Insider Weekends: Vice Chairman of AbbVie Stops Selling And Buys Shares Instead

Welcome to edition 483 of Insider Weekends. Insider buying almost doubled last week with insiders purchasing $252.96 million of stock last week compared to $133.82 million in the week prior. Selling on the other hand decreased with insiders selling $1.20 billion of stock last week compared to $1.24 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 4.75. In other words, insiders sold almost 5 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 9.25.

Insider Sector Heat Map September 20, 2019

Insider Sector Heat Map September 20, 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. The Kraft Heinz Company (KHC): $28.14

Shares of this food and beverage products company were acquired by 2 insiders:

  • Director Jorge P. Lemann acquired 3,496,503 shares, paying $28.60 per share for a total amount of $99.99 million. Mr. Lemann increased his stake by 17,530% to 3,516,449 shares with this purchase.
  • Director Alexandre Van Damme acquired 250,000 shares, paying $28.45 per share for a total amount of $7.11 million. These shares were purchased indirectly by Societe Familiale of d’Investissements.

The merger of Kraft with Heinz in 2015 to create a food giant backed by Brazilian private equity firm 3G capital and Warren Buffett appeared to work for a couple of years with rising earnings and dividends propelling the stock to over $90/share by early 2017. Unfortunately a trifecta of issues hit the company including,

i) a shift from branded products to private label products with higher perceived nutritional value and sometimes lower prices (Kraft American cheese slices vs. artisanal cheeses for example)

ii) a bifurcated advertising market with the rise of social media and other channels that made brand building significantly more difficult that buying spots on primetime TV networks and radio

iii) a leveraged balance sheet with nearly $30 billion in net debt after the merger that started hurting earnings as revenue declined

These issues transformed a once stable consumer staples company that was a refuge for investors in troubled market conditions into a train wreck that lost more than two-thirds of its value over the last two and a half years. What is interesting about these purchases is that while the co-founder of 3G Capital, Jorge Lemann was buying stock, the firm 3G Capital sold $713 million worth of shares as you can see here. 3G also sold $1.23 billion worth of stock in August 2018. According to CNBC, “The 3G sale was also sparked by periodic liquidity windows by 3G investors in the fund that holds Kraft Heinz stock and the private equity fund has no current intention to sell any additional shares”. 

The fact that 3G does not plan to sell additional shares and Warren Buffett still owns about 26.7% of shares could be perceived as a positive. In these situations it is probably best to let the company prove it has turned a corner by showing positive earnings and revenue growth before considering an investments even if it means you may miss out on the first 10 to 20% of the upside from the bottom.

You can view the list of recent insider transactions for The Kraft Heinz Company here.

P/E: N/A Forward P/E: 10.78 Industry P/E: 44.08
P/S: 1.34 Price/Book: 0.67 EV/EBITDA: 10.15
Market Cap: $34.33B Avg. Daily Volume: 8,631,473 52 Week Range: $24.86 – $58.08

2. Scientific Games Corporation (SGMS): $22.97

Director Ronald O. Perelman acquired 100,000 shares of this casino and lottery equipment provider, paying $22.41 per share for a total amount of $2.24 million. These shares were purchased indirectly through a trust.

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

P/E: N/A Forward P/E: 30.63 Industry P/E: 25.64
P/S: 0.63 Price/Book: N/A EV/EBITDA: 10.2
Market Cap: $2.14B Avg. Daily Volume: 1,222,360 52 Week Range: $14.79 – $29.95

3. AbbVie Inc. (ABBV): $72.39

Vice Chairman Laura J. Schumacher acquired 25,000 shares of this drug manufacturer, paying $70.42 per share for a total amount of $1,760,522. Ms. Schumacher increased her stake by 17.88% to 164,838 shares with this purchase.

AbbVie’s decision to merge with Allergan (AGN) in a $63 billion cash plus stock deal this summer put significant downward pressure on AbbVie’s stock as long-term investors were displeased with AbbVie’s plan and arbitrageurs shorted the stock to capture the attractive 10% spread on the deal. The stock has since rebounded but still remains below the $78.45 price AbbVie was trading at before the announcement and well below the $93 and change it was trading at a year ago.

Ms. Shumacher was a net seller of the stock until earlier this year as you can see here. It is interesting to see her switch gears and buy stock instead. In addition to being the Vice Chairman, she is also the Chief Legal Officer of the company and has been with AbbVie for nearly 7 years after spending more than two decades at Abbott.

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

P/E: 26.43 Forward P/E: 7.59 Industry P/E: 188.67
P/S: 3.28 Price/Book: N/A EV/EBITDA: 9.34
Market Cap: $107.03B Avg. Daily Volume: 11,668,533 52 Week Range: $62.66 – $96.6

4. Dominion Energy, Inc. (D): $80.84

Director Michael E. Szymanczyk acquired 21,400 shares of this energy company, paying $78.85 per share for a total amount of $1.69 million. These shares were purchased indirectly through a trust.

