Insider Weekends: Jay Hoag Purchases Shares of Zillow Again

Welcome to edition 440 of Insider Weekends. Insider buying decreased last week with insiders purchasing $130.03 million of stock compared to $178.94 million in the week prior. Selling also decreased with insiders selling $1.14 billion of stock last week compared to $1.18 billion 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 8.78. In other words, insiders sold almost 9 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 6.58.

Insider Sector Heat Map November 23, 2018

Insider Sector Heat Map November 23, 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. Zillow Group, Inc. (Z): $29.39

Shares of this real estate information provider were acquired by 2 insiders:

  • Director Jay C. Hoag acquired 850,000 shares, paying $29.18 per share for a total amount of $24.8 million. These shares were purchased indirectly by Mariner Investor II, L.P.
  • Executive Chairman Richard N. Barton acquired 703,497 shares, paying $27.50 per share for a total amount of $19.43 million.

Zillow has had a wild ride in 2018 with the stock trading all the way up to $65.70 by mid-June before losing more than half its value through last week. The selling accelerated last week after the company reported a 21.7% increase in third quarter revenue to $343.09 million, which missed estimates by a sliver and more importantly guided Q4 revenue below expectations. Investors were also unhappy that Zillow has gotten into the business of buying and selling homes, which unlike Redfin’s business model, requires Zillow to hold homes in inventory. Some investors referred to this new line of business as a “flipping business” and it comes at a times when the housing market is cooling.

Does this sharp decline in Zillow present a buying opportunity? Jay Hoag and the co-founder of Zillow Rich Barton certainly seem to think so. When Jay Hoag purchases shares of a company, I pay attention, as the timing of his purchases have been spot on in the past. I mentioned both Jay Hoag and Rich Barton briefly last summer when I wrote,

I was hiking through the Purisima Creek Redwoods Preserve this weekend while listening to a Masters in Business podcast where Barry Ritholtz interviews Rich Barton, the cofounder of Expedia (EXPE), Zillow (Z) and Glassdoor. The interview was as absorbing as the ones I mentioned last week and it was interesting to hear Mr. Barton bring up Jay Hoag, the founding general partner at venture capital firm TCV. Mr. Hoag’s track record of purchasing Netflix (NFLX) and Zillow (Z) in the public market has been excellent. You can read more about his purchases of both these companies in the February 26, 2016 edition of Insider Weekends.

Purisima Creek Redwoods

Purisima Creek Redwoods

Incidentally Jay Hoag and Rich Barton are both currently on the board of directors of Netflix (NFLX). With rising interest rates and a cooling housing market, I believe investors are right that the new home buying business and the new mortgage business are going to be a drag on the company’s margins but in my opinion this vertical expansion of Zillow’s business model was inevitable. Despite Mr. Hoag’s recent buying, I believe the pressure on Zillow is likely to remain on the downside unless the Nasdaq starts bouncing back or the housing market stabilizes. I am going to move Zillow to the top of my watch list and will likely buy a starter position in coming days.

Investors that look at the form 4 filings for these purchases will notice that the purchases were classified as “Z and ZG”. Class C non-voting shares trade under the symbol Z, while class A shares with voting rights trade under the symbol ZG. Mr. Hoag purchases class C shares (Z), while Mr. Barton purchases both types. Oddly enough the class A shares with voting rights are trading at a small discount to the class C shares.

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

P/E: N/A Forward P/E: 75.36 Industry P/E: 25.81
P/S: 4.77 Price/Book: 1.80 EV/EBITDA: 47.45
Market Cap: $5.97B Avg. Daily Volume: 2,856,203 52 Week Range: $26.38 – $65.70

2. Energy Transfer LP (ET): $14.23

CEO Kelcy L. Warren acquired 1 million shares of this energy storage and transportation company, paying $14.93 per share for a total amount of $14.93 million. Mr. Warren increased his stake by 2.53% to 40,542,084 shares with this purchase.

This is the third week in a row we have written about insider purchases at Energy Transfer LP.

You can view the list of recent insider transactions for Energy Transfer LP here.

P/E: 12.84 Forward P/E: 8.95 Industry P/E: 63.24
P/S: 0.72 Price/Book: N/A EV/EBITDA: 14.58
Market Cap: $37.24B Avg. Daily Volume: 8,655,485 52 Week Range: $12.8 – $19.34

3. Jazz Pharmaceuticals plc (JAZZ): $150.09

Director Seamus Mulligan acquired 50,000 shares of this biotech company, paying $144.56 per share for a total amount of $7.23 million. Mr. Mulligan increased his stake by 4.76% to 1,100,868 shares with this purchase.

You can view the list of recent insider transactions for Jazz Pharmaceuticals plc here.

