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Insider Weekends – June 10, 2011

Welcome to the one year anniversary edition of Insider Weekends. Insider buying increased with insiders purchasing $90.03 million of their stock last week when compared to $24.5 million in the week prior. A large part of this spike in insider buying was related to the CEO of Tesla Motors (TSLA) buying shares through a private placement as discussed below. Selling on the other hand decreased with insiders selling $582.9 million worth of stock compared to $847.71 million 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 6.47. In other words, insiders sold more than 6 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the week prior when the ratio stood at 34.59. 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 June 10, 2011

Insider Sell Buy Ratio June 10, 2011

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. Tesla Motors, Inc. (TSLA): $27.86

Shares of this electric car manufacturer were acquired by 2 insiders:

  • Chief Executive Officer Elon Musk acquired 1,416,000 shares, paying $28.76 per share for a total amount of $40.7 million. This was a private placement through a trust.
  • Director Herbert Kohler acquired 637,475 shares, paying $28.76 per share for a total amount of $18.3 million. This was a private placement through a trust.

I normally tend to exclude private placements but decided to include this one since Mr. Musk was supposed to personally sell a million shares when the company went public last June. Hence this purchase less than a year later piqued my interest. I wrote a brief post about Tesla following its IPO titled A Tale of Two IPOs. The company continues to lose cash as expected but both revenue and gross profits have jumped over the last two quarters. With the introduction of the Nissan Leaf and the Chevy Volt, competition in the mid-segment of the electric car market may be fierce by the time Tesla rolls out its slightly more affordable cars.

You can view the list of recent insider transactions for Tesla Motors, Inc. here.

P/E: N/A Forward P/E: N/A Industry P/E: 11
P/S: 19.59 Price/Book: 15.74 EV/EBITDA: -18.2
Market Cap: $2.87B Avg. Daily Volume: 1,563,120 52 Week Range: $14.98 – $36.42

2. Overseas Shipholding Group Inc. (OSG): $25.59

Shares of this shipping tanker company were acquired by 3 insiders:

  • Director Oudi Recanati acquired 138,124 shares, paying $25.35 per share for a total amount of $3.5 million. Mr. Recanati increased his stake by 23.35% to 729,536 shares with this purchase.
  • Director Charles Fribourg acquired 60,000 shares, paying $24.93 per share for a total amount of $1,496,047.
  • President and CEO Morten Arntzen acquired 3,154 shares, paying $26.55 per share for a total amount of $83,739.

OSG has been hurt in recent months due to falling oil tanker rates and a nearly 70% exposure to the spot market. These purchases are interesting in light of the fact that the billionaire chairman of rival oil tanker company Frontline (FRO) expects the market for tankers to crash over the next year or two as you can read in this article. In March 2008, Frontline announced that it owned 5.2% of rival OSG and had forward contracts that if exercised would bump its stake in OSG to 9.6%. There was speculation that Frontline may make a bid for OSG but such a bid has yet to materialize.

OSG sports a dividend yield of 6.9% but the dividend may not be sustainable given that the company has been reporting losses for several quarters and has $1.78 billion in net debt on its balance sheet.

Four insiders including three directors and the CEO have purchased shares since June.

You can view the list of recent insider transactions for Overseas Shipholding Group Inc. here.

P/E: N/A Forward P/E: N/A Industry P/E: 14.1
P/S: 0.75 Price/Book: 0.44 EV/EBITDA: 45.61
Market Cap: $779.62M Avg. Daily Volume: 722,983 52 Week Range: $25.82 – $44.98

3. NuStar Energy L.P. (NS): $64.15

Director William E. Greehey acquired 25,655 shares of this oil & gas pipelines company, paying $62.95 per share for a total amount of $1.6 million. Mr. Greehey increased his stake by 1.87% to 1,395,945 shares with this purchase.

Mr. Greehey started buying shares last month and has picked up 155,000 shares for a total of $9.8 million since then. Several insiders have exercised options over the last six months without turning around and selling them immediately as you can see from this page.

