Insider Weekends: Randal Kirk Buys Intrexon At Much Higher Prices

Welcome to edition 469 of Insider Weekends. We completed nine years of publishing these posts last week and it has been a very informative journey thus far. Insider buying decreased significantly last week with insiders purchasing $93.05 million of stock compared to $218.22 million in the week prior. Selling on the other hand nearly doubled with insiders selling $1.97 billion of stock last week compared to $1.02 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 21.15. In other words, insiders sold more than 21 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 4.69.

Insider Sector Heat Map June 14, 2019

Insider Sector Heat Map June 14, 2019 (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. RE/MAX Holdings, Inc. (RMAX): $31.64

Shares of this real estate services company were acquired by 2 insiders:

  • Director David L. Liniger acquired 230,800 shares, paying $31.98 per share for a total amount of $7.38 million. Mr. Liniger was the former co-CEO of RE/MAX.
  • Director Roger J. Dow acquired 9,100 shares, paying $32.30 per share for a total amount of $293,930. Mr. Dow increased his stake by 53.86% to 25,996 shares with this purchase.

An increase in mortgage interest rates last year combined with less favorable taxation for both mortgage interest as well as property taxes for states with high SALT taxes put a damper on real estate related stocks. The last year has been difficult for these companies as you can see from the chart below but it was particularly unkind to RE/MAX, which saw its stock drop by more than 42%.

REMAX 1 Year Chart

RE/MAX 1 Year Chart (source: Yahoo Finance)

RE/MAX uses a franchising model to sell services to real estate and mortgage agents. For Q1 2019, RE/MAX reported a 35% increase in revenue but almost all of that increase was on account of a January 2019 acquisition of an ad company called the Marketing Funds that RE/MAX acquired from its former co-CEO David Liniger. Excluding the impact of this acquisition, revenue declined by 0.4%. Adjusted earnings were 48 cents/share (25 cents GAAP EPS) in Q1 2019 and the company is expected to earn $2.22/share for the full year.

The company also expects to end the year with 2% to 4% more agents. Excluding the impact of the Marketing Funds acquisition, revenue for the full year is expected to grow by about 1%. Full year revenue is expected to be in a range of $287.0 million to $291.0 million (including revenue from the Marketing Funds in a range of $72.5 million to $74.5 million).

I first got interested in RE/MAX after seeing these insider purchases and noticing that it was trading for an EV/EBITDA of just 4. However after reviewing the balance sheet, the net debt is $227 million, translating to an Enterprise Value of $1.2 billion and not the $389 million most finance sites are reporting. The actual EV/EBITDA is closer to 16 making this melting ice cube company more expensive than it appears on the surface.

You can view the list of recent insider transactions for RE/MAX Holdings, Inc. here.

P/E: 21.23 Forward P/E: 13.52 Industry P/E: 69.1
P/S: 4.16 Price/Book: 1.16 EV/EBITDA: 4.01
Market Cap: $960.83M Avg. Daily Volume: 171,893 52 Week Range: $27.84 – $56.77

2. Guess, Inc. (GES): $14.23

Shares of this apparel and accessories retailer were acquired by 2 insiders:

  • CEO and Director Carlos Alberini acquired 347,353 shares, paying $14.32 per share for a total amount of $4.97 million. These shares were purchased indirectly through a trust.
  • Director Gianluca Bolla acquired 10,000 shares, paying $14.73 per share for a total amount of $147,300. Mr. Bolla increased his stake by 13.24% to 85,552 shares with this purchase.

