Welcome to edition 202 of Insider Weekends. Insider buying declined sharply last week with insiders purchasing $16.74 million of their stock compared to $48.69 million in the week prior. Selling on the other hand more than doubled with insiders selling $1.38 billion of stock last week compared to $502.48 million in the week prior. Despite the drop in insider buying there were some interesting purchases this week.
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 102.36. In other words, insiders sold more than 102 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 10.32. 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 May 2, 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. Sonus Networks, Inc. (SONS): $3.18
Shares of this networking equipment manufacturer were acquired by 2 insiders:
- CEO and President Raymond P. Dolan acquired 1,000,000 shares, paying $2.98 per share for a total amount of $2.98 million. Mr. Dolan increased his stake by 48.11% to 3,078,674 shares with this purchase.
- CFO Mark T. Greenquist acquired 15,000 shares, paying $2.95 per share for a total amount of $44,247. Mr. Greenquist increased his stake by 6.00% to 265,000 shares with this purchase.
This purchase caught my attention for several reasons beyond the size of the CEO’s purchase. The company is in the midst of a turnaround and saw 12% revenue growth last quarter, an increase in gross margin and positive operating margins. The company is targeting an increase in operating margin to 10% in 2015 on double digit revenue growth.
The company has purchased 40 million shares representing 14% of outstanding shares since launching a buyback program last July. This includes the purchase of 21.5 million shares for $75 million from their largest investor through a recent secondary offering. The company still has $40 million left in its current buyback plan. The company has a strong balance sheet with over $208 million in net cash and investments, a quick ratio of 2.8 and a current ratio of 3.06.