You can view the list of recent insider transactions for NuStar Energy L.P. here.

P/E: 19.68 Forward P/E: 17.29 Industry P/E: 21.98
P/S: 0.87 Price/Book: 1.57 EV/EBITDA: 13.51
Market Cap: $4.14B Avg. Daily Volume: 154,500 52 Week Range: $55.51 – $71.69

4. Two Harbors Investment Corp. (TWO): $10.43

Shares of this mortgage REIT were acquired by 5 insiders:

  • Director William W. Johnson acquired 55,000 shares, paying $10.64 per share for a total amount of $584,950. Mr. Johnson increased his stake by 33.29% to 220,233 shares with this purchase.
  • Vice President, Co-CIO Steven Kuhn acquired 50,000 shares, paying $10.67 per share for a total amount of $533,600. Mr. Kuhn increased his stake by 83.33% to 110,000 shares with this purchase.
  • Director Brian Taylor acquired 20,000 shares, paying $10.68 per share for a total amount of $213,600. Mr. Taylor increased his stake by 66.67% to 50,000 shares with this purchase.
  • Director William Reid Sanders acquired 10,000 shares, paying $10.66 per share for a total amount of $106,600. Mr. Sanders increased his stake by 24.34% to 51,082 shares with this purchase.
  • Vice President, Co-CIO William Roth acquired 2,000 shares, paying $10.69 per share for a total amount of $21,380. Mr. Roth increased his stake by 4.00% to 52,000 shares with this purchase.

We have mentioned Two Harbors several times in the past as a number of insiders have been actively buying stock since last August as you can see from this page. As is often the case with mortgage REITs, the stock sports a dividend yield of 15%.

P/E: 6.02 Forward P/E: N/A Industry P/E: 26.23
P/S: 7.76 Price/Book: 0.71 EV/EBITDA: N/A
Market Cap: $475.73M Avg. Daily Volume: 1,670,620 52 Week Range: $8.13 – $11.51

5. Valhi, Inc. (VHI): $46.11

Chairman of the Board Harold C. Simmons acquired 26,775 shares of this chemicals and components products company, paying $43.47 per share for a total amount of $1.2 million. These shares were acquired indirectly through Kronos Worldwide Inc. Mr. Simmons is also the Chairman of Kronos Worldwide.

Mr. Simmons has been consistently buying shares of Valhi over the last several weeks but his purchase on June 08, 2011 has been the largest since last August as you can see from this page.

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

P/E: 70.72 Forward P/E: N/A Industry P/E: 15.25
P/S: 3.04 Price/Book: N/A EV/EBITDA: 24.39
Market Cap: $5.22B Avg. Daily Volume: 31,866 52 Week Range: $11.03 – $48.34

6. Parkway Properties Inc. (PKY): $15.94

Chairman of the Board James R. Heistand acquired 50,000 shares of this office REIT, paying $17.33 per share for a total amount of $866,265. Mr. Heistand increased his stake by 72.67% to 118,802 shares with this purchase.

Revenue at Parkway declined in both 2009 and 2010 before showing sequential quarter growth in Q1 2011. The company sports a yield of just 1.7%, which is well below the average 4.07% yield of all REITs and a 3.06% average for office REITs as of May 2011. Even though earnings per share have been negative, funds from operations (FFO) was $0.59 in Q1 2011 and between $2.35 and $2.50 for full year 2011 primarily driven by depreciation and amortization. The company trades for 0.89 times tangible book value.

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

P/E: N/A Forward P/E: 6.7 Industry P/E: 37.38
P/S: 1.39 Price/Book: 0.94 EV/EBITDA: 11.01
Market Cap: $350.07M Avg. Daily Volume: 90,026 52 Week Range: $13.3 – $18.63

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

Notable Insider Sales:

1. Travelzoo Inc. (TZOO): $57.47

Director Ralph Bartel sold 567,955 shares of this travel and entertainment internet company for $70.50, generating $40.04 million from the sale. These shares were sold indirectly through Azzurro Capital Inc, a company that is 100% owned by Mr. Bartel.

