Insider Weekends: A Lost Decade Of Insider Buying By Dr. Frost

Welcome to edition 498 of Insider Weekends. Insider buying increased last week with insiders purchasing $16.77 million of stock compared to $10.27 million in the week prior. Selling on the other hand decreased with insiders selling $433.74 million of stock last week compared to $758.25 million 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 25.86. In other words, insiders sold almost 26 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 73.81. 

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. Enterprise Products Partners L.P. (EPD): $28.4

Director Randa Duncan Williams acquired 481,000 units of this oil & gas midstream company, paying $27.90 per share for a total amount of $13.42 million. These units were purchased indirectly through various family trusts.

Ms. Williams started her insider buying on December 2nd and over the course of the rest of December she acquired 2.27 million units at an average price of $26.76 for a total amount of $60.76 million. We wrote the following about her insider buying two weeks ago,

This is the third week in a row Ms. Williams has purchased units of Enterprise Products Partners. Her purchases this month have totaled $49.44 million. While these purchases are large, they represent less than 1% of Ms. William’s estimated net worth of $6.6 billion. She is one of the four children of Dan Duncan who co-founded Enterprise Product Partners in 1968 with $10,000 and two fuel trucks.

She joined Enterprise Products in 1994 after practicing law for six years and previously served as President and CEO of the company. She has been the non-executive Chairman of the Board since 2013.

You can view the list of recent insider transactions for Enterprise Products Partners L.P. here.

P/E: 13.08 Forward P/E: 12.79 Industry P/E: 14.44
P/S: 1.83 Price/Book: 2.54 EV/EBITDA: 11.6
Market Cap: $62.17B Avg. Daily Volume: 5,037,117 52 Week Range: $25.04 – $30.87

2. Cassava Sciences, Inc. (SAVA): $9.65

President and CEO Remi Barbier acquired 100,000 shares of this biotech company, paying $5.53 per share for a total amount of $553,000. Mr. Barbier increased his stake by 10.32% to 1,068,855 shares with this purchase.

This stock has jumped an astounding 86% since this insider purchase was filed with the SEC after market hours on December 31st. This includes a 34% run up in the stock price on Friday. The company was formerly known as Pain Therapeutics and is currently developing two products for the detection and treatment of Alzheimers.

This purchase and its subsequent run-up remind me of the jump in the stock of another microcap company two weeks ago, LMP Automotive Holdings (LMPX), which saw its stock more than quintuple since its IPO. That stock is now down more than 32% from those lofty levels and I am a little surprised it is not a whole lot lower. We wrote the following about the insider purchase at LMP Automotive Holdings,

More often than not, insiders sell during an IPO as they gain liquidity and can diversify their assets. But every once in a while we see insiders buy more in an IPO. This purchase is highly unusual because Mr. Tawfik has purchased shares multiple times at higher prices since the company went public earlier this month for $5/share. The stock was up 29% last Friday and is up 435% from its first trading day closing price of $5.36 on December 5th.

Looking at the company, it appears to have a single location close to Fort Lauderdale in Florida and allows you to buy, sell, rent or subscribe to cars. It appears to be competing with car dealerships like AutoNation (AN) and Lithia Motors (LAD),  car rental companies like Hertz Global Holdings (HTZ) and Avis Budget Group (CAR) as well as car subscription services like GM’s Maven that it is in the process of scaling down after a tepid response from consumers.

Revenue last quarter was $1.2 million (yes, you read that right), a significant decline from $4.8 million in Q3 2018. As one would expect, the company is posting both operating and net losses. I am not sure why the stock is up so much from its IPO but if I were a betting man and were not aware of the challenges of shorting low liquidity micro-cap stocks, I would surmise that this company would be the perfect short.

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

P/E: N/A Forward P/E: 74.23 Industry P/E: 41.47
P/S: N/A Price/Book: 9.53 EV/EBITDA: -36.46
Market Cap: $166.17M Avg. Daily Volume: 3,346,339 52 Week Range: $0.22 – $10.95

3. BrightSphere Investment Group Inc. (BSIG): $9.55

President and CEO Guang Yang acquired 50,001 shares of this asset management company, paying $10.14 per share for a total amount of $507,010. Mr. Yang increased his stake by 100% to 100,001 shares with this purchase.

