We believe that insiders have the greatest insight into the fundamental health of a company, and so we follow closely insider transactions. It has been shown that insiders tend to outperform the market by as much as 7% annually (read more about how this strategy can boost your returns).
In a recent Form 4 filing with the SEC, four directors were selling off shares of Delphi Automotive PLC (NYSE:DLPH). These four directors – Nicholas Donofrio, Gary Cowger, Bernd Wiedemann, and John Krol – sold off over 87,000 shares in the range of $33.75-$34.10. Krol was the biggest seller, dumping over 50,000 shares – 33% of his shares.
Insider selling in Delphi shares has been robust in 2012, and includes big cuts by its largest shareholders, billionaires John Paulson and Paul Singer. Paulson sold off 29% (2Q) followed by 22% (3Q) over the past two quarters. Billionaire Paul Singer – founder of Elliott Management – dumped 18% of his shares in 2Q and then 17% in 3Q (check out Paul Singer’s latest market moves). Other notable large insider trades include four insiders that have sold off 100,000 collectively through the month of November.
Delphi is already up 60% year to date, but still only trades at 9x earnings. This is below some of its top peers, including Johnson Controls (16x) and Visteon (76x). Delphi’s 3Q results came in at $0.84 versus $0.72 from the same quarter last year and well above consensus of $0.73. Despite this recent success and a relatively low P/E, 4Q guidance was lowered on weak European production expectations – estimates predict a 15% declination year over year. EPS is now expected to be in the range of $0.79-0.89 versus previous consensus of $0.99. Delphi also expects to have to spent $250 million for restructuring, with part going to help integrate its recent acquisition of FCI Group’s motorized vehicles division (MVL).
Johnson Controls, Inc. (NYSE:JCI), Visteon Corporation (NYSE:VC), Lear Corporation (NYSE:LEA) and Autoliv Inc. (NYSE:ALV) are some of Delphi’s closest peers. Johnson Controls is the largest of our five auto parts companies with an $18 billion market cap, but it is also down over 10% year to date. Johnson’s dividend yield of 2.7% and solid growth makes it a generally attractive investment, and on the back of increasing auto sales, Johnson expects to grow revenues by 4.6% in 2013.