Greenbrier Companies Inc. (GBX) Registers Cluster of Insider Selling, While Top Execs Sell Shares of Cavco (CVCO) and Calavo (CVGW)

Most investors and insider trading watchers believe that insider selling is not particularly informative or useful given the increased usage of stock-option-based compensation, which has distorted insider trading data, as corporate officers and directors sell shares in greater quantities for mere liquidity purposes on many occasions. However, there is some insider selling that may prove informative to the investment community. Precisely, insider selling activity that is not related to freshly-exercised stock options or pre-arranged trading plans may still offer valuable insight regarding an insider’s take on the current valuation of their companies. Past research suggests that companies with heavy insider selling tend to underperform companies with insider buying, so it does make sense to keep track of insider selling as well. With that in mind, the following article will examine the insider selling activity witnessed at several companies, one of which had multiple insiders unload shares within a short period of time recently.

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Producer of Factory-built Homes Sees CEO Unload Shares

The man in charge of Cavco Industries Inc. (NASDAQ:CVCO) sold shares this past week. President and Chief Executive Officer Joseph H. Stegmayer sold 11,000 shares on Thursday and 9,000 shares on Friday at a weighted average sale price of $89.90, cutting his ownership to 502,428 shares. The company’s business involves designing and producing factory-built homes marketed under the Cavco Homes, Fleetwood Homes, Palm Harbor Homes, Fairmont Homes, and Chariot Eagle brand names. In fact, the company conducts its business operations through two segments: factory-build housing, and financial services, the latter of which involves manufactured housing consumer finance and insurance. Cavco Industries operates 45 company-owned retail stores across the United States.

Fresh data revealed by the Manufactured Housing Institute (MHI) shows that industry home shipments continue to increase, climbing by 8.8% year-over-year during the first 11 months of 2015. A total of 64,000 HUD code-manufactured homes were shipped in 2014, up from 60,000 homes shipped in 2013. Despite the improvement in manufactured home shipments in recent years, the overall manufactured housing industry and Cavco Industries in particular continue to operate at relatively weak production and shipment levels.

Shares of Cavco Industries Inc. (NASDAQ:CVCO) have gained 96% over the past five years and are up by 33% in the past year, which seems to reflect the positive trend in the manufactured housing industry. The company’s net revenue for the nine months that ended December 26 reached $535.06 million, up from $425.41 million reported for the same period of the prior year. Net revenue from the factory-built housing segment increased by 27.4% year-over-year, mainly due to businesses acquired in the first quarter of fiscal year 2016, as well as sales growth registered by the company’s pre-existing factory-built housing operations. Meanwhile, financial services segment revenue increased by 9.4% year-over-year as a result of additional insurance policies in force and loans serviced.

Cavco shares are currently trading at a forward P/E multiple of 22.6, which is significantly above the forward P/E ratio of 11.7 for the homebuilding industry and the ratio of 18.8 for the NASDAQ 100 Index. Earlier this year, analysts at Sidoti initiated coverage on Cavco Industries with a ‘Buy’ rating. The number of hedge funds tracked by Insider Monkey with stakes in the producer of factory-built homes increased to 12 from eight during the December quarter, with those 12 funds holding nearly 21% of the company’s outstanding common stock. Martin Whitman’s Third Avenue Management owned 957,501 shares of Cavco Industries Inc. (NASDAQ:CVCO) at the end of December.

On the next two pages of this article we’ll we discuss the insider selling registered at Calavo Growers Inc. (NASDAQ:CVGW) and Greenbrier Companies Inc. (NYSE:GBX).

Avocado Grower Has One Influential Insider Sell Massive Block of Shares

Calavo Growers Inc. (NASDAQ:CVGW) also had one of its most influential executives sell shares last week. President and Chief Operating Officer Kenneth J. Catchot discarded 14,666 shares on Thursday and 30,334 shares on Friday at prices between $55.02 and $56.41 per share, which trimmed his overall holding to 471,472 shares. Calavo Growers is a key player in the avocado industry, marketing and distributing avocados, prepared avocados, and other perishable foods to food distributors, supermarkets, and restaurants. The company conducts its business operations through three business segments: Fresh products; Calavo Foods; and RFG. The Fresh products segment involves the distribution of avocados and other fresh produce products. The Calavo Foods segment involves the purchasing, manufacturing and distribution of prepared products such as guacamole and salsa, while the RFG segment includes the manufacturing and distribution of fresh-cut fruit, ready-to-eat vegetables, recipe-ready vegetables, and deli products.

