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
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

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!