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

P/E: 67.65 Forward P/E: 18.41 Industry P/E: 29.42
P/S: 4.44 Price/Book: 2.49 EV/EBITDA: 16.2
Market Cap: $64.95B Avg. Daily Volume: 3,791,377 52 Week Range: $67.41 – $81.24

5. Pluralsight, Inc. (PS): $18.23

Shares of this software application company were acquired by 4 insiders:

  • Director Karenann K. Terrell acquired 31,500 shares, paying $17.10 per share for a total amount of $538,609. These shares were purchased indirectly through a trust.
  • Director Frederick Onion acquired 30,000 shares, paying $17.19 per share for a total amount of $515,829. These shares were purchased indirectly through a trust.
  • Director Gary L. Crittenden acquired 14,600 shares, paying $17.11 per share for a total amount of $249,771. These shares were purchased indirectly by Bear Mountain Ranch Asset Management, LLC.
  • Director Bonita C. Stewart acquired 6,000 shares, paying $17.15 per share for a total amount of $102,911. These shares were purchased indirectly through a trust.

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

P/E: 9.33 Forward P/E: -56.97 Industry P/E: 42.20
P/S: 9.31 Price/Book: 8.96 EV/EBITDA: -13.89
Market Cap: $2.55B Avg. Daily Volume: 2,495,525 52 Week Range: $14.84 – $35.7

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

Notable Insider Sales:

1. Facebook, Inc. (FB): $189.93

COB and CEO Mark Zuckerberg sold 628,000 shares of Facebook for $187.32, generating $117.64 million from the sale. These shares were sold indirectly by various entities.

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

P/E: 32.12 Forward P/E: 19.99 Industry P/E: 28.65
P/S: 8.66 Price/Book: 6.11 EV/EBITDA: 18.76
Market Cap: $541.86B Avg. Daily Volume: 14,150,471 52 Week Range: $123.02 – $208.66

2. Intuit Inc. (INTU): $269.18

Chairman of Exec. Committee Scott D. Cook sold 133,333 shares of this software application company for $270.24, generating $36.03 million from the sale. These shares were sold indirectly through a trust.

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

P/E: 45.7 Forward P/E: 31.59 Industry P/E: 42.20
P/S: 10.32 Price/Book: 18.68 EV/EBITDA: 32.88
Market Cap: $70.01B Avg. Daily Volume: 1,245,930 52 Week Range: $182.61 – $295.77

3. RealPage, Inc. (RP): $64.64

Chairman President & CEO Stephen T. Winn sold 200,000 shares of this software application company for $62.49, generating $12.49 million from the sale. These shares were sold indirectly by Seren Capital, Ltd.

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

P/E: 149.28 Forward P/E: 31.38 Industry P/E: 42.20
P/S: 6.59 Price/Book: 5.34 EV/EBITDA: 41.7
Market Cap: $6.13B Avg. Daily Volume: 608,438 52 Week Range: $42.9 – $66.25

4. Hess Corporation (HES): $65.67

Shares of this integrated energy company were sold by 4 insiders:

  • Chief Executive Officer John B. Hess sold 85,841 shares for $69.42, generating $5.96 million from the sale. 71,042 of these shares were sold indirectly through a trust.
  • Senior Vice President Michael R. Turner sold 32,746 shares for $69.00, generating $2.26 million from the sale. 21,791 of these shares were sold as a result of exercising options immediately prior to the sale.
  • Senior Vice President Barbara J. Lowery-Yilmaz sold 19,189 shares for $70.65, generating $1.36 million from the sale.
  • COO and President, E&P Gregory P. Hill sold 17,750 shares for $70.94, generating $1.26 million from the sale.

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

P/E: N/A Forward P/E: 60.25 Industry P/E: 12.39
P/S: 3.08 Price/Book: 2.15 EV/EBITDA: 9.15
Market Cap: $20B Avg. Daily Volume: 2,971,952 52 Week Range: $35.59 – $74.81

5. Guidewire Software, Inc. (GWRE): $109.24

Shares of this insurance software company were sold by 7 insiders:

  • Director Marcus Ryu sold 62,333 shares for $106.90, generating $6.66 million from the sale.
  • Director Clifton Thomas Weatherford sold 9,651 shares for $108.65, generating $1.05 million from the sale.
  • Chief Sales Officer Steven P. Sherry sold 9,199 shares for $107.51, generating $988,993 from the sale.
  • Chief Operating Officer Priscilla Hung sold 7,406 shares for $107.43, generating $795,598 from the sale.
  • Chief Delivery Officer Michael Polelle sold 5,477 shares for $107.73, generating $590,012 from the sale.
  • Chief Admin Officer, General Counsel James Winston King sold 3,068 shares for $106.78, generating $327,603 from the sale.
  • Chief Financial Officer Curtis Smith sold 1,310 shares for $106.78, generating $139,882 from the sale.

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

P/E: 436.96 Forward P/E: 70.48 Industry P/E: 42.20
P/S: 12.42 Price/Book: 5.69 EV/EBITDA: 196.71
Market Cap: $8.94B Avg. Daily Volume: 685,676 52 Week Range: $73.82 – $113.34

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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