INSIDER PURCHASES
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CHAIN BRIDGE INVESTING
JANUARY 31, 2010
LARGE INSIDER PURCHASES FROM JANUARY 25 - 29, 2010
Chain Bridge Investing (“CB”), on a weekly basis, will shift through the significant purchases — defined as an investment of $100,000 or more — that high level managers make in the companies they operate. While an insider’s purchase of his company is not a guarantee that the stock price will increase, a significant purchase can merit additional research. An insider that places a large sum of his money into the company he is operating, usually has confidence in its future financial results and its market position. Furthermore, the larger the insider’s ownership the more likely the insider will take corporate actions that are in favor of the shareholder, thus another reason for an investor seeking to allocate capital to prefer insider purchases. Nevertheless, insiders are not always correct, or perhaps, the information/edge giving them the confidence to buy more shares is fleeting. At times, insiders can become blind to the inadequacies and weaknesses of their companies. As a result, CB uses this process as a means of gathering new potential investment ideas that could merit future research after an initial quick analysis is performed. The significant insider purchases of last week tend to focus on the regional banks. The regional banking industry remains depressed an may be good hunting grounds for contrarian-value investors. Enterprise Financial Services (“EFSC”) is making its second appearance on this weekly report (see the report on January 18, 2010). While the Bank of South Carolina, which was on the report from the previous week, did not have any significant purchases last week, its chief executive officer accumulated an additional $73,899 of shares. The largest purchase of last week was by the chief operating officer of Hovnanian Enterprises, Inc. (“HOV”), a homebuilder. Like regional banks, many homebuilders continue to be depressed at this time. On the surface, its hard to disagree with the depressed valuation given the fact that there is much uncertainty regarding home prices and sales once the government starts removing its support from the industry. Still, the contrarian CB believes the HOV may warrant further consideration. If CB discovers any future investment potential in any of the above mentioned companies, it will be posted on www.chainbridgeinvesting.com. Furthermore, CB totaled the amounts of purchases and sales from insiders during January 25th through January 29th. Insiders, in this context, are defined as anyone working in the daily operations of the company as well as the chairman of the board of directors, thus pure directors and 10% owners are not included. The amount of purchases by insiders totaled $4,347,275, while the amount of sales by insiders totaled $88,048,882 for the observed period. This represents a sell-to-buy ratio of 20.5x, and continues to demonstrate a lack of confidence within the companies regarding the future. As a final note, these listings are in no way to be construed as financial advice or investment recommendations. These listings are meant to provide ideas to readers for their own research and show parts of the investment research process of CB. All data is pulled from Stock Pro Investor and Yahoo! Finance. CB is not an investment advisor, please read the disclaimer at www.chainbridgeinvesting.com/disclaimer/.
INSIDER PURCHASES © 2010 Chain Bridge Investing
INSIDER
PURCHASES
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CHAIN BRIDGE INVESTING
PAGE 2 JANUARY 31, 2010
EXHIBITS
Exhibit A: Companies with Large Insider Purchases from January 25 - 29, 2010 Date 1/28/2010 1/27/2010 1/27/2010 1/26/2010 1/26/2010 1/26/2010 1/25/2010 1/25/2010 Insider Lowell C. McAdam Leonard M. Tannenbaum Robert J. McCormick Gerald H. Lipkin Stephen D. Steinour John A. Moore Thomas J. Pellerito Linda Hanson Title EVP and CEO - Veriz. Wrls. President & CEO President & CEO, Chairman President & CEO, Chairman President & CEO, Chairman President & CEO COO President Shares Trade Price Cost (000s) Company Ticker P/E P/FCFPS 14,989 $ 9.25 $ 138.65 Verizon Communications Inc. VZ 15.0x 9.0x 25,000 11.20 280.00 Fifth Street Finance Corp. FSC 43.9x nm 18,077 6.03 109.00 TrustCo Bank Corp NY TRST 16.7x 1.8x 56,610 13.76 778.95 Valley National Bancorp VLY 21.1x 46.9x 102,000 4.87 496.74 Huntington Bancshares Incorpor HBAN nm 1.3x 25,000 6.37 159.25 Acorn Energy, Inc. ACFN nm nm 300,000 3.55 1,065.00 Hovnanian Enterprises, Inc. HOV nm nm 14,989 9.25 138.65 Enterprise Financial Services EFSC nm 3.5x Oper. LT Debt/ Margin Total Cap. 13.0% 57.0% -51.8% 0.0% 59.1% 0.0% 56.3% 71.4% -29.1% 40.5% -23.6% 0.0% -76.7% 123.6% 16.7% 33.8%
* CEO = Chief Executive Officer, P/E = Price/Earnings Ratio, P/FCFPS = Price/Free-Cash-Flow-Per-Share, Oper. Margin = Operating Margin; LT Debt/Total Cap. = Long-Term Debt/Total Capital, nm = not material; CFO = Chief Financial Officer; EVP = Executive Vice President; COO = Chief Operating Officer.
