Insider Weekends: Adam Portnoy Acquires 4.2% Of TA For The RMR Group

Welcome to edition 434 of Insider Weekends. Insider buying declined significantly last week with insiders purchasing $22.32 million of stock compared to $124.14 million in the week prior. Selling also decreased significantly with insiders selling $411.84 million of stock last week compared to $1.22 billion in the week prior.

While the S&P 500 lost 4.1% last week after a bounce back on Friday helped trim some of the losses for the week, it has been declining for three weeks in a row for a total drop of 5.55% over this three week period. Normally we would have seen an uptick in insider buying following this decline but considering we are in the pre-earnings quiet period at most companies, insider activity is likely to remain muted until more companies start reporting third quarter earnings.

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 18.45. In other words, insiders sold more than 18 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 9.86.

Insider Sector Heat Map October 12, 2018

Insider Sector Heat Map October 12, 2018

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. TravelCenters of America LLC (TA): $5.00

Director Adam D. Portnoy acquired 1,492,691 shares of this travel centers and convenience store, paying $5.61 per share for a total amount of $8.37 million. These shares were purchased indirectly by The RMR Group LLC.

With annual sales of a little over $6 billion in 2017, TravelCenters of America (TA) is nearly a third of the size of Pilot Travel Centers, a company in which Berkshire Hathaway acquired a 38.6% stake last year. While one can only surmise from Berkshire’s purchase that Pilot Travel Centers doing business as Pilot Flying J much have impressive operating margins or growth, this is not the case with TA. After years of declining revenue, they finally saw top line growth of 11% in 2017. After building a stand-alone convenience store business over a five year period under the Mini Mart brand that now consists of 225 stores, TA decided to sell the business for $330.8 million in a transaction that is expected to close in the fourth quarter. Investors reacted positively to this news and the stock rose more than 26% to $5.50 last month on this news.

It is easy to see why investors were happy to see this divesture as TA managed to get a rich valuation worth 13.5 times EBITA for the deal. The cash generated from the deal will help the company both pay down high interest debt as well as focus on its core business, which currently sports dismal operating margins. Mr. Portnoy is purchasing a stake in this microcap company for the RMR Group in anticipation of the positive impact of this deal. His purchase amounts to nearly 4.2% of the company’s outstanding shares and considering the price paid, it does not appear to be an open-market purchase. The RMR Group is an alternative asset management firm with $30 billion in assets under management including six publicly traded REITs. Three of their six REITs (SIR, GOV and ILPT) are in the midst of a deal we covered in one of our Merger Arbitrage Mondays post last month.

You can view the list of recent insider transactions for TravelCenters of America LLC here.

P/E: N/A Forward P/E: -16.67 Industry P/E: 18.40
P/S: 0.03 Price/Book: 0.38 EV/EBITDA: 3.32
Market Cap: $198.85M Avg. Daily Volume: 307.014 52 Week Range: $3.05 – $6.10

2. salesforce.com, inc. (CRM): $146.74

Director Susan Wojcicki acquired 6,000 shares of this software application company, paying $146.70 per share for a total amount of $880,216. Ms. Wojcicki increased her stake by 6.64% to 96,320 shares with this purchase.

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

P/E: 153.01 Forward P/E: 53.75 Industry P/E: 20.2
P/S: 9.42 Price/Book: 8.21 EV/EBITDA: 101.58
Market Cap: $111.04B Avg. Daily Volume: 5,313,560 52 Week Range: $95.93 – $161.19

3. Hyster-Yale Materials Handling, Inc. (HY): $59.26

Chairman Alfred M. Rankin acquired 9,861 shares of this lift truck manufacturing company, paying $62.57 per share for a total amount of $617,010. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for Hyster-Yale Materials Handling, Inc. here.

P/E: 28.33 Forward P/E: 10.11 Industry P/E: 15.32
P/S: 0.32 Price/Book: 1.76 EV/EBITDA: 9.98
Market Cap: $981.09M Avg. Daily Volume: 39,253 52 Week Range: $56.4 – $93.9

4. Thor Industries, Inc. (THO): $80.47

Director James L. Ziemer acquired 5,000 shares of this recreational vehicles company, paying $81.74 per share for a total amount of $408,700. Mr. Ziemer increased his stake by 55.56% to 14,000 shares with this purchase.

