Insider Weekends: John Malone Purchases $75 Million Of Discovery

Welcome to edition 492 of Insider Weekends. Insider buying increased last week with insiders purchasing $225.13 million of stock last week compared to $134.86 million in the week prior. Selling also increased with insiders selling $2.26 billion of stock last week compared to $1.58 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 10.06. In other words, insiders sold more than 10 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 11.72.

Insider Sector Heat Map November 22, 2019

Insider Sector Heat Map November 22, 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. Discovery, Inc. (DISCA): $32.535

Shares of this media and entertainment company were acquired by 2 insiders:

  • Director John C. Malone acquired 2,670,000 shares, paying $28.03 per share for a total amount of $74.84 million. Mr. Malone increased his stake by 34.91% to 10,317,937 shares with this purchase.
  • Director David J. Wargo acquired 162,450 shares, paying $28.28 per share for a total amount of $4.59 million. Mr. Wargo increased his stake by 49.96% to 487,624 shares with this purchase.

Mr. Malone also purchased shares of Discovery in June 2018 through a trust. Unlike those purchases, this time he purchased the shares directly and the size of the purchase was also significantly larger. CNBC interviewed John Malone last week and you can watch his reasons for buying Discovery here at minute 37 of the interview (hat tip Tobias Carlisle).

In his words, “I believe that they will solve this issue and that they are dramatically undervalued right now. When I put my screen up and I look at companies based upon market cap versus levered free cash flow, they were the cheapest thing on the screen. And I said wait a minute, they are growing in a world where everyone else in shrinking, they own all their content, they are generating a ton of cash, they have an investment grade balance sheet, why are they, why are they cheap.”

It is very likely that he said the piece about running a fundamental screen in jest and his purchase was driven by his long history with Discovery. You can see all of John Malone’s insider transactions across various companies here.

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

P/E: 14.63 Forward P/E: 8.36 Industry P/E: 16.44
P/S: 1.47 Price/Book: 2.38 EV/EBITDA: 7.78
Market Cap: $16.3B Avg. Daily Volume: 3,946,212 52 Week Range: $23.79 – $32.87

2. Intel Corporation (INTC): $57.61

Director James J. Goetz acquired 172,720 shares of Intel, paying $58.19 per share for a total amount of $10.05 million.

The CEO and CFO of Intel also purchased shares in August of this year in a couple of well timed purchases. Mr. Goetz is a managing member of the venture capital firm Sequoia Capital. His most memorable insider purchase was that of Barracuda Networks at an average price of $21.45 right after the company went public. The stock went on to more than double from there before eventually settling lower. The company was taken private by Thoma Bravo for $1.6 billion or $27.55 per share in 2017.

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

P/E: 13.49 Forward P/E: 12.31 Industry P/E: 24.40
P/S: 3.56 Price/Book: 3.38 EV/EBITDA: 8.35
Market Cap: $250.6B Avg. Daily Volume: 18,498,266 52 Week Range: $42.86 – $59.59

3. Uber Technologies, Inc. (UBER): $29.56

Chief Executive Officer Dara Khosrowshahi acquired 250,000 shares of Uber, paying $26.75 per share for a total amount of $6.69 million. Mr. Khosrowshahi increased his stake by 19.52% to 1,530,939 shares with this purchase.

Uber’s stock had recently been under pressure from heavy selling related to the expiry of the six month post-IPO lockup period. This purchase helped the stock register a gain of more 5% the day after it was filed. While the purchase appears to be an open market purchase (there were no footnotes in the filing to indicate otherwise), it was odd to see another insider sell the same number of shares at the same price on the same day as you can see below.

Mr. Khosrowshahi’s purchase is dwarfed by the nearly $750 million in sales by Uber’s founder Travis Kalanick in a single week.

Uber Insider Transactions November 2019

Uber Insider Transactions November 2019

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

P/E: N/A Forward P/E: -12.27 Industry P/E: 36.87
P/S: 3.86 Price/Book: 3.34 EV/EBITDA: -5.78
Market Cap: $50.42B Avg. Daily Volume: 17,782,375 52 Week Range: $25.58 – $47.08

4. Kinder Morgan, Inc. (KMI): $19.96

Director Fayez Sarofim acquired 200,000 shares of this oil & gas midstream company, paying $20.10 per share for a total amount of $4.02 million. Mr. Sarofim increased his stake by 0.69% to 29,373,127 shares with this purchase.

We wrote the following about Mr. Sarofim and his $15 million purchase of Kinder Morgan back in October 2016,

This purchase was interesting not just because of the size of the purchase but also because it was by a long time director of a company that also happens to be an investment professional.   Fayez Sarofim is a Texas based billionaire who was one of the original shareholders of Kinder Morgan when it went public in 2011. Mr. Sarofim is the Chairman and Co-CIO of Fayez Sarofim & Co., an investment manager with $23 billion in assets under management.

A recent Reuters article about Mr. Sarofim mentioned,

The Egyptian-born, thrice-married Sarofim, whose life story rivals anything seen in TV soap operas, supported Jeb Bush in his run for the presidency.

This article about Mr. Sarofim’s wedding last year provides some color on why Reuters might have referred to his life rivaling anything seen in TV soap operas.

Getting back to Kinder Morgan, the stock saw a sharp decline over the last two years and bottomed out under $12 in January of this year at about the same time we saw a bottom in crude oil. We wrote the following about KMI in our January 29th insider weekends post,

The S&P 500 rallied 1.75% last week after we saw insider selling drop to its lowest level in four years. While the rally was broad based, we saw big increases in some long suffering energy names as you can see from the 34% gain in Consol Energy (CNX) and the nearly 10% gain in Kinder Morgan (KMI) in the chart below.

