Insider Weekends: GameStop Insiders Finally Step Up To Buy Shares

Welcome to edition 484 of Insider Weekends. Insider buying declined significantly last week with insiders purchasing $57.61 million of stock last week compared to $252.96 million in the week prior. Selling also declined with insiders selling $683.67 million of stock last week compared to $1.20 billion in the week prior.

With the end of the quarter upon us and most companies entering their pre-earnings quiet periods, insider activity is likely to remain lackluster for a few weeks.

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 11.87. In other words, insiders sold almost 12 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 4.75.

Insider Sector Heat Map September 27, 2019

Insider Sector Heat Map September 27, 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. Scientific Games Corporation (SGMS): $20.80

Director Ronald O. Perelman acquired 200,000 shares of this gaming company, paying $21.90 per share for a total amount of $4.38 million. These shares were purchased indirectly through a trust.

Mr. Perelman also purchased 100,000 shares earlier this mont and 305,000 shares in June of this year. He was an aggressive buyer last December when the stock was trading in the high teens after a general market decline. We wrote the following after his December 2018 purchases,

The seventy five year old corporate raider of the 1980s turned philanthropist was active this December making multiple purchases in three stocks including Scientific Games, Revlon (REV) and vTv Therapeutics (VTVT). While Scientific Games and Revlon have market caps of over $1 billion, vTv is a tiny microcap stock, which shot up 120.39% last Friday on volume that was 243 times the volume of shares traded on Thursday. I did not see any other news for vTv and this huge move appears to be on account of Mr. Perelman’s purchase through his holding company MacAndrews & Forbes Incorporated. We saw a similar huge move in VTVT in October following Mr. Perelman’s purchases but the stock eventually gave back most of those gains.

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

P/E: N/A Forward P/E: 27.02 Industry P/E: N/A
P/S: 0.57 Price/Book: N/A EV/EBITDA: 10.2
Market Cap: $1.94B Avg. Daily Volume: 1,165,942 52 Week Range: $14.79 – $29.95

2. Interface, Inc. (TILE): $14.59

Director Christopher G. Kennedy acquired 49,000 shares of this modular flooring company, paying $13.74 per share for a total amount of $673,337. Mr. Kennedy increased his stake by 55.86% to 136,721 shares with this purchase.

It appears that directors of three different flooring companies include two manufacturers and one retailer appear to be bullish on the prospects of the flooring business even as the stocks of all three companies have had a rough year as you can see from the chart below. All three appear to be in an uptrend in recent week as investors rotate out of growth and into value names.

All three companies trade for less than 10 times EBITDA but their biggest challenge appears to be top line growth, or lack thereof. The double digit top line growth at Interface is driven by an acquisition by the company last year. Mohawk (MHK) has the best operating margins, lowest valuation and least leverage balance sheet of the three. Unfortunately it is barely growing and has exposure to China both as a country it sources from and sells to.

One Year Chart Interface, Mohawk and Tile Shop.

One Year Chart Interface, Mohawk and Tile Shop. Source: Yahoo Finance. (click to enlarge)

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

P/E: 17.16 Forward P/E: 8.34 Industry P/E: N/A
P/S: 0.65 Price/Book: 2.42 EV/EBITDA: 8.09
Market Cap: $852.54M Avg. Daily Volume: 389,157 52 Week Range: $10.37 – $23.5

3. GameStop Corp. (GME): $5.34

Shares of this video game retailer were acquired by 4 insiders:

  • Director Gerald R. Szczepanski acquired 40,000 shares, paying $5.04 per share for a total amount of $201,600. Mr. Szczepanski increased his stake by 52.96% to 115,527 shares with this purchase.
  • Director Carrie W. Teffner acquired 21,118 shares, paying $4.73 per share for a total amount of $99,888. Ms. Teffner increased her stake by 61.48% to 55,469 shares with this purchase.
  • Director Kathy P. Vrabeck acquired 20,000 shares, paying $5.29 per share for a total amount of $105,800. Ms. Vrabeck increased her stake by 33.71% to 79,327 shares with this purchase.
  • Director Raul J. Fernandez acquired 4,900 shares, paying $5.07 per share for a total amount of $24,843. Mr. Fernandez increased his stake by 14.75% to 38,119 shares with this purchase.

GameStop, the classic value stock (or value trap depending on whom you ask) declined most of this year but appears to have bottomed in early September shortly before the company reported fiscal Q2 results that saw its top line shrink nearly 14.35% to $1.29 billion and a non-GAAP loss of 32 cents.

With the exception of collectibles, revenue declined in every other category. There are several reasons for the decline including a late cycle console market that caused a 41% decline in new hardware sales and a shift away from physical media to game downloads. The low teen same-store-sales decline forecast appears bleak but the company expects annual operating cash flow to improve by more than $200 million compared to approximately $100 million from a prior forecast.

What is interesting this time around is that we are seeing a cluster of insider purchases. Through this multi-year decline at GameStop, insiders have not stepped up to buy the stock except for an EVP picking up 10,000 shares in September 2016. You have to go back all the way to May 2012 to see two other insider purchases by the then CEO and the President of the company.  GameStop picked a retail veteran, George Sherman, as its new CEO in March of this year.

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

P/E: N/A Forward P/E: 4.68 Industry P/E: N/A
P/S: 0.06 Price/Book: 0.6 EV/EBITDA: 3.79
Market Cap: $483.04M Avg. Daily Volume: 7,973,298 52 Week Range: $3.15 – $16.9

4. IGM Biosciences, Inc. (IGMS): $17.91

Director Jakob Haldor Topsoe acquired 18,340 shares of this biotech company, paying $21.68 per share for a total amount of $397,604. Mr. Topsoe increased his stake by 50.84% to 54,415 shares with this purchase.