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

P/E: 9.89 Forward P/E: 8.21 Industry P/E: 32.88
P/S: 0.51 Price/Book: 2.19 EV/EBITDA: 5.38
Market Cap: $4.24B Avg. Daily Volume: 1,081,078 52 Week Range: $77.69 – $161.48

5. First Choice Bancorp (FCBP): $25.62

Director Peter Hui acquired 13,411 shares of this regional bank, paying $26.94 per share for a total amount of $361,320. Mr. Hui increased his stake by 2.10% to 651,369 shares with this purchase.

You can view the list of recent insider transactions for First Choice Bancorp here.

P/E: 21.16 Forward P/E: 11.75 Industry P/E: 17.3
P/S: 7.13 Price/Book: 1.71 EV/EBITDA: N/A
Market Cap: $298.4M Avg. Daily Volume: 23,212 52 Week Range: $23.465 – $33.5

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

Notable Insider Sales:

1. Twitter, Inc. (TWTR): $27.99

Shares of Twitter were sold by 2 insiders:

  • Director Evan Clark Williams sold 682,242 shares for $27.20, generating $18.56 million from the sale. These shares were sold indirectly by various trusts.
  • CFO Ned D. Segal sold 6,000 shares for $28.89, generating $173,336 from the sale.

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

P/E: 90.58 Forward P/E: 35.43 Industry P/E: 64.51
P/S: 7.84 Price/Book: 3.79 EV/EBITDA: 29.68
Market Cap: $21.13B Avg. Daily Volume: 25,858,137 52 Week Range: $17.03 – $47.79

2. CarGurus, Inc. (CARG): $42.86

Shares of this online auto shopping company were sold by 5 insiders:

  • Director Anastasios Parafestas sold 240,000 shares for $46.74, generating $11.22 million from the sale. 100,000 of these shares were sold indirectly by Argonaut 22 LLC and 20,000 of these shares were sold indirectly by a trust.
  • CEO, President and Chairman Langley Steinert sold 130,456 shares for $48.43, generating $6.32 million from the sale. 13,047 of these shares were sold indirectly through a trust.
  • Chief Operating Officer Samuel Zales sold 15,000 shares for $42.45, generating $636,719 from the sale. These shares were sold as a result of exercising otions immediately prior to the sale.
  • Chief Technology Officer Oliver Ian Chrzan sold 6,000 shares for $49.96, generating $299,760 from the sale.
  • Sr. VP, Product Thomas Michael Caputo sold 3,093 shares for $49.99, generating $154,619 from the sale.

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

P/E: 104.28 Forward P/E: 138.26 Industry P/E: 34.48
P/S: 12.26 Price/Book: 29.97 EV/EBITDA: 344.63
Market Cap: $4.69B Avg. Daily Volume: 1,038,676 52 Week Range: $27.13 – $57.25

3. The Chefs’ Warehouse, Inc. (CHEF): $30.56

Vice Chairman John Pappas sold 492,711 shares of this food distribution company for $35.81, generating $17.64 million from the sale.

You can view the list of recent insider transactions for The Chefs’ Warehouse, Inc. here.

P/E: 43.29 Forward P/E: 31.51 Industry P/E: 60.86
P/S: 0.67 Price/Book: 3.43 EV/EBITDA: 18.47
Market Cap: $915.94M Avg. Daily Volume: 366,600 52 Week Range: $16.15 – $39.26

4. Garmin Ltd. (GRMN): $62.59

Executive Chairman Min H. Kao sold 246,628 shares of this GPS manufacturer for $64.60, generating $15.93 million from the sale. These shares were sold indirectly by Mr. Kao’s children.

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

P/E: 19.74 Forward P/E: 18.46 Industry P/E: 25.42
P/S: 3.67 Price/Book: 3.14 EV/EBITDA: 14.91
Market Cap: $11.82B Avg. Daily Volume: 1,145,896 52 Week Range: $54.57 – $70.77

5. Facebook, Inc. (FB): $153.74

Shares of Facebook were sold by 3 insiders:

  • Chief Operating Officer Sheryl Sandberg sold 55,000 shares for $154.87, generating $8.52 million from the sale. These shares were sold indirectly by a trust.
  • Chief Technology Officer Michael Todd Schroepfer sold 38,105 shares for $159.04, generating $6.06 million from the sale. These shares were sold indirectly by a trust.
  • VP and General Counsel Colin Stretch sold 750 shares for $157.12, generating $117,840 from the sale.

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

P/E: 23.79 Forward P/E: 18.48 Industry P/E: 34.48
P/S: 9.15 Price/Book: 5.6 EV/EBITDA: 14.66
Market Cap: $443.88B Avg. Daily Volume: 28,582,445 52 Week Range: $149.02 – $218.62

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: I hold a long position in Twitter (TWTR). 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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