Insider Weekends – A Large Purchase of Kinder Morgan by Fayez Sarofim

Welcome to edition 332 of Insider Weekends. Insider buying increased last week with insiders buying $30.51 million of stock compared to $21.13 million in the week prior. Selling also increased with insiders selling $965.22 million of stock last week compared to $424.51 million in the week prior.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week went up to 31.64. In other words, insiders sold more than 31 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 20.09. We are calculating an adjusted ratio by removing transactions by funds and companies and trying as best as possible only to retain information about insiders and 10% owners who are not funds or companies.

Insider Sell Buy Ratio October 28, 2016

Insider Sell Buy Ratio October 28, 2016

Note: As mentioned in the first post in this series, certain industries have their preferred metrics such as same store sales for retailers, funds from operations (FFO) for REITs and revenue per available room (RevPAR) for hotels that provide a better basis for comparison than simple valuation metrics. However metrics like Price/Earnings, Price/Sales and Enterprise Value/EBITDA included below should provide a good starting point for analyzing the majority of stocks.

Notable Insider Buys:

1. Kinder Morgan, Inc. (KMI): $20.43

Director Fayez Sarofim acquired 700,000 shares of this oil & gas pipelines company, paying $21.41 per share for a total amount of $14.99 million. Mr. Sarofim increased his stake by 2.46% to 29,142,387 shares with this purchase.

This purchase was interesting not just because of the size of the purchase but also because it was by a long time director of a company that also happens to be an investment professional.   Fayez Sarofim is a Texas based billionaire who was one of the original shareholders of Kinder Morgan when it went public in 2011. Mr. Sarofim is the Chairman and Co-CIO of Fayez Sarofim & Co., an investment manager with $23 billion in assets under management.

A recent Reuters article about Mr. Sarofim mentioned,

The Egyptian-born, thrice-married Sarofim, whose life story rivals anything seen in TV soap operas, supported Jeb Bush in his run for the presidency.

This article about Mr. Sarofim’s wedding last year provides some color on why Reuters might have referred to his life rivaling anything seen in TV soap operas.

Getting back to Kinder Morgan, the stock saw a sharp decline over the last two years and bottomed out under $12 in January of this year at about the same time we saw a bottom in crude oil. We wrote the following about KMI in our January 29th insider weekends post,

The S&P 500 rallied 1.75% last week after we saw insider selling drop to its lowest level in four years. While the rally was broad based, we saw big increases in some long suffering energy names as you can see from the 34% gain in Consol Energy (CNX) and the nearly 10% gain in Kinder Morgan (KMI) in the chart below.

Consol Energy and KinderMorgan 1 Week Chart

Consol Energy and KinderMorgan 1 Week Chart

Pull back the curtain a year and this rally pales in comparison as Consol is down nearly 74% and Kinder Morgan is down more than 60% despite the recent rally. We have highlighted insider purchases in both these names in the past. As is often the case with insiders and value investors, it was a case of “premature accumulation”. Where we go from here is anyone’s guess but the the 9.38% drop in the S&P 500 doesn’t even begin to paint the picture of how much some segments of the market like energy, commodities and young technology companies have dropped in the last six months. For the prudent investor who is willing to put in the time to do detailed bottoms-up analysis, there appear to be interesting opportunities amongst these beaten down names if you can navigate the dangerous currents of value traps masquerading as value stocks.

You can view the list of recent insider transactions for Kinder Morgan, Inc. here.

P/E: N/A Forward P/E: 27.61 Industry P/E: 23.9
P/S: 3.5 Price/Book: 1.34 EV/EBITDA: 13.13
Market Cap: $45.61B Avg. Daily Volume: 15,622,600 52 Week Range: $11.2 – $27.78

2. Misonix, Inc. (MSON): $5.78

Interim CEO Stavros G. Vizirgianakis acquired 761,469 shares of this surgical devices company, paying $5.25 per share for a total amount of $3.99 million. Mr. Vizirgianakis increased his stake by 169.36% to 1,211,078 shares with this purchase.

You can view the list of recent insider transactions for Misonix, Inc. here.

P/E: 14.41 Forward P/E: N/A Industry P/E: N/A
P/S: 1.91 Price/Book: 1.84 EV/EBITDA: -14.68
Market Cap: $45.02M Avg. Daily Volume: 17,374 52 Week Range: $3.83 – $11.88

3. Freeport-McMoRan Inc. (FCX): $10.93

Director Courtney Mather acquired 150,000 shares of this mining company, paying $10.72 per share for a total amount of $1.61 million. Mr. Mather increased his stake by 370.16% to 190,523 shares with this purchase.

You can view the list of recent insider transactions for Freeport-McMoRan Inc. here.

