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More Insider Trading Activity at Carmike Cinemas; Now CEO Raises Bet

Insider trading activity: Carmike Cinemas, Inc. (NASDAQ:CKEC) is once again in the spotlight of insider trading news, as S. David Passman III, President And CEO, bought 255 shares of common stock recently. He paid $22.14 per share and holds, after the transaction, 295,038*shares, valued at $ 6,526,240 .

Carmike Cinemas, Inc. (NASDAQ:CKEC)

Less than three weeks ago, Carmike had already made the headlines due to another insider purchase: Daniel Ellis, a Special VP and General Counsel at Carmike, had acquired 86 shares of common stock at $21.85 per share, following the clearance for the construction of a massive Carmike Cinemas movie theater in East Montgomery, AL.

Back to Passman, I should highlight that this is not an isolated purchase, but rather part of a wider strategy. Both Passman and Ellis have been buying the company’s stock every month for, at least, the last two years. Over this period, the stock has almost quadrupled in price.

In this case, the acquisition comes just one day before the company announced that it will open its newest state-of-the-art entertainment complex, the Carmike 13, in Champaign, IL, on October 31st (especially timed for a Halloween event). It seems like Passman is making a bet on future profits, just like Ellis did less than 20 days ago. However, the purchase was reported at the U.S. Securities and Exchange Commission only today, Oct. 17th, after the opening was made public.

It’s not only insiders that are betting on Carmike. In terms of institutional support, 14 of the hedge fund that we track hold stakes in the company. The largest “hedgie” bull, by far, is Mark Broach‘s Manatuck Hill Partners, which holds roughly $31.3 million in stock.

All this bullishness is not very hard to understand, given Carmike’s industry leading returns, coupled with a very attractive valuation (see table below).

Carmike Ind. Avg.
Price/Earnings TTM 4.2 16.5
Price/Sales TTM 0.7 2.5
ROA TTM 15.4 7.9
ROE TTM 89.2 18.1

Source: Morningstar.

* “Includes 20,000 shares of restricted stock granted on March 11, 2011 (previously reported) which will vest on March 11, 2014, 30,000 shares of restricted stock granted on March 15, 2012 (previously reported) which will vest on March 11, 2014, 30,000 shares of restricted stock granted on March 15, 2012 (previously reported) which will vest on March 15, 2015, 30,000 shares of restricted stock (previously reported) which will vest on February 28, 2016, and 33,600 performance shares (previously reported) which will be issued in 2015, in all cases provided Reporting Person remains continuously employed until each vesting date” (SEC).

Disclosure: Javier Hasse holds no position in any stocks mentioned

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