P/E: 17.73 Forward P/E: 10.58 Industry P/E: 31.23
P/S: 4.89 Price/Book: 2.99 EV/EBITDA: 10.31
Market Cap: $9.05B Avg. Daily Volume: 560,444 52 Week Range: $130.15 – $184

4. American Homes 4 Rent (AMH): $19.84

Shares of this real estate investment trust were acquired by 2 insiders:

  • Director Tamara Hughes Gustavson acquired 144,138 shares, paying $19.71 per share for a total amount of $2.84 million. Ms. Gustavson increased her stake by 0.83% to 17,603,978 shares with this purchase.
  • Director B. Wayne Hughes acquired 144,137 shares, paying $19.71 per share for a total amount of $2.84 million. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for American Homes 4 Rent here.

P/E: N/A Forward P/E: 90.18 Industry P/E: 28.45
P/S: 6.68 Price/Book: 1.12 EV/EBITDA: 17.7
Market Cap: $6.98B Avg. Daily Volume: 2,347,587 52 Week Range: $18.39 – $23.34

5. Trinity Industries, Inc. (TRN): $22.26

Director Brandon B. Boze acquired 152,364 shares of this industrial products company, paying $21.99 per share for a total amount of $3.35 million. These shares were purchased indirectly by ValueAct Capital Master Fund, L.P.

We don’t normally highlight purchases by funds but decided to make an exception in this case because San Francisco based activist value-oriented fund ValueAct Capital is buying shares.

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

P/E: 5.09 Forward P/E: 17.67 Industry P/E: 16.66
P/S: 0.9 Price/Book: 0.76 EV/EBITDA: 9.32
Market Cap: $3.26B Avg. Daily Volume: 2,270,669 52 Week Range: $19.3665 – $28.3297

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

Notable Insider Sales:

1. Walmart Inc. (WMT): $95.1

Shares of Walmart were sold by 2 insiders:

  • Director Robson S. Walton sold 3,543,644 shares for $96.22, generating $340.98 million from the sale. These shares were sold indirectly by a trust.
  • Executive Vice President Jacqueline P. Canney sold 4,026 shares for $97.95, generating $394,347 from the sale.

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

P/E: 54.31 Forward P/E: 20.19 Industry P/E: 60.34
P/S: 0.54 Price/Book: 3.86 EV/EBITDA: 10.51
Market Cap: $278.52B Avg. Daily Volume: 8,377,565 52 Week Range: $81.78 – $109.98

2. Hasbro, Inc. (HAS): $96.03

Director Alan G. Hassenfeld sold 405,350 shares of this toy company for $97.41, generating $39.48 million from the sale. These shares were sold indirectly by a trust.

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

P/E: 59.06 Forward P/E: 19.17 Industry P/E: 33.79
P/S: 2.54 Price/Book: 6.45 EV/EBITDA: 16.95
Market Cap: $12.15B Avg. Daily Volume: 1,182,716 52 Week Range: $79 – $109.6

3. Novanta Inc. (NOVT): $65.91

Director Stephen W. Bershad sold 500,000 shares of this laser based solutions company for $68.15, generating $34.08 million from the sale.

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

P/E: 59.27 Forward P/E: 28.78 Industry P/E: 22.95
P/S: 3.8 Price/Book: 6.4 EV/EBITDA: 23.04
Market Cap: $2.3B Avg. Daily Volume: 220,378 52 Week Range: $43.65 – $78.85

4. Alphabet Inc. (GOOG): $1023.88

Shares of Alphabet were sold by 2 insiders:

  • Director John L. Doerr sold 11,908 shares for $1049.76, generating $12.5 million from the sale. These shares were sold indirectly by a trust.
  • CEO, Google LLC Sundar Pichai sold 10,000 shares for $1038.35, generating $10.38 million from the sale.

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

P/E: 38.42 Forward P/E: 21.78 Industry P/E: 24.75
P/S: 5.5 Price/Book: 4.2 EV/EBITDA: 16.16
Market Cap: $714.03B Avg. Daily Volume: 1,757,353 52 Week Range: $980.64 – $1273.89

5. Vector Group Ltd. (VGR): $13.56

Shares of this tobacco company were sold by 2 insiders:

  • 10% Owner Phillip Frost M.D. sold 145,609 shares for $14.19, generating $2.07 million from the sale. These shares were sold indirectly by a trust.
  • Director Bennett S. Lebow sold 400,000 shares for $13.83, generating $5.53 million from the sale. These shares were sold indirectly by LeBow Gamma Limited Partnership.

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

P/E: 25.98 Forward P/E: 19.94 Industry P/E: 30.08
P/S: 1.37 Price/Book: N/A EV/EBITDA: 11.23
Market Cap: $1.91B Avg. Daily Volume: 1,619,033 52 Week Range: $12.56 – $22.0381

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 positions in AMH and 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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