Opsware Insiders Step Up by Bill Martin (04-OCT-05)
Shares of fast-growing software automation shop Opsware (NASDAQ: OPSW ) caught a bid towards the end of last week on the disclosure of fresh insider buying in the name.
First, a new Form 4 filing last week disclosed that OPSW co-founder and CEO Ben Horowitz had stepped up and purchased 12k shares of OPSW on September 28th at a price of $4.46 per share for the Horowitz Family Trust. Horowitz already owned a little more than a 5% stake in OPSW ahead of this open market purchase.
Horowitz`s filing was followed by the disclosure a day later that OPSW Director Michael Ovitz had added to his OPSW position by purchasing an additional 60k shares at the $4.45-$4.50 level also on September 28th. The former Hollywood super agent and Disney (DIS) president was in fact the last insider prior to the Horowitz purchase to have taken down some stock. Ovitz had been a buyer at the $4.83-$4.91 level back in May of this year.
Last month, after reviewing a presentation that OPSW`s Horowitz gave at a ThinkEquity conference, Bill Martin and Matt Ragas reiterated that they would be ``patiently accumulating the stock around $4.50 and below for more aggressive-oriented accounts`` and they noted the nice amount of ``skin in the game`` by OPSW insiders (the group owns a ~24% stake).
Bill and Matt stepped up and bought shares of the beaten-down small-cap software name at the $4.39 level at the start of September. Former bears on OPSW, they’ve profitably played OPSW on the short side twice before, booking a 14% gain back in 2003 and a 16% gain in early 2004.
Since then, Bill and Matt have kept tabs on OPSW`s progress and have been impressed with its operating momentum in recent quarters even as the stock has taken it on the chin.
``This is a blue-chip team we were always hesitant to bet against on the short side before, and now with operating momentum building and OPSW poised to break into the black (but with the stock still hanging near its lows), we`re glad to have gotten on board. Please keep in mind this is a medium- to long-term position for us and we purposely started the stock with only a modest 4% weighting so that we could add to this holding on weakness if need be,`` Bill and Matt concluded in their recap of OPSW`s most recent investor presentation.
Again, while OPSW already has a good-sized market cap under its belt ($500 million), which leaves management with less room for error, this latest round of insider buying suggests that Horowitz & Co. think they`re up to the task. Bill and Matt are comfortable letting their OPSW position ride, and would look for weakness to patiently scale into new positions.
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