Insider Trading Report Edition 304: Notable Buys And Sales

Welcome to edition 304 of Insider Weekends. 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

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.

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Disclosure: Clients of Signal Partners, LLC  and I may have positions in ...

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