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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.|
|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%.)
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.