Smart Money Investors Are Finally Selling Las Vegas Sands

Is Las Vegas Sands (NYSE: LVS  ) headed higher or lower? That's the question we ask when we evaluate insider buying and selling. We ask because how executives spend their paychecks is often a reflection of what they think of their companies' prospects.

Of course, not all buys are equal. According to two decades' worth of research from H. Nejat Seyhun compiled in his book Investment Intelligence from Insider Trading, buying is most predictive when it (a) comes from the CEO or other top-level executive, and (b) it's performed in bulk. Seyhun found buys of between 10,000 and 100,000 shares to be most informative.

How do Las Vegas Sands' managers measure up against Seyhun's benchmarks over the past year? See for yourself:

Insider Rating Bearish, sort of: Multiple insider sales, but at levels above where the stock trades presently. Also, sales by CEO Adelson.
Business Description A leading operator of casinos in the U.S. and Asia.
Recent Price $46.70
CAPS Stars (Out of 5) **
Percentage of Shares Owned by Insiders 50.28%
Net Buying (Selling)* ($3.63 million)
Last Buyer (% Increase) None over the past 12 months
Last Seller (% Decrease)

Charles Forman, Director

35,000 shares at $51.75 apiece on Dec. 1, 2010

(Reduced direct holdings by 17%.)

Competitors

Melco Crown Entertainment (Nasdaq: MPEL  )

MGM Resorts (NYSE: MGM  )

Wynn Resorts (Nasdaq: WYNN  )

Sources: Form 4 Oracle, Capital IQ (a division of Standard & Poor's), and Motley Fool CAPS. Data current as of Dec. 20.
* Open market sales and purchases only.

What we're tracking here, and why
Insider buying data can be confusing. Here, I'm concentrating only on buying and selling conducted in the open market. With most of these transactions, insiders control the timing. Other times they're buying or selling under the purview of a 10b5-1 plan. Either way, personal holdings are being bought and sold.

Those personal holdings matter the most -- they're the shares executives hold for investment, rather than compensation. Employee stock options are different; they're compensatory in the purest sense. I've stripped out options-related buying and selling from the calculations you see above.

The Foolish view: bearish, sort of
Some stocks seem perfect. Las Vegas Sands certainly does. Combine a massive growth opportunity with a reasonable valuation, rising margins, and institutional support and you've got what appears to be a formula for Big Returns. Almost.

Management is Las Vegas Sands' problem. Not only are returns on capital and equity declining, but directors and executives alike have been selling shares. Three separate insiders have sold since March. Two of those have sold large stakes.

Earlier this month, board member Charles Forman sold 35,000 shares, or 17% of his holdings, at $51.75 each. In November, executive vice president Robert Goldstein sold 33,824 shares, or 18% of his holdings, for $53.85 each. Both sales look like moves to diversify after Las Vegas Sands' remarkable 2010 run. (The stock has more than tripled year-to-date.)

But diversifying isn't dumping. For as much as I dislike large insider sales, calling Forman's and Goldstein's sales bearish is likely premature. CEO Sheldon Adelson still isn't selling, and he's sitting on a 15-bagger from big purchases made in March 2009. He also owns more than 50% of the company.

There's a reason for this. Las Vegas Sands hasn't fully capitalized on the massive growth opportunity that Asia represents. When it does, maybe then Adelson will take some profits. But not before; there's too much potential upside at stake.

Do you agree? Disagree? Log into Motley Fool CAPS today and tell us how you would rate Las Vegas Sands. You can also add the stock to your watchlist.

And if you want me to take a Foolish peek at the insider action of your favorite stock, email me here, reply to me on Twitter, or use the comments box below. I'll write this column as often as you, our readers, demand.

Melco Crown Entertainment is a Motley Fool Global Gains recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy has its eye on you.


Read/Post Comments (6) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 20, 2010, at 4:58 PM, cbotrader wrote:

    Dittos:

    I am still long from about $4.00 and have written several pieces on this topic.

    The sad part is that there is certainly nothing wrong with dissent, as that is what makes markets...but these articles are so moronic, as you put it...that I am starting to totally dismiss the commentary at Motley Fool, which I once enjoyed.

    If you are short LVS....you have been wrong...PERIOD! Perhaps you should listen to the voices of reason who have been right on this issue and even WHY we were right.

    I like Fools but lately there are too many morons here.

    Regards and happy holidays all.....I am going to spend some of my LVS winnings and buy myself a toy!

    As for Cramer.....he is a shill and a carnival barker....but he has a good gig and he makes a lot of money amusing the masses.

  • Report this Comment On December 20, 2010, at 5:09 PM, Chartel wrote:

    I'm neither a bull or a bear on LVS, but I work the stock. The high volatility creates lots of opportunities.

  • Report this Comment On December 20, 2010, at 5:35 PM, TMFMileHigh wrote:

    @mrkrazyk,

    Well, I guess this puts you in the running for Worst Comment Ever. Yeesh.

    Not only do you make it seem like you didn't read the story, but you offer nothing of substance to react to. How about a legitimate buy thesis at these levels? You know, something that would allow us to take you seriously?

    Here's hoping and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On December 20, 2010, at 6:35 PM, gayano6 wrote:

    After the stock came back from$42 up to $ 47,50 it is all very easy to scream and shout:idiots!.

    Where were you when it went down last week for good reasons?!

    The stock is a gamble as long as the situation in Macau is not clear....just wait and see what the locals come up with the next year...harassment is ok ,but sabotage not!

    I prefer to buy the ETF gambling at$31,46...you find it under BJK...11,6% of LVS is in it.Succes everybody.

  • Report this Comment On December 20, 2010, at 6:44 PM, TMFMileHigh wrote:

    @cbotrader,

    >>If you are short LVS....you have been wrong...PERIOD! Perhaps you should listen to the voices of reason who have been right on this issue and even WHY we were right.

    Thanks for the comment, but ... what does this have to do with the story? I'm not suggesting shorting LVS. I'm *long* LVS in my CAPS portfolio.

    This is the third in a series of stories that looks at the various elements of LVS:

    http://www.fool.com/investing/general/2010/12/10/the-best-re...

    http://www.fool.com/investing/general/2010/11/26/the-big-mon...

    You're welcome to your opinion, of course. I also welcome dissent. But arm-waving helps no one. How about telling us why LVS is a buy at these levels? You have my thesis per the links above. What's yours?

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On December 20, 2010, at 8:39 PM, ivousa wrote:

    LVS is a buy because we still haven't seen the best of Singapore,Macau and Las Vegas altogether. Watch this one go to $60-65 level by the end of 2011. I am long from $14 on this one and added more at $28. My prediction that by the end of 2010 it will be $40-45 is actually true and even a little better surprised me too but nothing bad with this if you are long on it:) Jumped from $30 level to $55 last month way too fast and that's why it is a little "on hold" right now and of course the uncertainty over Macau expansion is holding it too,but this is still way more profitable company than it was before even The Palazzo was opened and check where it was before that-in the triple digits.I think it will actually visit the triple digits in a couple of years but let's watch,enjoy and see :)

    Good luck everybody!

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