Insider Weekends – Alexander Otto Steps Up His Purchases Of DDR

Welcome to edition 411 of Insider Weekends. Insider buying decreased slightly last week with insiders purchasing $78.25 million of stock compared to $78.99 million in the week prior. Selling on the other hand increased significantly with insiders selling $1.52 billion of stock last week compared to $651.93 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 19.38. In other words, insiders sold more than 19 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 8.25.

Sector Heat Map May 4, 2018

Sector Heat Map May 4, 2018 (click to enlarge)

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. DDR Corp. (DDR): $7.25

Director Alexander Otto acquired 2,613,948 shares of this shopping center REIT, paying $7.32 per share for a total amount of $19.12 million. Mr. Otto increased his stake by 4.95% to 55,474,027 shares with this purchase.

Mr. Otto has been a very active buyer of DDR stock this year and the purchases this week were his largest purchases in a week since we started tracking this data nearly 8 years ago. His $16 million purchase of DDR in mid-2015 comes close. The big decline in the stock in the third week of April that saw it drop to $6.67 made me want to start a position but I still feel it is best to wait until DDR spins off some of its assets including its Puerto Rico portfolio into a new company. I wrote the following about DDR last month,

Alexander Otto is the CEO of closely-held real estate management company ECE Projektmanagement. The company is based in Hamburg, Germany and manages about 200 shopping centers. He has been buying DDR stock actively since late February and following his latest purchases, owns about 14.4% of the company. To say retail REITs have had a difficult couple of  years would be an understatement as you can see from the following chart comparing DDR to the S&P 500 over the last two years.

DDR vs S&P 500

DDR vs S&P 500 (click to enlarge)

Yields on some of these retail REITs have reached double digits reflecting the turmoil in this sector and potentially providing some attractive opportunities. I feel that it is going to take a long time for this sector to stabilize as finding new tenants or repurposing space with a focus on entertainment/events can take years based on what I am seeing in two local malls. One of them is repurposing a Sears store and an old food court into a new space that includes movie theaters, a bowling alley and a new dining area. This project has been going on for at least a couple of years. Another shopping center was able to find a new tenant for a Sports Authority that closed after declaring bankruptcy but now three other shops including Toys R Us are closing down in the same shopping center.

The question is whether we are in the middle of this downturn or close to the end. I feel that we are still in the middle and any recovery is going to be a U shaped recovery instead of a V shaped rally from the lows. Mr. Otto appears to feel otherwise and is putting his money where his conviction lies. Given his considerable net worth and experience, it is probably worth exploring why he has been consistently purchasing DDR.

The company is spinning off a portfolio of 50 properties including its full exposure to Puerto Rico in Q3 2018 and the “new” DDR could be better positioned to weather this retail storm. This is one of those rare cases where the parent of the spinoff may prove to be a better opportunity than the spinoff.

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

P/E: N/A Forward P/E: 51.79 Industry P/E: 30.58
P/S: 2.91 Price/Book: 1.13 EV/EBITDA: 10.7
Market Cap: $2.67B Avg. Daily Volume: 4,920,456 52 Week Range: $6.63 – $10.87

2. Mohawk Industries, Inc. (MHK): $216.36

Director Filip Balcaen acquired 66,199 shares of this home flooring products company, paying $209.08 per share for a total amount of $13.84 million. These shares were purchased indirectly by Floorenter NV.

After a good 5 year run, Mohawk’s stock peaked last December and is down more than 21% this year. The recent weakness is a little perplexing considering the company beat both top line and bottom line expectations for Q1 2018 when it reported earnings a couple of week ago. Beyond some near-term weakness related to start-up costs and patent expirations, the outlook for the rest of 2018 and next year was encouraging. Considering a strong real estate market and even stronger remodeling activity fueled by shows like Fixer Upper on HGTV, the company is worth exploring further.

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

P/E: 4.34 Forward P/E: 12.56 Industry P/E: 36.91
P/S: 1.69 Price/Book: 2.28 EV/EBITDA: 11
Market Cap: $16.13B Avg. Daily Volume: 866,917 52 Week Range: $207.79 – $286.85

3. Cullen/Frost Bankers, Inc. (CFR): $115.27

Shares of this regional bank were acquired by 2 insiders:

  • Director Graham M. Weston acquired 69,632 shares, paying $115.64 per share for a total amount of $8.05 million. These shares were purchased indirectly by Trout Capital, Ltd.
  • Director Samuel G. Dawson acquired 859 shares, paying $116.47 per share for a total amount of $100,048.

