When it comes to insider transactions, there are few insiders as consistent — and successful — as OPKO Health (US:OPK, IL:OPK) chairman and CEO Phillip Frost. The octogenarian billionaire shows an average profit of almost 43% on his trades, according to data on Fintel’s Insider Roster and Profitability Metrics.
There is significant academic research that suggests corporate insiders outperform the market when buying shares in their own companies. The 100 most profitable insider traders currently on Fintel’s leaderboard average return of 382%, on an average total of 10.4 trades in the last two years.
To generate this list, we examine every open-market, unplanned purchase made by the insider, excluding all trades that were marked as part of a 10b5-1 trading plan. We then calculate the average performance of those trades over three, six, and 12 months, average each of those durations to generate a final performance metric for each trade. Finally, we average all of the performance metrics to calculate a performance metric for the insider. This list only includes insiders that have made at least three trades in the last two years.
Dermatologist Turned Investor
Trained as a dermatologist, Frost long ago left behind the daily grind of examining and diagnosing patients’ skin ailments. He joined Key Pharmaceuticals in 1972, and set to work reformulating its asthma drug, selling the company in 1986 for $836 million. A year later, he started generic drug maker Ivax. He sold that company to Teva Pharmaceuticals (US:TEVA) for $7.6 billion in 2005.
In 2006, Frost and several associates formed Opko, a healthcare holding company for diagnostic equipment and medical products. Ten years ago, Opko Health Inc. agreed to buy Israeli drugmaker Prolor Biotech Inc. for about $480 million, combining two companies in which Frost was the largest shareholder.
OPKO has been called the “Berkshire Hathaway of healthcare,” by hedge fund manager Larry Feinberg, a long-time holder of stakes in Frost’s companies.
20% Upside
Across nine trades in March (shown in table below), Frost purchased 404,566 shares of OPK stock, at an average price of $1.288 per share, according to data compiled by Fintel. This analysis helps an investor understand if the insider consistently generates abnormal returns, and is worth following. This analysis is for one-year following each trade, and the results are theoretical.
Two Frost-affiliated trusts, Frost Gamma Investments Trust and Frost Nevada Investments Trust, have also been recent buyers. The OPKO chairman is the trustee of both, according to filings made to the Securities and Exchange Commission. Each trust is a reported 10% owner of the company, with holdings of more than 30 million shares by each of the two.
OPK stock is down more than 57% over the past 12 months, versus a 20.5% decline in the ETFMG Treatments Testing and Advancements ETF (US:GERM). That biotech exchange-traded fund includes 70 stocks in its portfolio; OPKO is in the top 20, at 1.98% allocation. Among the 101 stocks in the portfolio, the VanEck Israel ETF (US:ISRA) represents 0.37% of the total holdings.
Not Alone
Beyond Dr. Frost, OPKO stock scores very high on Fintel’s sentiment metrics. At 94.14, the stock is currently ranked number 25 out of 11,878 stocks tracked on the Officer Sentiment Scoreboard of companies being bought by corporate officers. On the broader Insider Sentiment Scoreboard, it garners an 88.39, placing it at number 185 out of 14,947 stocks analyzed by Fintel’s multi-factor quantitative model that identifies companies with the highest levels of insider accumulation.
Among the biggest holders, as seen on Insider Roster and Profitability Metrics dashboard, we see that company president Dale Pfost holds 1.69 million shares, with an average profit of 33.5%. Steven Rubin, executive vice president for administration, holds 6.17 million shares, calculated to have an average profit of almost 50%. Senior Vice President Jon Cohen holds 125,000 shares with an average profit of 35.2%.
For a briefing on how Fintel calculates historical trade performance, check out this archived webinar.
This article originally appeared on Fintel
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