Welcome to edition 478 of Insider Weekends. With the S&P 500 down 6% by the middle of last week from its all time peak set on July 26th, insiders stepped up their buying significantly resulting in a number of interesting insider purchases. Insider buying more than doubled last week with insiders purchasing $283.3 million of stock last week compared to $108.48 million in the week prior. Selling on the other hand decreased with insiders selling $1.6 billion of stock last week compared to $2.16 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 dropped to 5.66. In other words, insiders sold almost 6 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 19.92.
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. Symantec Corporation (SYMC): $23.51
Director Peter A. Feld acquired 5,325,814 shares of this security software company, paying $22.69 per share for a total amount of $120.83 million. These shares were purchased indirectly by Starboard Value and Opportunity Master Fund Ltd.
We normally exclude fund related purchases but decided to make an exception in this case because of Starboard’s long-term track record. We wrote the following about Starboard Value and its CIO Jeff Smith last year,
Fortune magazine once called Starboard Value’s Jeff Smith “the most feared man in corporate america”. Over the last year while other value managers like David Einhorn and Bill Ackman have struggled, Starboard Value has continued to perform well as you can see from the chart below.
Unfortunately the last few quarters have not been kind to Starboard’s performance as some of their top holdings like generic drug company Perrigo have seen their price decline sharply. This purchase of Symantec is interesting because the company was already Starboard’s largest position and Symantec recently struck a deal to sell its enterprise security division to Broadcom for $10.7 billion in cash. The transaction is expected to close by early 2020.
A little more than half of Symantec’s $1.25 billion in revenue last quarter came from its consumer division ($636 million) and the enterprise division accounted for $615 million in revenue. The enterprise division revenue was growing faster (11%) compared to the consumer division (7%) but the operating margin of the consumer division at 53% was significantly higher than the 7% operating margin of the enterprise division.
Symantec is planning on returning 100% of the after-tax proceeds from the sale of the enterprise division to its investors in the form of a $12 special dividend. The company is also adding $1.1 billion to its existing share buyback program and expects to increase its regular quarterly dividend by 67% to $0.125 per quarter in the quarter after the transaction closes.
Assuming Symantec’s stock price is roughly the same after the transaction as it is today, adjusting for the $12 special dividend gives us a price of $11.51 and a $0.50 annual dividend after the regular dividend increases. This translates to a juicy dividend yield of 4.34% for a company that is growing its top line in the high single digits and sports very attractive operating margins.
You can view the list of recent insider transactions for Symantec Corporation here.
|P/E: 546.74||Forward P/E: 12.64||Industry P/E: 283.27|
|P/S: 3.44||Price/Book: 2.58||EV/EBITDA: 16.58|
|Market Cap: $16.26B||Avg. Daily Volume: 9,765,888||52 Week Range: $17.43 – $26.07|
2. Red Rock Resorts, Inc. (RRR): $18.74
Director Lorenzo J. Fertitta acquired 993,500 shares of this resorts & casinos company, paying $18.70 per share for a total amount of $18.58 million. These shares were purchased indirectly by various trusts and entities.
You can view the list of recent insider transactions for Red Rock Resorts, Inc. here.
|P/E: 14.66||Forward P/E: 11.64||Industry P/E: 18.47|
|P/S: 1.29||Price/Book: 2.46||EV/EBITDA: 9.07|
|Market Cap: $2.2B||Avg. Daily Volume: 771,058||52 Week Range: $16.76 – $33.51|
3. MEDNAX, Inc. (MD): $21.67
Director Michael Fernandez acquired 500,000 shares of this medical services company, paying $21.52 per share for a total amount of $10.67 million. 250,000 of these shares were purchased indirectly by MBF Family Investments, Ltd.
MEDNAX has had a tough year with its stock losing more than half of its value on account declining revenue in the last two quarters. This is the first insider purchase at MEDNAX in more than two years. Mr. Fernandez has been on Mednax’s board since 1995. The last time he purchased Mednax stock on the open market was in August 2011.
You can view the list of recent insider transactions for MEDNAX, Inc. here.
|P/E: N/A||Forward P/E: 6||Industry P/E: 27.97|
|P/S: 0.51||Price/Book: 0.67||EV/EBITDA: 7.72|
|Market Cap: $1.88B||Avg. Daily Volume: 844,093||52 Week Range: $20.43 – $48.77|
4. Capri Holdings Limited (CPRI): $28.24
Chairman & CEO John D. Idol acquired 363,000 shares of this apparel company, paying $27.48 per share for a total amount of $9.98 million. Mr. Idol increased his stake by 34.84% to 1,405,015 shares with this purchase.
You can view the list of recent insider transactions for Capri Holdings Limited here.
|P/E: 10.64||Forward P/E: 5.29||Industry P/E: 38.29|
|P/S: 0.8||Price/Book: 1.84||EV/EBITDA: 8.24|
|Market Cap: $4.28B||Avg. Daily Volume: 3,110,701||52 Week Range: $26.61 – $75.96|
5. General Electric Company (GE): $8.79
Shares of General Electric were acquired by 5 insiders:
- Chairman and CEO Lawrence H. Culp Jr. acquired 583,884 shares, paying $8.56 per share for a total amount of $4.99 million. These shares were purchased indirectly by a holding company.
