As Peter Lynch has been quoted as saying many times: “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.” So when insiders and gurus both buy into a company, it’s time to take notice. As a previous article written by GuruFocus discusses, insider buys of undervalued companies can sometimes lead to large gains, and value Gurus tend to buy stocks that are undervalued. So by finding the stocks that Gurus and insiders are buying, you increase your chance of finding a winner.
As of March 31, David Einhorn held 38 stocks valued at over $6.5 billion. The following three companies are Einhorn’s most active insider buying stocks.
Tessera Technologies (TSRA)
Tessera Technologies develops, invests in, licenses and delivers innovative miniaturization technologies and products for next-generation electronic devices. The company’s micro-electronics solutions enable smaller, higher-functionality devices through chip-scale and wafer-level packaging, silicon-level interconnect and 3D packaging, as well as silent air cooling technology.
Tessera Technologies has a market cap of $1.11 billion; its shares were traded at around $20.85 with a P/E ratio of 187.20 and P/S ratio of 5.00. The dividend yield of Tessera stocks is 1.90%.
Einhorn and Tessera:
Einhorn bought into Tessera Technologies in the fourth quarter of 2011, and since then he has held 695,580 shares of the company’s stock. When Einhorn bought in 2011, he paid an average price of $15.14 per share. Since this buy, Einhorn has seen a 37.7% increase in Tessera’s share price.
Einhorn’s holdings in Tessera only account for 0.2% of his total portfolio and 1.33% of Tessera’s shares outstanding.
Tessera has seen one insider buy in the company since 2008 and this buy came during in a time of alteration for Tessera.
Director Christopher Seams bought 20,000 shares of Tessera at an average price of $21.11 per share. This cost the director a total of $422,200. Seams now owns 300,000 shares of Tessera. Since his buy, the price per share has declined 1.23%.
Financials and Recent Happenings:
On May 30, Tessera replaced its CEO with a new, interim CEO. The new CEO, Thomas Lacey, will serve in an interim capacity until a replacement is found. The former CEO, Richard Hill, will continue to serve as the firm’s board chairman. Earlier this month Lacey was elected as a director of the company’s board.
The management and board changes have come about through an agreement with minor shareholder Starboard Value, a hedge fund that has been strongly advocating for change at the company for some time. The agreement comes in the midst of a proxy fight for control of the company.
Tessera offered a special dividend of $0.30 to its shareholders of the record as of May 23. The company hinted that this would not be the only special dividend they offer in the near future. The company pointed out that additional special dividend could come on the back of future “episodic revenues.”
The company also announced that it will revamp its capital allocation strategy and commit anywhere up to $16 million to a program of share buybacks that could last as long as one year.
The analysis on Tessera reports:
· The gross margin has been in a long-term decline. The average rate of decline per year is 1.6%.
· Tessera has no debt.
· The price of Tessera is nearing a two-year high of $20.93.
· The P/E ratio has hit a 10-year high.
· The P/S ratio is nearing a five-year high of 5.23.
The Peter Lynch Valuation of Tessera shows that the company appears to be overvalued:
There are currently six gurus that hold stake in Tessera. Click here to see their holding histories of the company.
Fifth Street Finance Corp. (FSC)
Fifth Street Finance is a specialty finance company that lends to and invests in small and mid-sized companies in connection with investments by private equity sponsors.
Fifth Street Finance has a market cap of $1.27 billion; its shares were traded at around $10.25 with a P/E ratio of 10.50 and a P/S ratio of 6.10. The dividend yield of Fifth Street stocks is 11.10%. The company had an annual average earnings growth of 36.7% over the past five years.
David Einhorn currently owns 1,998,692 shares of Fifth Street Finance, representing 0.34% of his total portfolio and 1.89% of Fifth Street’s shares outstanding. Einhorn has held the company for a while, and the last time he made a change to his holdings in Fifth Street was in the second quarter of 2011 when he decreased his position slightly. As of March 31 Einhorn’s Greenlight Capital was the fifth largest institutional holder of Fifth Street stock.
Einhorn’s holding history:
Einhorn first bought into Fifth Street in the first quarter of 2009. At this time he bought 2,259,492 shares at an average price of $7.74.
In the past month, four different insiders made buys into FSC.
