 2016: Insider Buying Dropped Precipitously For A Reason

by Asif Suria

Insider buying decreased significantly last week with insiders buying $8.36 million of stock compared to $119.62 million in the week prior. Selling also declined with insiders selling $362.04 million of stock last week compared to $906 million in the week prior.

As we mentioned in our last report, 94% of the insider buying in the prior week was related to a single private placement transaction and insider buying dropped to just $7.2 million once you remove that transaction. In that context, insider buying did not drop as precipitously as it appears at first blush but is still low since we are entering earnings season.

One of the more interesting insider purchases last week did not make the top 5 list but caught my attention because the stock popped 9.33% over the course of four days after the purchase. The CEO of Stage Stores, a specialty department stores company with 834 stores in 39 states,purchased 24,556 shares paying $6.68 per share for a total amount of $163,951. The stock sports an unusually high dividend yield of 8.1% and trades for just 3 times EBITDA. The dividend has been going up every year for the last 5 years. On the negative side, growth appears to have stalled with the company reporting a 3.5% drop in revenue last quarter and free cash flow was negative in two out of the last three years. The short ratio at 8 is higher than I would have expected. Insider buying provides an interesting way to uncover new companies for further research and may not in itself be a buying signal.

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 43.36. In other words, insiders sold more than 43 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 7.57. 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 April 15, 2016

Insider Sell Buy Ratio April 15, 2016

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. Sears Holdings Corporation (SHLD): $16.9

Chief Executive Officer Edward S. Lampert acquired 57,261 shares of this department stores chain, paying $14.34 per share for a total amount of $821,267. Mr. Lampert increased his stake by 0.18% to 31,045,117 shares with this purchase.

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

P/E: N/AForward P/E: N/AIndustry P/E: 22.92
P/S: 0.07Price/Book: N/AEV/EBITDA: -4.37
Market Cap: $1.80BAvg. Daily Volume: 665,44752 Week Range: $14.05 - $44.72

2. Western Refining Logistics, LP (WNRL): $24.04

President and CEO Jeff A. Stevens acquired 31,800 shares of this oil and gas pipelines company, paying $24.36 per share for a total amount of $774,759. Mr. Stevens increased his stake by 29.88% to 138,226 shares with this purchase.

You can view the list of recent insider transactions for Western Refining Logistics, LP here.

P/E: 18.02Forward P/E: 12.52Industry P/E: 28.76
P/S: 0.44Price/Book: N/AEV/EBITDA: 12.92
Market Cap: $1.14BAvg. Daily Volume: 76,94452 Week Range: $17.35 - $32.7

3. aTyr Pharma Inc. (LIFE): $4.19

Director Paul Schimmel acquired 202,840 shares of this biotech company, paying $3.64 per share for a total amount of $738,884. Mr. Schimmel increased his stake by 251.22% to 283,581 shares with this purchase. 77,400 of these shares were purchased indirectly through a trust.

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

P/E: N/AForward P/E: N/AIndustry P/E: N/A
P/S: N/APrice/Book: 0.77EV/EBITDA: 0.08
Market Cap: $99.21MAvg. Daily Volume: 372,15552 Week Range: $3.03 - $28.29

4. SeaChange International, Inc. (SEAC): $3.78

Shares of this software and media services company were acquired by 2 insiders:

  • Chief Executive Officer Edward Terino acquired 40,000 shares, paying $3.83 per share for a total amount of $153,000. Mr. Terino increased his stake by 21.00% to 230,475 shares with this purchase.

  • Director Steven Craddock acquired 25,000 shares, paying $3.90 per share for a total amount of $97,500. Mr. Craddock increased his stake by 42.21% to 84,233 shares with this purchase.

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

P/E: N/AForward P/E: 27Industry P/E: 35.69
P/S: 1.14Price/Book: 0.83EV/EBITDA: -6.31
Market Cap: $127.36MAvg. Daily Volume: 225,19552 Week Range: $3.7 - $7.93

5. Bank of the Ozarks, Inc. (OZRK): $43.74

Shares of this regional bank were acquired by 2 insiders:

  • Director Richard L. Cisne acquired 3,700 shares, paying $44.29 per share for a total amount of $163,863. Mr. Cisne increased his stake by 4.98% to 77,950 shares with this purchase.