P/E: N/A Forward P/E: 9.85 Industry P/E: 36.46
P/S: 0.94 Price/Book: 3.04 EV/EBITDA: 11.22
Market Cap: $14.52B Avg. Daily Volume: 28,075,900 52 Week Range: $3.52 – $14.06

4. AT&T, Inc. (T): $36.51

Director Geoffrey Y. Yang acquired 27,129 shares of AT&T, paying $36.91 per share for a total amount of $1 million. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for AT&T, Inc. here.

P/E: 15.55 Forward P/E: 12.25 Industry P/E: 18.28
P/S: 1.37 Price/Book: 1.81 EV/EBITDA: 6.34
Market Cap: $224.61B Avg. Daily Volume: 22,765,100 52 Week Range: $32.22 – $43.89

5. Agree Realty Corp. (ADC): $47.14

Director John Rakolta Jr. acquired 12,000 shares of this retail REIT, paying $47.50 per share for a total amount of $570,000. Mr. Rakolta increased his stake by 8.19% to 158,484 shares with this purchase.

You can view the list of recent insider transactions for Agree Realty Corp. here.

P/E: 25.1 Forward P/E: 16.96 Industry P/E: N/A
P/S: 13.14 Price/Book: 1.96 EV/EBITDA: 22.4
Market Cap: $1.12B Avg. Daily Volume: 210,672 52 Week Range: $31.75 – $51.33

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Microsoft Corporation (MSFT): $59.87

Shares of Microsoft were sold by 2 insiders:

  • Founder Bill Gates sold 4,700,000 shares for $60.90, generating $286.23 million from the sale.
  • Chief Accounting Officer Frank H. Brod sold 5,000 shares for $60.53, generating $302,625 from the sale.

You can view the list of recent insider transactions for Microsoft Corporation here.

P/E: 28.67 Forward P/E: 18.48 Industry P/E: 27.59
P/S: 5.47 Price/Book: 6.65 EV/EBITDA: 15.01
Market Cap: $466.03B Avg. Daily Volume: 24,803,400 52 Week Range: $48.04 – $61.37

2. Facebook, Inc. (FB): $131.29

Shares of Facebook were sold by 2 insiders:

  • Director Jan Koum sold 766,652 shares for $132.68, generating $101,719,418 from the sale.  These shares were sold indirectly through a trust.
  • VP and General Counsel Colin Stretch sold 750 shares for $132.69, generating $99,519 from the sale.

You can view the list of recent insider transactions for Facebook, Inc. here.

P/E: 62.76 Forward P/E: 25.84 Industry P/E: 26.73
P/S: 16.81 Price/Book: 7.37 EV/EBITDA: 31.94
Market Cap: $377.02B Avg. Daily Volume: 16,534,100 52 Week Range: $89.37 – $133.5

3. salesforce.com, inc. (CRM): $75.13

Shares of this cloud software company were sold by 3 insiders:

  • Chairman of the Board and CEO Marc Benioff sold 87,500 shares for $74.48, generating $6.52 million from the sale.
  • EVP, Global Employee Success Cynthia G. Robbins sold 681 shares for $74.88, generating $50,993 from the sale.  These shares were sold as a result of exercising options immediately prior to the sale.
  • EVP, General Counsel Amy E. Weaver sold 681 shares for $74.88, generating $50,993 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.

You can view the list of recent insider transactions for salesforce.com, inc. here.

P/E: 231.88 Forward P/E: 59.16 Industry P/E: 36.18
P/S: 6.85 Price/Book: 8.35 EV/EBITDA: 94.36
Market Cap: $51.02B Avg. Daily Volume: 7,714,120 52 Week Range: $52.6 – $84.48

4. Papa John’s International Inc. (PZZA): $73.85

CEO John H. Schnatter sold 73,686 shares of this pizza delivery restaurant for $80.37, generating $5.92 million from the sale.

You can view the list of recent insider transactions for Papa John’s International Inc. here.

P/E: 31.33 Forward P/E: 26.76 Industry P/E: 32.66
P/S: 1.66 Price/Book: N/A EV/EBITDA: 16.2
Market Cap: $2.73B Avg. Daily Volume: 341,225 52 Week Range: $44.47 – $82.55

5. Cullen/Frost Bankers, Inc. (CFR): $76

Director Jack A. Wood sold 75,000 shares of this regional bank for $75.71, generating $5.68 million from the sale.  These shares were purchased indirectly by a Limited Partnership.

You can view the list of recent insider transactions for Cullen/Frost Bankers, Inc. here.

P/E: 17.67 Forward P/E: 15.83 Industry P/E: 15.29
P/S: 4.64 Price/Book: 1.72 EV/EBITDA: N/A
Market Cap: $4.72B Avg. Daily Volume: 453,069 52 Week Range: $42.41 – $77.68

You can view the full list of sales from this Insider Sales page.

Disclaimer: I hold a long position in Freeport-McMoRan (FCX). Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.

Connect with me on LinkedIn: http://www.linkedin.com/in/asifsuria or follow me on Twitter @asifsuria

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