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

P/E: N/A Forward P/E: 24.56 Industry P/E: 23.54
P/S: 8.05 Price/Book: 29.87 EV/EBITDA: 30.41
Market Cap: $946.01M Avg. Daily Volume: 1,286,960 52 Week Range: $11.6 – $103.8

2. Tiffany & Co. (TIF): $71.41

Shares of this upscale jewelry retailer were sold by 4 insiders:

  • Chairman and CEO Michael Joseph Kowalski sold 69,347 shares for $73.04, generating $5.07 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Exec, Vice President and CFO James N. Fernandez sold 43,000 shares for $74.09, generating $3.2 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Executive Vice President Beth O. Canavan sold 10,000 shares for $74.00, generating $740,000 from the sale.
  • Director Abby F. Kohnstamm sold 7,500 shares for $73.24, generating $549,300 from the sale.

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

P/E: 23.81 Forward P/E: 17.55 Industry P/E: 15.13
P/S: 2.89 Price/Book: 4.07 EV/EBITDA: 11.78
Market Cap: $9.12B Avg. Daily Volume: 2,025,640 52 Week Range: $35.81 – $76.88

3. Acme Packet, Inc. (APKT): $67.29

Shares of this communication equipment company were sold by 2 insiders:

  • Chief Technology Officer Patrick J. Melampy sold 60,000 shares for $72.59, generating $4.4 million from the sale.
  • VP Professional Services Erin Medeiros sold 7,000 shares for $68.54, generating $479,757 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.

Voluntary Disclosure: I have a put backspread position in APKT where I sold $75 June puts and simultaneously purchased a larger quantity of $70 puts from the premium generated.

You can view the list of recent insider transactions for Acme Packet, Inc. here.

P/E: 97.66 Forward P/E: 44.86 Industry P/E: 15.87
P/S: 17.83 Price/Book: 12.55 EV/EBITDA: 49.32
Market Cap: $4.41B Avg. Daily Volume: 2,196,630 52 Week Range: $26 – $84.5

4. The Washington Post Company (WPO): $416.14

Shares of this newspaper and education services company were sold by 2 insiders:

  • CEO and COB Donald Graham sold 11,203 shares for $423.01, generating $4.7 million from the sale. These shares were sold indirectly from trusts set up for the siblings of Mr. Graham.
  • Senior Vice President Ann Mcdaniel sold 150 shares for $417.55, generating $62,632 from the sale.

You can view the list of recent insider transactions for The Washington Post Company here.

P/E: 14.58 Forward P/E: 24.54 Industry P/E: 15.19
P/S: 0.73 Price/Book: 1.25 EV/EBITDA: 3.8
Market Cap: $3.30B Avg. Daily Volume: 32,663 52 Week Range: $295.56 – $477.74

5. FEI Co. (FEIC): $37.7

Shares of this scientific & technical instruments company were sold by 4 insiders:

  • President, CEO Don R. Kania sold 75,000 shares for $40.27, generating $3.02 million from the sale. 48,860 of these shares were sold as a result of exercising options immediately prior to the sale.
  • VP-General Counsel Bradley J. Thies sold 33,500 shares for $38.15, generating $1.3 million from the sale. 30,500 of these shares were sold as a result of exercising options immediately prior to the sale.
  • Executive VP, CFO Raymond A. Link sold 4,739 shares for $38.17, generating $180,893 from the sale.
  • Director Jan C. Lobbezoo sold 600 shares for $40.20, generating $24,120 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 FEI Co. here.

P/E: 21.64 Forward P/E: 14.67 Industry P/E: 18.53
P/S: 2.15 Price/Book: 2.14 EV/EBITDA: 10.55
Market Cap: $1.46B Avg. Daily Volume: 467,118 52 Week Range: $16.51 – $40.24

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

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