Calavo Growers reported net sales of $204.58 million for the first quarter of fiscal year 2016 that ended January 31, an increase of 5% year-over-year due to higher sales in all three segments. The largest percentage increase in sales was registered by the RFG segment (which accounted for 37% of net revenue in the quarter), which was driven by higher sales from deli products, vegetables platters and cut fruit. Fresh product sales, which accounted for 55% of net sales in the fiscal first quarter, increased by 1.3% year-over-year due to increased sales of tomatoes, which was partially offset by a decrease in the sales of Mexican- and California-sourced avocados. Meanwhile, Calavo Foods’ sales, which made up approximately 8% of Calavo Growers’ net sales, increased by 5.9% year-over-year due to higher sales of salsa and guacamole products. The Company’s management anticipates each segment to experience double-digit margin expansion for fiscal year 2016, saying that Calavo Growers will report record revenue and earnings per share for the fiscal year.

Shares of Calavo have advanced by 169% in the past five years and are 15% in the green year-to-date, so the COO might have decided to take some profits off the table to diversify his holdings. The stock is priced at around 25.3-times expected earnings, above the forward P/E multiple of 18.8 for the NASDAQ 100 benchmark. The smart money sentiment towards the avocado grower declined notably in the December quarter, with the number of money managers invested in the company shrinking to 11 from 18 quarter-over-quarter. Steve Cohen’s Point72 Asset Management had 136,900 shares of Calavo Growers Inc. (NASDAQ:CVGW) in its equity portfolio at the end of December.

Railcar Maker Has Three Different Insiders Sell Shares within Short Period

Greenbrier Companies Inc. (NYSE:GBX) has seen three different insiders offload shares thus far in April. To start with, Alejandro Centurion, Executive Vice President and President of Global Manufacturing Operations, sold 5,000 shares on Wednesday and 5,000 shares on Friday at a weighted average price of $31.84, which reduced his ownership to 13,194 shares. Moreover, Lorie L. Tekorius, Senior Vice President, Chief Financial Officer and Treasurer, unloaded 1,355 units of common stock last Tuesday for $31.23 each, after which Ms. Tekorius owns 17,706 units. Lastly, James T. Sharp, Executive Vice President and President of Greenbrier Leasing Corporation, sold 5,000 shares on April 8 at exactly $31 apiece, cutting his holding to a mere 3,668 shares.

The railcar manufacturer primarily operates its business through four segments: Manufacturing, which involves the production of double-stack intermodal railcars, tank cars, conventional railcars, automotive railcar products and marine vessels; Wheels & Parts, which provides wheel and axle servicing, and produces various parts for the railroad industry; Leasing & Services, which owns 9,400 railcars and provides management services for 257,000 railcars for railroads, shippers, carriers and other companies; and GBW Joint Venture, which provides repair services at more than 30 locations on the North American continent. Shares of Greenbrier Companies have declined by 51% in the past 12 months, as the railway industry has been hit by lower shipments of crude oil, coal and loads of fracking sand used to drill new wells.

The company’s shares have gained 46% in the past three months, which may have prompted the insiders might to diversify their holdings as the struggling energy sector continues to put pressure on the company’s financial performance. Greenbrier Companies registered revenue of $1.47 billion for the six months that ended February 29, up from $1.13 billion reported for the same period of the previous fiscal year. The 30.8% increase in the company’s top-line figure was mainly driven by a 25% increase in the volume of railcar deliveries, which included a mix that led to a higher average selling price. Moreover, revenue was also spurred by a 193.8% increase in Leasing & Services revenue due to an increase in the sale of railcars purchased last year. It is important to note though that 83% of the company’s backlog of railcar units, which was roughly 34,100 units at the end of February, was non-energy related.

The shares of the railcar maker are currently trading at 8.8-times expected earnings, below the forward P/E multiple of 10.0 for competitor GATX Corporation (NYSE:GMT) and the ratio of 11.5 for Trinity Industries Inc. (NYSE:TRN). The number of hedge fund vehicles in our system with stakes in Greenbrier increased to 21 from 17 during the December quarter. Israel Englander’s Millennium Management owned 633,026 shares of Greenbrier Companies Inc. (NYSE:GBX) on December 31.

Disclosure: None