- Senior Vice President Kevin L. Cox acquired 105,600 shares, paying $9.42 per share for a total amount of $994,752. These shares were purchased indirectly through a trust.
- Director Thomas W. Horton acquired 55,248 shares, paying $9.02 per share for a total amount of $498,337. Mr. Horton increased his stake by inf% to 55,248 shares with this purchase.
- Senior Vice President Scott Strazik acquired 34,836 shares, paying $8.01 per share for a total amount of $279,036. These shares were purchased indirectly by a 401(k) account.
- Director Paula Rosput Reynolds acquired 10,000 shares, paying $8.53 per share for a total amount of $85,300. Mr. Reynolds increased his stake by 86.96% to 21,500 shares with this purchase.
This cluster of insider purchases occurred shortly before and right after a short seller piece labelled GE a bigger fraud than Enron and temporarily caused a big drop in the stock. The report was panned by both analysts and other short sellers, some of whom called it The flat-out silly Markopolos GE report.
You can view the list of recent insider transactions for General Electric Company here.
|P/E: N/A||Forward P/E: 11.72||Industry P/E: 19.15|
|P/S: 0.64||Price/Book: 2.14||EV/EBITDA: 12.88|
|Market Cap: $76.71B||Avg. Daily Volume: 60,945,877||52 Week Range: $6.40385 – $13.25|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. Facebook, Inc. (FB): $183.7
Shares of Facebook were sold by 2 insiders:
- COB and CEO Mark Zuckerberg sold 622,420 shares for $186.87, generating $116.31 million from the sale. These shares were sold indirectly through various entities.
- Chief Operating Officer Sheryl Sandberg sold 55,000 shares for $181.62, generating $9.99 million 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 Facebook, Inc. here.
|P/E: 31.07||Forward P/E: 19.32||Industry P/E: 40.18|
|P/S: 8.37||Price/Book: 5.91||EV/EBITDA: 18.08|
|Market Cap: $524.09B||Avg. Daily Volume: 16,865,079||52 Week Range: $123.02 – $208.66|
2. PROS Holdings, Inc. (PRO): $72.42
Shares of this software application company were sold by 2 insiders:
- Director Mariette M. Woestemeyer sold 750,000 shares for $72.12, generating $54.09 million from the sale.
- Director Ronald F. Woestemeyer sold 750,000 shares for $72.15, generating $54.11 million from the sale.
You can view the list of recent insider transactions for PROS Holdings, Inc. here.
|P/E: N/A||Forward P/E: -452.63||Industry P/E: 32.48|
|P/S: 13.14||Price/Book: 30.48||EV/EBITDA: -75.72|
|Market Cap: $2.91B||Avg. Daily Volume: 529,293||52 Week Range: $28.18 – $75.4|
3. Guardant Health, Inc. (GH): $101.52
Shares of this diagnostics & research company were sold by 3 insiders:
- Chief Executive Officer Helmy Eltoukhy sold 680,000 shares for $99.81, generating $67.87 million from the sale. 217,600 of these shares were sold as a result of exercising options immediately prior to the sale.
- Chief Legal Officer Michael J. Wiley sold 93,000 shares for $99.83, generating $9.28 million from the sale. 30,000 of these shares were sold as a result of exercising options immediately prior to the sale.
- Chief Medical Officer Richard B. Lanman sold 63,075 shares for $105.25, generating $6.64 million from the sale. 5,765 of 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 Guardant Health, Inc. here.
|P/E: N/A||Forward P/E: -76.91||Industry P/E: 98.31|
|P/S: 65||Price/Book: 11.55||EV/EBITDA: -109.9|
|Market Cap: $9.44B||Avg. Daily Volume: 1,042,065||52 Week Range: $27.04 – $112.22|
4. The Trade Desk, Inc. (TTD): $248.62
Shares of this advertising software company were sold by 2 insiders:
- President and CEO Jeffrey Terry Green sold 294,000 shares for $259.44, generating $76.27 million from the sale.
- Chief Financial Officer Paul Ross sold 2,682 shares for $279.30, generating $749,083 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 The Trade Desk, Inc. here.
|P/E: 119.93||Forward P/E: 68.12||Industry P/E: 38.13|
|P/S: 19.96||Price/Book: 22.69||EV/EBITDA: 90.86|
|Market Cap: $11.18B||Avg. Daily Volume: 1,518,244||52 Week Range: $102.351 – $289.51|
5. Garmin Ltd. (GRMN): $77.17
Executive Chairman Min H. Kao sold 889,092 shares of this GPS manufacturer for $77.94, generating $69.29 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: 19.89||Forward P/E: 18.91||Industry P/E: 34.8|
|P/S: 4.24||Price/Book: 3.53||EV/EBITDA: 14.78|
|Market Cap: $14.67B||Avg. Daily Volume: 1,127,226||52 Week Range: $59.98 – $89.72|
You can view the full list of sales from this Insider Sales page.
Disclaimer: I hold a long position in GE. 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.