  • Director John B. Reynolds acquired 750 shares, paying $43.64 per share for a total amount of $32,730. Mr. Reynolds increased his stake by 4.19% to 18,649 shares with this purchase.

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

P/E: 20.93Forward P/E: 13.93Industry P/E: 15.67
P/S: 8.47Price/Book: 2.69EV/EBITDA: N/A
Market Cap: $3.97BAvg. Daily Volume: 1,322,64052 Week Range: $35.87 - $54.96

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

Notable Insider Sales:

1. Bed Bath & Beyond Inc. (BBBY): $48.04

Co-Chairman Warren Eisenberg sold 959,837 shares of this retail chain for $47.56, generating $45.65 million from the sale. 165,970 of these shares were sold as a result of exercising options immediately prior to the sale and 321,126 shares were sold indirectly by Mr. Eisenberg's spouse.

You can view the list of recent insider transactions for Bed Bath & Beyond Inc. here.

P/E: 9.5Forward P/E: 9.19Industry P/E: 17.78
P/S: 0.64Price/Book: 2.99EV/EBITDA: 5.1
Market Cap: $7.86BAvg. Daily Volume: 2,279,39052 Week Range: $41.26 - $74.21

2. QVC Group (QVCA): $26.04

Director Mark C. Vadon sold 855,000 shares of this online commerce company for $25.82, generating $22.08 million from the sale. These shares were sold indirectly by Lake Tana LLC.

You can view the list of recent insider transactions for QVC Group here.

P/E: 13.79Forward P/E: 16.28Industry P/E: 52.82
P/S: N/APrice/Book: 1.76EV/EBITDA: N/A
Market Cap: $12.18BAvg. Daily Volume: 2,255,06052 Week Range: $22.51 - $31.62

3. ServiceNow, Inc. (NOW): $63.28

Shares of this software-as-a-service provider were sold by 2 insiders:

  • Chief Product Officer Frederic B. Luddy sold 150,000 shares for $62.92, generating $9.44 million from the sale. These shares were sold indirectly through a trust.

  • Chief Revenue Officer David Schneider sold 30,900 shares for $63.62, generating $1.97 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 ServiceNow, Inc. here.

P/E: N/AForward P/E: 63.28Industry P/E: 23.24
P/S: 10.11Price/Book: 17.87EV/EBITDA: -92.84
Market Cap: $10.17BAvg. Daily Volume: 2,884,87052 Week Range: $46 - $91.28

4. JPMorgan Chase & Co. (JPM): $61.87

Shares of this JP Morgan were sold by 4 insiders:

  • Chief Operating Officer Matthew E. Zames sold 45,144 shares for $61.77, generating $2.79 million from the sale.

  • Executive Vice President Gordon Smith sold 32,096 shares for $62.01, generating $1.99 million from the sale.

  • Managing Director Daniel E. Pinto sold 28,837 shares for $62.38, generating $1.79 million from the sale.

  • Chief Financial Officer Marianne Lake sold 13,684 shares for $62.41, generating $854,064 from the sale.

You can view the list of recent insider transactions for JPMorgan Chase & Co. here.

P/E: 10.31Forward P/E: 9.68Industry P/E: 12.43
P/S: 2.56Price/Book: 1.04EV/EBITDA: N/A
Market Cap: $226.63BAvg. Daily Volume: 20,161,90052 Week Range: $50.07 - $70.61

5. Palo Alto Networks, Inc. (PANW): $140.66

Shares of this network security company were sold by 2 insiders:

  • CTO Nir Zuk sold 30,000 shares for $151.25, generating $4.54 million from the sale.

  • Director Asheem Chandna sold 15,000 shares for $141.26, generating $2.12 million from the sale. These shares were sold indirectly through a trust.

You can view the list of recent insider transactions for Palo Alto Networks, Inc. here.

P/E: N/AForward P/E: 53.89Industry P/E: 17.32
P/S: 10.81Price/Book: 20.98EV/EBITDA: -98.21
Market Cap: $12.43BAvg. Daily Volume: 2,326,75052 Week Range: $111.09 - $200.55

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

Disclaimer Clients of Signal Partners, LLC and I may have positions in any of these stocks at any time. Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.

Connect with me on LinkedIn: http://www.linkedin.com/in/asifsuria or follow me on Twitter @asifsuria

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