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

P/E: 88.94 Forward P/E: 9.88 Industry P/E: 33.81
P/S: 0.39 Price/Book: 1.86 EV/EBITDA: 12.18
Market Cap: $1.02B Avg. Daily Volume: 2,296,096 52 Week Range: $13.88 – $26.95

3. Occidental Petroleum Corporation (OXY): $49.31

Shares of this oil & gas exploration and production company were acquired by 8 insiders:

  • President and CEO Vicki A. Hollub acquired 37,460 shares, paying $48.15 per share for a total amount of $1.8 million. Ms. Hollub increased her stake by 17.76% to 248,326 shares with this purchase.
  • Senior Vice President Oscar K. Brown acquired 15,000 shares, paying $48.28 per share for a total amount of $724,200. Mr. Brown increased his stake by 14.12% to 121,228 shares with this purchase.
  • SVP, GC & CCO Marcia E. Backus acquired 10,000 shares, paying $48.09 per share for a total amount of $480,900. Ms. Backus increased her stake by 10.96% to 101,248 shares with this purchase.
  • Director William R. Klesse acquired 10,000 shares, paying $48.22 per share for a total amount of $482,200. Mr. Klesse increased his stake by 12.31% to 91,203 shares with this purchase.
  • Director Eugene L. Batchelder acquired 9,100 shares, paying $48.11 per share for a total amount of $437,790. Mr. Batchelder increased his stake by 25.24% to 45,148 shares with this purchase. 5,100 of these shares were purchased indirectly by Mr. Batchelder’s spouse.
  • Director Avedick Baruyr Poladian acquired 5,000 shares, paying $48.77 per share for a total amount of $243,850. Mr. Poladian increased his stake by 9.04% to 60,319 shares with this purchase.
  • SVP – Business Support Glenn M. Vangolen acquired 5,000 shares, paying $48.53 per share for a total amount of $242,650. Mr. Vangolen increased his stake by 5.67% to 93,111 shares with this purchase.
  • SVP & CFO Cedric W. Burgher acquired 4,100 shares, paying $49.61 per share for a total amount of $203,401. Mr. Burgher increased his stake by 5.64% to 76,842 shares with this purchase.

Occidental is currently in the process of acquiring Anadarko Petroleum (APC) in a stock plus cash deal. The acquisition has been challenged by Carl Icahn who owns nearly 5% of Occidental and called the deal “fundamentally misguided”. Occidental managed to wrest Anadarko from Chevron after offering a higher price thanks to a $10 billion financing commitment from Warren Buffet.

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

P/E: 9.27 Forward P/E: 13.26 Industry P/E: 14.33
P/S: 2.04 Price/Book: 1.74 EV/EBITDA: 5.19
Market Cap: $36.88B Avg. Daily Volume: 10,620,222 52 Week Range: $47 – $86.6

4. Intrexon Corporation (XON): $7.03

Chief Executive Officer Randal J. Kirk acquired 805,447 shares of this biotech company, paying $5.24 per share for a total amount of $4.22 million. These shares were purchased indirectly through various entities.

We wrote the following about Mr. Kirk’s purchase of Intrexon at an average price of $4.67 last month. The stock is up nearly 50% since then.

One of the things I like about reviewing insider transactions every week is the opportunity to discover companies that would not have otherwise been on my radar. Intrexon and Randal Kirk are a good example where I came across the company and Mr. Kirk after his purchase of Ziopharm Onchology (ZIOP) back in November 2013.

Unfortunately the last few years have not been kind to Intrexon with the stock dropping nearly 78% while the Nasdaq went up 80% over the same period. The company has reported losses in each of the last four years and revenue declined last year to $160 million from $231 million in 2017. The company has a large pipeline of products in both healthcare to treat cancer as well as in bioengineering where the company builds technology for a wide range of applications including the prevention of browning in apples. You can explore their pipeline on DNA.com.

Intrexon DNA Applications

Intrexon DNA Applications (Click to enlarge. Source: Intrexon company website)

This could be another case of a billionaire spending a significant amount his wealth to get a healthcare company off the ground like Alfred Mann tried with MannKind (MNKD) before his death in 2016 or Phillip Frost is trying with Opko Health (OPK) or it could turn out to be something a whole lot more. An investment in Intrexon would require an understanding of the company’s pipeline, its technology and addressable markets.