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

P/E: 20.93 Forward P/E: 15.89 Industry P/E: 17.54
P/S: 6.29 Price/Book: 2.32 EV/EBITDA: N/A
Market Cap: $7.35B Avg. Daily Volume: 457,811 52 Week Range: $81.09 – $117.53

4. Sohu.com Inc. (SOHU): $33.96

CEO Charles Zhang acquired 128,940 shares of this Chinese online media company, paying $30.89 per share for a total amount of $3.98 million. These shares were purchased indirectly by Photon Group Limited.

You can view the list of recent insider transactions for Sohu.com Inc. here.

P/E: N/A Forward P/E: -10.39 Industry P/E: 39.56
P/S: 0.71 Price/Book: 1.76 EV/EBITDA: -3.78
Market Cap: $1.32B Avg. Daily Volume: 525,608 52 Week Range: $26.7 – $70.86

5. Equity LifeStyle Properties, Inc. (ELS): $90.01

Chairman of the Board Samuel Zell acquired 20,000 shares of this real estate investment trust, paying $89.56 per share for a total amount of $1.79 million. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for Equity LifeStyle Properties, Inc. here.

P/E: 41.48 Forward P/E: 35.58 Industry P/E: 27.27
P/S: 9.24 Price/Book: 7.73 EV/EBITDA: 22.68
Market Cap: $8.51B Avg. Daily Volume: 380,190 52 Week Range: $79.78 – $91.94

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

Notable Insider Sales:

1. Facebook, Inc. (FB): $176.61

Shares of Facebook were sold by 2 insiders:

  • COB and CEO Mark Zuckerberg sold 911,552 shares for $174.43, generating $159 million from the sale. These shares were sold indirectly by various entities.
  • VP and General Counsel Colin Stretch sold 16,500 shares for $174.30, generating $2.88 million from the sale. These shares were sold indirectly by the Graham Stretch Family Foundation.

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

P/E: 32.77 Forward P/E: 19.41 Industry P/E: 39.56
P/S: 12.58 Price/Book: 6.9 EV/EBITDA: 18.82
Market Cap: $511.22B Avg. Daily Volume: 36,231,875 52 Week Range: $144.42 – $195.32

2. Garmin Ltd. (GRMN): $59.89

Executive Chairman Min H. Kao sold 945,130 shares of this GPS manufacturer for $60.23, generating $56.93 million from the sale.

You can view the list of recent insider transactions for Garmin Ltd. here.

P/E: 16.27 Forward P/E: 18.43 Industry P/E: 26.89
P/S: 3.66 Price/Book: 2.96 EV/EBITDA: 13.42
Market Cap: $11.29B Avg. Daily Volume: 1,133,611 52 Week Range: $49.8 – $65.96

3. Andeavor (ANDV): $139.76

Shares of this oil refining company were sold by 2 insiders:

  • Director Paul L. Foster sold 200,000 shares for $133.16, generating $26.63 million from the sale. These shares were sold indirectly by Franklin Mountain Investments Limited Partnership.
  • Director Jeff A. Stevens sold 109,275 shares for $123.19, generating $13.46 million from the sale.

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

P/E: 12.93 Forward P/E: 12.38 Industry P/E: 21.44
P/S: 0.62 Price/Book: 2.18 EV/EBITDA: 9.84
Market Cap: $21.38B Avg. Daily Volume: 2,229,358 52 Week Range: $80.46 – $144.08

4. Evercore Inc. (EVR): $102.8

Shares of this investment banking and asset management company were sold by 2 insiders:

  • President and CEO Ralph Schlosstein sold 262,200 shares for $102.41, generating $26.85 million from the sale.
  • CEO of EVR Mexico Ostoa Augusto Arellano sold 17,665 shares for $102.45, generating $1.81 million from the sale.

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

P/E: 36.7143 Forward P/E: 13.6159 Industry P/E: 29.03
P/S: 2.74157 Price/Book: 7.38984 EV/EBITDA: N/A
Market Cap: $4.48B Avg. Daily Volume: 644,162 52 Week Range: $66.8 – $103.85

5. CAI International, Inc. (CAI): $24.68

Director Andrew Ogawa sold 1,225,214 shares of this intermodal freight container leasing and management company for $22.81, generating $27.95 million from the sale. These shares were sold indirectly by a trust.

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

P/E: 6.71 Forward P/E: 5.79 Industry P/E: 21.74
P/S: 1.45 Price/Book: 0.89 EV/EBITDA: 19.69
Market Cap: $505.8M Avg. Daily Volume: 347,369 52 Week Range: $17.68 – $40.11

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

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium members.

Disclaimer: 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.

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