EA’s CEO Bought Over 30,000 Shares

Page 1 of 2

According to a filing with the SEC, John Riccitiello, the CEO of Electronic Arts Inc. (NASDAQ:EA), purchased a little over 31,000 shares of the company’s stock on February 1st at an average price of $15.90 per share. Riccitiello now owns almost 450,000 shares directly, and his children’s trust owns a small number of shares as well. However, it’s generally not rational for insiders to buy more shares of their company’s stock; clearly the CEO of EA in earns an income dependent on the company’s prospects and so negative company-specific or industry-specific events could harm his income and his wealth. It is therefore rational for Riccitiello to diversify his investments unless he is very confident that the stock is undervalued. In general, this is why we believe that insider purchases tend to outperform the market (read more about studies in insider trading), though we’d note that EA’s stock has already risen significantly on the news.

This purchase came shortly after EA’s quarterly report, which provided relatively good news for a company in the struggling electronic games industry. While Electronic Arts Inc. did report net losses of $45 million for the third quarter of its fiscal year (which ended in December 2012), this was an improvement from a loss of $205 million a year earlier. The company has slashed cost of goods sold, marketing, and administrative costs alike as well as R&D, resulting in an improved bottom line despite a 13% decline in sales.

Electronic ArtsElectronic Arts Inc. and many of its peers have struggled with the shift to tablet and mobile gaming, but Wall Street analysts believe that this shift is slowing and that major market players finally have a handle on the new business in any case. Their estimates call for $1.14 in earnings per share in the forward fiscal year ending in March 2014; at current prices, that represents a forward P/E multiple of 15. We aren’t quite confident that EA has such strong prospects, but its cost-cutting strategy is certainly showing some progress and the CEO putting his own money into the stock is a positive sign.

Billionaire Kerr Neilson’s Platinum Asset Management reported a position of 5.2 million shares of EA in its portfolio at the end of September (see Neilson’s stock picks). Glenview Capital, managed by Larry Robbins, increased its own stake by 21% during the third quarter of 2012 to a total of 9.1 million shares (find Glenview’s favorite stocks); Robbins had previously worked for billionaire Leon Cooperman’s Omega Advisors.

See how we like EA compared to similar companies:

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!