Consol Energy and KinderMorgan 1 Week Chart

Consol Energy and KinderMorgan 1 Week Chart

Pull back the curtain a year and this rally pales in comparison as Consol is down nearly 74% and Kinder Morgan is down more than 60% despite the recent rally. We have highlighted insider purchases in both these names in the past. As is often the case with insiders and value investors, it was a case of “premature accumulation”. Where we go from here is anyone’s guess but the the 9.38% drop in the S&P 500 doesn’t even begin to paint the picture of how much some segments of the market like energy, commodities and young technology companies have dropped in the last six months. For the prudent investor who is willing to put in the time to do detailed bottoms-up analysis, there appear to be interesting opportunities amongst these beaten down names if you can navigate the dangerous currents of value traps masquerading as value stocks.

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

P/E: 21.98 Forward P/E: 19.38 Industry P/E: 13.35
P/S: 3.31 Price/Book: 1.34 EV/EBITDA: 13.11
Market Cap: $45.21B Avg. Daily Volume: 11,437,947 52 Week Range: $14.62 – $21.5

5. Assured Guaranty Ltd. (AGO): $48.68

Chief Investment Officer Andrew T. Feldstein acquired 76,342 shares of this insurance company, paying $48.58 per share for a total amount of $3.71 million. Mr. Feldstein increased his stake by 21.52% to 431,130 shares with this purchase.

You can view the list of recent insider transactions for Assured Guaranty Ltd. here.

P/E: 14.16 Forward P/E: 14.28 Industry P/E: 14.54
P/S: 5.1 Price/Book: 0.71 EV/EBITDA: N/A
Market Cap: $4.64B Avg. Daily Volume: 559,438 52 Week Range: $36.13 – $49.86

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

Notable Insider Sales:

1. Uber Technologies, Inc. (UBER): $29.56

Shares of Uber were sold by 5 insiders:

  • Director Travis Cordell Kalanick sold 26,895,222 shares for $27.87, generating $749.45 million from the sale.
  • Director Garrett Camp sold 250,000 shares for $26.75, generating $6.69 million from the sale. These shares were sold indirectly by Expa-1, LLC.
  • Chief Product Officer Manik Gupta sold 3,444 shares for $26.81, generating $92,328 from the sale.
  • Chief Accounting Officer and Global Corporate Controller Glen Ceremony sold 1,367 shares for $26.60, generating $36,356 from the sale.
  • SVP, Marketing and Public Affairs Jill Hazelbaker sold 733 shares for $26.60, generating $19,494 from the sale.

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

P/E: N/A Forward P/E: -12.27 Industry P/E: 36.87
P/S: 3.86 Price/Book: 3.34 EV/EBITDA: -5.78
Market Cap: $50.42B Avg. Daily Volume: 17,782,375 52 Week Range: $25.58 – $47.08

2. Invitation Homes Inc. (INVH): $29.64

Shares of this residential REIT were sold by 2 insiders:

  • Director Barry S. Sternlicht sold 1,412,068 shares for $30.07, generating $42.46 million from the sale. These shares were sold indirectly by various entities.
  • President & CEO Dallas B. Tanner sold 70,000 shares for $29.88, generating $2.09 million from the sale.

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

P/E: 131.73 Forward P/E: 114 Industry P/E: 36.27
P/S: 9.1 Price/Book: 1.97 EV/EBITDA: 26.01
Market Cap: $15.96B Avg. Daily Volume: 4,606,507 52 Week Range: $19.21 – $31.32

3. Columbia Sportswear Company (COLM): $90.71

Director Sarah Bany sold 332,347 shares of this apparel chain for $91.54, generating $30.42 million from the sale. These shares were sold indirectly through a trust. These shares were sold indirectly through a trust.

You can view the list of recent insider transactions for Columbia Sportswear Company here.

P/E: 18.95 Forward P/E: 17.72 Industry P/E: 27.89
P/S: 2.04 Price/Book: 3.51 EV/EBITDA: 12.32
Market Cap: $6.13B Avg. Daily Volume: 314,767 52 Week Range: $80.03 – $109.74

4. CarGurus, Inc. (CARG): $39.6

Shares of this online auto shopping provider were sold by 4 insiders:

  • Director Anastasios Parafestas sold 383,634 shares for $39.68, generating $15.22 million from the sale. These shares were sold indirectly by Argonaut 22 LLC.
  • Director Ian G. Smith sold 206,762 shares for $39.96, generating $8.26 million from the sale.
  • CEO and Chairman Langley Steinert sold 64,892 shares for $38.65, generating $2.51 million from the sale.
  • CFO and Treasurer Jason Trevisan sold 5,000 shares for $39.30, generating $196,484 from the sale.

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

P/E: 110 Forward P/E: 61.88 Industry P/E: 32.41
P/S: 7.96 Price/Book: 18.68 EV/EBITDA: 125.59
Market Cap: $4.43B Avg. Daily Volume: 964,973 52 Week Range: $28.65 – $45.25

5. American Financial Group, Inc. (AFG): $107.46

Co-CEO & Co-President Carl H. Lindner III sold 200,000 shares of this insurance company for $108.09, generating $21.62 million from the sale. These shares were sold indirectly through a trust.

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

P/E: 14.85 Forward P/E: 12.21 Industry P/E: 14.54
P/S: 1.28 Price/Book: 1.53 EV/EBITDA: 16.78
Market Cap: $9.69B Avg. Daily Volume: 335,800 52 Week Range: $84.18 – $110.88

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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