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

P/E: N/A Forward P/E: -5.54 Industry P/E: 103.12
P/S: 7.86 Price/Book: 3.61 EV/EBITDA: -3.05
Market Cap: $1.13B Avg. Daily Volume: 2,542,839 52 Week Range: $3.95 – $19.94

5. Entercom Communications Corp. (ETM): $5.95

Chairman Emeritus Joseph M. Field acquired 632,162 shares of this radio broadcasting company, paying $5.99 per share for a total amount of $3.79 million. These shares were purchased indirectly by Mr. Field’s spouse. Mr. Field also reported some old purchases from 2017 but we are not including those in the totals for this week.

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

P/E: N/A Forward P/E: 5.13 Industry P/E: 12.6
P/S: 0.58 Price/Book: 0.64 EV/EBITDA: 9.17
Market Cap: $848.52M Avg. Daily Volume: 1,268,158 52 Week Range: $5.16 – $8.6

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

Notable Insider Sales:

1. STERIS plc (STE): $140.43

Director Richard Martin Steeves sold 294,360 shares of this healthcare products company for $137.59, generating $40.5 million from the sale. 33,493 of these shares were sold indirectly through a trust.

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

P/E: 39.45 Forward P/E: 23.68 Industry P/E: 33.29
P/S: 4.27 Price/Book: 3.73 EV/EBITDA: 23.72
Market Cap: $11.88B Avg. Daily Volume: 529,090 52 Week Range: $99.14 – $142.98

2. Arista Networks, Inc. (ANET): $236.08

Shares of this computer systems company were sold by 2 insiders:

  • Chief Development Officer Andreas Bechtolsheim sold 140,241 shares for $252.84, generating $35.46 million from the sale. 52,350 of these shares were sold as a result of exercising options immediately prior to the sale.
  • CTO and SVP Software Eng. Kenneth Duda sold 10,876 shares for $251.38, generating $2.73 million from the sale. These shares were sold indirectly by a trust.

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

P/E: 49.72 Forward P/E: 22.21 Industry P/E: 20.6
P/S: 7.95 Price/Book: 7.52 EV/EBITDA: 21
Market Cap: $18.09B Avg. Daily Volume: 1,020,428 52 Week Range: $187.08 – $331.27

3. Intuit Inc. (INTU): $254.13

Chairman of Exec. Committee Scott D. Cook sold 133,334 shares of this software application company for $259.27, generating $34.57 million from the sale. These shares were sold indirectly by various trusts.

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

P/E: 46.4 Forward P/E: 33.7 Industry P/E: 155.94
P/S: 9.99 Price/Book: 16.19 EV/EBITDA: 32.27
Market Cap: $65.88B Avg. Daily Volume: 1,480,249 52 Week Range: $182.61 – $272.14

4. EPAM Systems, Inc. (EPAM): $174.5

Shares of this information technology services company were sold by 2 insiders:

  • CEO, President, Chairman Arkadiy Dobkin sold 125,000 shares for $177.08, generating $22.14 million from the sale.
  • VP, Corporate Controller, PAO Gary C. Abrahams sold 361 shares for $177.16, generating $63,955 from the sale.

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

P/E: 42.04 Forward P/E: 27.44 Industry P/E: 20.65
P/S: 4.91 Price/Book: 7.11 EV/EBITDA: 29.8
Market Cap: $9.53B Avg. Daily Volume: 460,768 52 Week Range: $104.77 – $180.55

5. Black Knight, Inc. (BKI): $59.6

Executive Chairman William P. Foley II sold 250,000 shares of this software infrastructure company for $61.21, generating $15.3 million from the sale.

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

P/E: 53.21 Forward P/E: 26.37 Industry P/E: 155.94
P/S: 7.81 Price/Book: 4.83 EV/EBITDA: 29.08
Market Cap: $8.8B Avg. Daily Volume: 688,534 52 Week Range: $42.3 – $62.21

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 Entercom Communications (ETM). 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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