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Monster Energy Stocks Plummet, Insider Trades Reported
Posted by: Dianne Tordillo (IP Logged)
Date: October 23, 2012 05:27PM
As news circulated about five cases of deaths potentially linked to Monster Beverage Corp. (MNST), currently being investigated by the US Food and Drug Administration, Monster shares have dropped more than 11 percent today.
View this data on GuruFocus Interactive Charts.
The stock is currently trading at $40.85, almost $20 lower from a week ago.
GuruFocus Real Time Insider Trades indicate that the latest recorded insider activity was a third quarter purchase by Monster director, Sydney Selati, of a total of 88 shares, bringing her total holding of the company up to 18,400; this transaction makes up one of only two purchases in its recorded insider trading history dating back to 2007.
The rest of the recorded Monster trading activity has been sells.
Most of the sells that permeate prior fiscal quarters were done by Monster chairman and CEO Rodney Sacks, and Monster vice chairman and president, Hilton Schlosberg, selling as much as three times in one quarter. Despite the frequent reductions to their shareholding, both Sacks and Schlosberg proceed to own more than 22 million shares to date.
It has been four months since the last batch of insider sells have been recorded; the latest sells comprised of Selati’s $709,000 transaction, Senior Vice President Kelly Thomas’ $1.2 million transaction, and Sacks’ and Schlosberg’s $32.4 million transaction each.
Although selling activity has died down for now, SEC filings indicate that several insiders have taken part in exercising their stock options recently.
Schlosberg, Sacks, Thomas and Monster Beverage Division President, Mark Hall, have all exercised their stock option in September alone.
Monster Beverage stocks have been on a downward trend since reaching its one-year peak on June 18, steadily sloping negatively after that, with its sharpest drop between Aug, 7-13 at about $15.
Several Gurus have reduced their shares of Monster since the start of the year.
Jean-Marie Eveillard of First Eagle Investment Management LLC and Columbia Wagner both reduced a quarter or more of its shares of Monster in the second quarter. Jim Simons of Renaissance Technologies LLC reduced his shareholding down 50 percent in the first quarter.
The following Gurus have sold out their Monster shares completely: Steven Cohen of SAC Capital Advisors, John Burbank of Passport Capital, Jeremy Grantham of GMO LLC and Bruce Kovner of Caxton Associates.
Paul Tudor Jones also sold out of his shares of Monster in the first quarter, after keeping it on his portfolio since 2009. He, however, bought 5,700 shares back in the end of the second quarter.
Monster has received much scrutiny after the mother of a 14-year-old girl who died last December, has filed a wrongful death suit against the energy beverage titan, alleging that the caffeine content in Monster Energy caused her daughter’s cardiac arrest and death.
The lawsuit was filed through the Superior Court of California, Riveside County, which listed seven different counts of complaints against the corporation including failure to appropriately list its caffeine content on its labeling and fraud due to concealment, suppression or omission of material facts, in this case, failure to warn about the risks that come with consuming its energy drinks.
About a week before her death, Maryland-native Anais Fournier went to a local mall for two consecutive days where she consumed a 24-oz. Monster Energy drink both times, according to the court filing.
The lawsuit triggered FDA to hold an investigation, as well as a confirmation that there have been five cases reported that suggest people have died due to energy drinks.
In its second quarter financial report, Monster Beverage reported a 28.7 percent increase in gross sales compared to the same period last year. Its net income also increased 31 percent to $0.59 per diluted share compared to last year’s $0.45 per diluted share.
“We are continuing to expand into new international markets with retail sales of Monster Energy commencing in Ecuador, Hong Kong, Japan, Macau and Slovenie in the second quarter,” CEO Sacks said in a press release posted in August. “We are planning launches in additional international markets later this year and in 2013.”
Monster Beverage Corp. has a market cap of $9.41 billion, a P/E (ttm) ratio of 28.1, a P/S ratio of 5.5 and a P/B ratio of 28.1. Besides a Financial Strength rank of 9 out of 10 and a Profitability and Growth rank of 8 out of 10, it also has a Business Predictability rank of 3 out of 5 stars.
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In 2010, GuruFocus held a three-part Insider Research series examining the relevance of Insider trading activity within companies. The research revealed many interesting facts about incorporating the gathered information to personal investment strategies, as it contributed to the development in the Insider tracking and alert tools offered on GuruFocus. You can view the three-part research series by visiting the following links:
Guru Insider Research (I): The Summary of Previous Research Results
Guru Insider Research (II): Can Aggregated Insider Trading Activities Predict the Market?
Guru Insider Research (III): Can Aggregated Insider Trading Activities Predict the Market of Different Sectors?
Guru Discussed: Bruce Kovner: Current Portfolio, Stock Picks
Jeremy Grantham: Current Portfolio, Stock Picks
Stocks Discussed: MNST,