Exhibit B: Companies with Large Insider Purchases from January 25 - 29, 2010
# 1 2 3 4 5 6 7 8 Company Name Verizon Communications Inc. Fifth Street Finance Corp. TrustCo Bank Corp NY Valley National Bancorp Huntington Bancshares Incorpor Acorn Energy, Inc. Hovnanian Enterprises, Inc. Enterprise Financial Services Ticker VZ FSC TRST VLY HBAN ACFN HOV EFSC Industry Communications Services Misc. Financial Services Regional Banks Regional Banks Regional Banks Computer Services Construction Services Regional Banks Exchange New York New York Nasdaq New York Nasdaq Nasdaq New York Nasdaq Website http://www22.verizon.com/ http://www.fifthstreetfinance.com/ http://www.trustcobank.com/ http://www.valleynationalbank.com/ https://www.huntington.com/ http://www.acornenergy.com/ http://www.khov.com/ http://www.enterprisebank.com Country United States United States United States United States United States United States United States United States
Exhibit C: Companies with Large Insider Purchases from January 25 - 29, 2010
# 1 2 3 4 5 6 7 8 Company Name Verizon Communications Inc. Fifth Street Finance Corp. TrustCo Bank Corp NY Valley National Bancorp Huntington Bancshares Incorpor Acorn Energy, Inc. Hovnanian Enterprises, Inc. Enterprise Financial Services Price $ 29.42 10.95 6.00 13.75 4.79 6.27 3.64 9.34 % of 52Mkt. Cap. Wk. High (m) 86.2% $ 83,180 90.9% 418 78.6% 470 88.7% 2,153 77.5% 3,572 75.3% 72 63.3% 286 73.0% 117 Debt (m) $ 62,256 122 3,128 3,634 1 1,829 85 Cash (m) $ 2,009 113 40 306 1,521 12 427 13 EV (m) $ 143,427 305 552 4,974 5,684 61 1,688 190 Short Gross Ratio Margin 3.1x 58.9% 5.3x 72.1% 38.0x nm 16.1x nm 2.1x nm 1.8x 41.7% 7.2x 4.0% 11.2x nm Oper. RoA RoE Margin (LTM) (LTM) 13.0% 1.6% 8.6% -51.8% -0.4% -0.4% 59.1% 0.8% 11.2% 56.3% 0.7% 8.3% -937.2% -6.3% -91.9% -23.6% -11.9% -17.5% -76.7% -35.1% 467.5% 16.7% -4.2% -64.8%
Exhibit D: Companies with Large Insider Purchases from January 25 - 29, 2010
# 1 2 3 4 5 6 7 8 Company Name Verizon Communications Inc. Fifth Street Finance Corp. TrustCo Bank Corp NY Valley National Bancorp Huntington Bancshares Incorpor Acorn Energy, Inc. Hovnanian Enterprises, Inc. Enterprise Financial Services PE PE - 3 Yr. P/E PE Yr+0 Yr+1 Avg. EPS PEG 15.0x 12.5x 11.6x 16.1x 2.5 43.9x 9.7x 8.3x 64.9x 1.4 16.7x 16.2x 11.8x 11.7x nm 21.1x 19.0x 15.5x 17.0x 3.2 nm nm 14.6x NA nm nm nm nm 12.3x nm nm nm nm NA nm nm 30.1x 15.2x 8.8x 2.9 P/S .79x 8.39x 3.92x 4.55x 10.04x 2.32x .18x 2.48x % S 1 Yr. S 3 Yr. EV/ LT Debt/ Net Debt/ P/B P/ FCFPS CapEx/S Gwth CAGR EBITDA Total Cap. EBITDA 1.9x 9.1x 15.8% 10.7% 6.9% 4.05x 57.0% 1.70x 1.0x nm 0.0% 50.0% #VALUE! nm 0.0% nm 1.9x 1.8x 5.6% -9.8% 4.4% nm 0.0% nm 1.7x 45.8x nm -2.4% 0.2% nm 71.4% nm .9x 1.2x nm -20.0% 2.6% nm 40.5% nm 2.1x nm 4.5% 263.2% 70.2% -20.17x 0.0% nm .0x nm 0.1% -51.7% -36.2% -6.29x 123.6% nm .9x 3.6x 1.0% -3.7% 20.1% nm 33.8% nm
* Abbreviations: EV = Enterprise Value; M = Millions; LTM = Latest-12 Months; RoA = Return on Assets; RoE = Return on Equity; P/E = Price/Earnings; PEG = Price/Estimated Earnings Growth; P/S = Price/Sales; P/B = Price/Book; P/FCFPS = Price/Free Cash Flow per Share; CapEx = Capital Expenditures; S = Sales; CAGR = Compounded Annual Growth Rate; EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization; NM = Not Material. * All company financial data is downloaded from Yahoo and Stock Investor Pro, Chain Bridge Investing does not guarantee the accuracy of these figures and encourages readers to do their own research. This presentation is meant to provide the reader with some research ideas. * Due to formatting some company names may be abbreviated.
INSIDER PURCHASES © 2010 Chain Bridge Investing