This Board Member Bought Nearly $260,000 In Stock

According to a filing with the SEC, James Robo purchased 4,500 shares of J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) on October 31st at an average price of $57.49. Robo, who became the new CEO of Nextera Energy earlier this year, serves on J.B. Hunt’s Board of Directors and so this transaction had to be disclosed as an insider buy. Insiders who purchase shares of their company’s stock are forgoing diversification- it’s generally rational to diversify one’s wealth away from being too concentrated in a small number of companies- and so when they do this it is theoretically because they are extremely confident in the company’s prospects. Read our review of studies on insider purchases. Robo now owns about 63,000 shares of the trucking company. Our database of insider filings shows that he bought shares in August 2011 at an average price of $42.41 per share- note the 36% increase in the stock price in the last 15 months, while the S&P 500 index has returned about 10%. Research Robo’s insider purchases and sales.

In the third quarter of 2012, J.B. Hunt’s revenues were up 11% from the same period in 2011. The growth rates were about the same for the company’s core business and for its fuel surcharges. Operating expenses were higher, led by bigger bills for rents and purchased transportation, but margins expanded to the point where earnings were up 14%. This was a slowdown from the pace that J.B. Hunt Transport Services, Inc. grew in the first half of the year- in total, net income for the first nine months of 2012 was up 23% versus a year ago- but still represents impressive performance.

VINIK ASSET MANAGEMENT

At a market capitalization of $6.9 billion, it is apparent that the market expects considerably more growth from the company: its current trailing P/E is 23, which is higher than where we’d generally consider recommending a stock. It even trades at 20 times consensus estimates for next year’s earnings, and so our impression is that investors shouldn’t be imitating this insider purchase. Jeffrey Vinik’s Vinik Asset Management reduced its stake in J.B. Hunt Transport Services, Inc. over the course of the second quarter, but still owned about 280,000 shares at the end of June (find more stocks owned by Vinik Asset Management).

Peers in the trucking industry include Old Dominion Freight Line (NASDAQ:ODFL), Landstar System, Inc. (NASDAQ:LSTR), Werner Enterprises, Inc. (NASDAQ:WERN), and Con Way Inc (NYSE:CNW). These four companies are all smaller than J.B. Hunt in terms of market cap, being clustered between equity valuations of $1.5 billion and $3 billion. Possibly because their businesses generate less profit, their earnings multiples place them at a discount to the larger trucker: the trailing P/Es are between 14 and 18, making J.B. Hunt a substantial outlier on that basis. It’s possible that whether because of its size or some other industry factor that company does have better growth opportunities, and there is the insider purchase to consider, but we’d generally prefer to invest in a cheaper alternative.

At Werner and Con Way, little change in revenue last quarter compared to the third quarter of last year led to a double-digit percentage decline in earnings. Landstar and Old Dominion each grew both of these numbers. Con Way is the lowest-priced of these five companies, on both a trailing and a forward basis, but we think that investors can get a stock in a more consistent business at only a slightly higher multiple that still looks good relative to J.B. Hunt.

Investors who are interested in the trucking industry probably shouldn’t pay too much attention to Robo’s move. J.B. Hunt is considerably more expensive on an earnings basis than its peers, and even taking the company’s historical growth rate into account it still looks overvalued.

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

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

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!