CEO Leonard Tannenbaum made the most significant buy on May 29. The CEO bought 25,000 shares at $10.37 per share. This transaction cost him a total of $259,250. Since his buy, the share price has decreased 1.64%.
On May 23 President and Secretary Bernard Berman bought 1,000 shares at $10.47 per share. This cost Berman a total of $10,470. Since his buy, the price per share has dropped -2.58%.
On May 16 CIO Ivelin Dimitrov also bought 1,000 shares. His shares traded at an average price of $10.71 per share for a total transaction amount of $10,701. Since the CIO’s buy, the price per share has dropped 4.76%.
The first buy of May came on the 15th as Director Richard Dutkiewicz bought 4,000 shares at an average price of $10.79 per share. This cost Dutkiewicz a total of $43,160. Since his buy, the price has dropped 5.47%.
Financials and Recent Happenings:
This morning Fifth Street announced the closing of their acquisition of Healthcare Finance Group. FSC invested $114 million to effect the acquisition. Fifth Street expects the acquisition to be immediately accretive to net investment income. Fifth Street named Dan Chapa the new CEO of Healthcare Finance Group.
In May, Fifth Street declared a dividend of $0.0958 per share. The company also declared monthly dividends of the same price for the next three months.
Some of the first quarter financial highlights include:
· Net investment income for the quarter was $29.3 million or $0.28 per share, as compared to $22.8 million or $0.29 per share for the first quarter of 2012.
· The net asset value per share was $9.90 as of March 31, as compared to $9.88 as of Dec. 31.
· Net increase in net assets from operations for the first quarter was $31.8 million or $0.30 per share compared to $20.1 million or $0.25 per share for the first quarter 2012.
Historical price and P/E ratio graph:
According to the Peter Lynch Valuation of Fifth Street, the company appears to be undervalued:
David Einhorn and Jeremy Grantham are the only gurus that hold stake in FSC. Click here to see Jeremy Grantham’s holding history of Fifth Street.
State Bank Financial Corp. (NASDAQ:STBZ)
State Bank Financial Corporation through its subsidiary provides community banking services to individuals and businesses in the middle Georgia and metropolitan Atlanta markets. Products offered by the company include checking accounts, commercial accounts, savings accounts, retirement accounts, time deposits and various loans.
State Bank has a market cap of $485.164 million; its shares were traded at around $15.22 with a P/E ratio of 30.03 and a P/S ratio of 3.76. The dividend yield of State Bank is 0.79%.
Einhorn currently has 2,100,000 shares of State Bank Financial, representing 0.52% of his total portfolio. Einhorn bought these shares in the second quarter of 2011 at an average price of $16.90 per share. Since that buy, the price per share has dropped approximately 10% and is currently trading at $15.22 per share.
Einhorn’s history in State Bank Financial:
Greenlight Capital is the third largest institutional holder of State Bank. Their holdings represent 6.58% of State Bank’s shares outstanding.
Two insiders made notable buys in May.
Director John Houser bought 5,000 shares at $15.67 per share. This cost the director a total of $78,350. Houser currently holds approximately 117,450 shares of State Bank. Since this buy, the price per share has decreased 2.87%.
CEO and Chairman Joseph Evans bought 1,000 shares at $14.50 per share. This cost the CEO a total of $14,500. Since his buy, the price per share has increased 4.97%. Evans holds 243,300 shares of State Bank making him the largest major direct holder of State Bank stock.
Financials and Recent Happenings:
The company’s P/E and P/S ratios are close to three-year highs. The P/B ratio, on the other hand, is near a three-year low.
The Peter Lynch Valuation of State Bank shows that it appears to be overvalued:
During the last week of May, State Bank declared its fourth consecutive quarterly cash dividend.
David Einhorn, John Paulson, Chuck Royce and Private Capital all hold stake in State Bank. Click here to see these gurus’ holding histories of State Bank.
You can view David Einhorn’s complete list of stocks reporting insider trades here.
- CEO Buys, CFO Buys: Stocks that are bought by their CEO/CFOs.
- Insider Cluster Buys: Stocks that multiple company officers and directors have bought.
- Double Buys:: Companies that both Gurus and Insiders are buying
- Triple Buys: Companies that both Gurus and Insiders are buying, and Company is buying back.