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

P/E: N/A Forward P/E: N/A Industry P/E: N/A
P/S: N/A Price/Book: N/A EV/EBITDA: -2.77
Market Cap: $546.84M Avg. Daily Volume: 363,425 52 Week Range: $16.56 – $24.57

5. Gossamer Bio, Inc. (GOSS): $17.19

Shares of this biotech company were acquired by 4 insiders:

  • President & CEO Sheila Gujrathi acquired 10,000 shares, paying $16.80 per share for a total amount of $167,980. These shares were purchased indirectly through a trust.
  • Director Faheem Hasnain acquired 10,000 shares, paying $16.80 per share for a total amount of $167,980. These shares were purchased indirectly through a trust.
  • Chief Financial Officer Bryan Giraudo acquired 1,121 shares, paying $16.78 per share for a total amount of $18,810. These shares were purchased indirectly through a trust.
  • EVP & General Counsel Waage Christian acquired 1,000 shares, paying $16.65 per share for a total amount of $16,654. These shares were purchased indirectly through a trust.

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

P/E: N/A Forward P/E: -4.84 Industry P/E: N/A
P/S: N/A Price/Book: 2.35 EV/EBITDA: -4.46
Market Cap: $1.13B Avg. Daily Volume: 435,112 52 Week Range: $15.59 – $25.06

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

Notable Insider Sales:

1. Facebook, Inc. (FB): $177.1

Shares of Facebook were sold by 2 insiders:

  • COB and CEO Mark Zuckerberg sold 617,294 shares for $186.61, generating $115.19 million from the sale. These shares were sold indirectly by various entities.
  • Chief Operating Officer Sheryl Sandberg sold 55,000 shares for $180.92, generating $9.95 million from the sale. These shares were sold indirectly by a trust.

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

P/E: 29.95 Forward P/E: 18.64 Industry P/E: N/A
P/S: 8.07 Price/Book: 5.69 EV/EBITDA: 17.71
Market Cap: $505.26B Avg. Daily Volume: 14,311,481 52 Week Range: $123.02 – $208.66

2. Morningstar, Inc. (MORN): $146.21

Executive Chairman Joseph D. Mansueto sold 40,761 shares of this investment research services provider for $158.44, generating $6.46 million from the sale.

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

P/E: 36.11 Forward P/E: 51.48 Industry P/E: N/A
P/S: 5.92 Price/Book: 6.23 EV/EBITDA: 23.45
Market Cap: $6.25B Avg. Daily Volume: 88,201 52 Week Range: $99.67 – $162.53

3. Jabil Inc. (JBL): $35.23

Shares of this electronic manufacturing services provider were sold by 6 insiders:

  • Director Thomas A. Sansone sold 100,000 shares for $33.50, generating $3.35 million from the sale. These shares were sold indirectly by TAS Management.
  • EVP, CFO Michael Dastoor sold 47,542 shares for $34.07, generating $1.62 million from the sale.
  • EVP, CEO, Engineered Solutions Michael J. Loparco sold 14,000 shares for $34.01, generating $476,105 from the sale.
  • EVP, CEO, E & I Alessandro Parimbelli sold 11,500 shares for $33.46, generating $384,830 from the sale.
  • EVP, CEO, Healthcare Steven D. Borges sold 10,000 shares for $33.00, generating $330,000 from the sale.
  • SVP, Chief Human Resources Bruce Allan Johnson sold 6,000 shares for $35.00, generating $210,000 from the sale.

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

P/E: 32.32 Forward P/E: 8.83 Industry P/E: N/A
P/S: 0.22 Price/Book: 2.9 EV/EBITDA: 4.66
Market Cap: $5.3B Avg. Daily Volume: 1,254,087 52 Week Range: $21.49 – $35.96

4. Goosehead Insurance, Inc (GSHD): $48.76

CEO Mark Evan Jones sold 62,015 shares of this insurance company for $49.02, generating $3.04 million from the sale. These shares were sold indirectly by a trust.

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

P/E: 192.73 Forward P/E: 73.88 Industry P/E: N/A
P/S: 24.32 Price/Book: 9.58 EV/EBITDA: 35.62
Market Cap: $1.77B Avg. Daily Volume: 179,956 52 Week Range: $20.49 – $51.98

5. salesforce.com, inc. (CRM): $148.26

Shares of this software application company were sold by 9 insiders:

  • Chairman of the Board & co-CEO Marc Benioff sold 30,000 shares for $152.62, generating $4.58 million from the sale.
  • Co-Founder and CTO Parker Harris sold 1,285 shares for $153.62, generating $197,400 from the sale. These shares were sold indirectly by a trust.
  • co-CEO Keith Block sold 865 shares for $154.07, generating $133,270 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Pres. & Chief Product Officer Bret Steven Taylor sold 665 shares for $154.07, generating $102,456 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • President and CFO Mark J. Hawkins sold 532 shares for $154.07, generating $81,965 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • President, Technology Srinivas Tallapragada sold 355 shares for $154.07, generating $54,695 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Pres., Legal & General Counsel Amy E. Weaver sold 333 shares for $154.07, generating $51,305 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Pres. & Chief Product Officer Alexandre Dayon sold 333 shares for $154.07, generating $51,305 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Chief Accounting Officer Joe Allanson sold 167 shares for $154.07, generating $25,730 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 salesforce.com, inc. here.

P/E: 123.14 Forward P/E: 47.83 Industry P/E: N/A
P/S: 8.83 Price/Book: 6.74 EV/EBITDA: 64.92
Market Cap: $130.02B Avg. Daily Volume: 6,415,559 52 Week Range: $113.6 – $167.56

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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