Insider Places a Very Big Bet on Horsehead Holding

Not a single corporate officer has bought a single share of Horsehead Holding (NASDAQ:ZINC) in at least the past two months, according to Form 4 filings with the SEC — but that doesn’t mean insiders are avoiding Horsehead stock. To the contrary, one “statutory insider” of the company, one which owns more than 10% of the company’s shares, just made a big bet on the zinc miner’s stock bouncing back.

Big time.

Specifically, according to SEC filings published on July 22, Dalal Street, LLC, purchased 581,393 shares of Horsehead Holding on July 20. With purchase prices averaging $7.91 per share, that amounts to a $4,598,287 investment — or more than 1% of Horsehead’s market capitalization, all bought on a single day. Dalal Street is the investment vehicle used by famed value investor Mohnish Pabrai.

What does it mean to you?
Coming just weeks before Horsehead Holding is due to report Q2 earnings (on August 7), Dalal’s investment this week suggests that “someone knows something” — or at least strongly suspects something, and probably something good for Horsehead shareholders.

With Horsehead shares down 62% over the past year, this would be a nice change to say the least.

Still, before investors decide to let Dalal lead them to water, a few words of caution about Horsehead are in order: Firstly, the stock is not currently profitable, and analysts expect Horsehead to end this year with a loss. Second, the stock pays no dividend — so if earnings disappoint next month, there will be no dividend check to soften the blow. Third and finally, Horsehead is carrying a mule-load of debt — $418 million against less than $85 million in cash.

All of which is to suggest that Horsehead Holding looks like too much of a nag to be betting the ranch on. Sure, it could pay off correspondingly big, and Dalal seems to think it will. But until Horsehead has proven it can go the distance, the best approach here is probably to “bet small, lose small.”

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