You can view the list of recent insider transactions for BrightSphere Investment Group Inc. here.

P/E: 5.13 Forward P/E: 4.85 Industry P/E: 18..37
P/S: 1 Price/Book: 29.48 EV/EBITDA: 5.61
Market Cap: $822.33M Avg. Daily Volume: 521,141 52 Week Range: $8.4 – $14.87

4. Abeona Therapeutics Inc. (ABEO): $2.9

Director Stefano Buono acquired 200,000 shares of this biotech company, paying $2.50 per share for a total amount of $500,000. Mr. Buono increased his stake by 285.71% to 270,000 shares with this purchase.

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

P/E: N/A Forward P/E: -2.07 Industry P/E: N/A
P/S: 502.61 Price/Book: 1.54 EV/EBITDA: -1.52
Market Cap: $242.26M Avg. Daily Volume: 1,124,452 52 Week Range: $1.46 – $8.41

5. OPKO Health, Inc. (OPK): $1.47

CEO & Chairman Phillip Frost M.D. acquired 200,000 shares of this medical devices and drug development company, paying $1.49 per share for a total amount of $298,500. These shares were purchased indirectly by Frost Gamma Investments Trust.

Dr. Frost has been buying shares of Opko for the better part of a decade and at one point in mid-2015, he was paying as much as $16.64/share to buy those shares. The company has attempted to grow through acquisitions and even as Dr. Frost has continued buying shares in the public markets, the company diluted shareholders by issuing shares for many of those acquisitions.

Dr. Frost began his career in 1972, when he bought Key Pharmaceuticals along with Michael Jaharis and turned the company around. He was Chairman of the Board of Directors of Key Pharmaceuticals until 1986 when it was acquired by Schering-Plough for $587 million.

After the acquisition of Key Pharmaceuticals, Dr. Frost founded the IVAX Corporation in 1986 along with Dr. Jane H. Hsiao, the current CTO of Opko Health. Ivax specialized in generic drugs and played a significant international role in Latin America, Central and Eastern Europe. IVAX was acquired by Teva Pharmaceuticals (TEVA) in 2006. Dr. Frost became Vice Chairman of Teva after the acquisition of IVAX in 2006. In 2010, he was named Chairman of the Board of Teva and was reelected to the position in May 2012. He founded OPKO Health in 2007 shortly after the IVAX acquisition by Teva.

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

P/E: N/A Forward P/E: -5.07 Industry P/E: N/A
P/S: 1.09 Price/Book: 0.55 EV/EBITDA: -9.19
Market Cap: $978.43M Avg. Daily Volume: 5,515,880 52 Week Range: $1.33 – $3.94

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

Notable Insider Sales:

1. Chewy, Inc. (CHWY): $29.34

Chief Executive Officer Sumit Singh sold 425,000 shares of this e-commerce pet business for $29.14, generating $12.39 million from the sale.

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

P/E: N/A Forward P/E: -63.78 Industry P/E: 47.79
P/S: 2.55 Price/Book: N/A EV/EBITDA: -50.7
Market Cap: $11.69B Avg. Daily Volume: 2,435,460 52 Week Range: $21.68 – $41.34

2. The Boston Beer Company, Inc. (SAM): $367.7

Shares of this beverage company were sold by 5 insiders:

  • Chairman James C. Koch sold 22,569 shares for $380.15, generating $8.58 million from the sale.
  • Chief Sales Officer John C. Geist sold 8,186 shares for $369.40, generating $3.02 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • President and CEO David A. Burwick sold 279 shares for $373.04, generating $104,078 from the sale.
  • Vice President of Brewing David L. Grinnell sold 170 shares for $373.05, generating $63,418 from the sale. 74 of these shares were sold as a result of exercising options immediately prior to the sale.
  • Senior VP, Supply Chain Quincy B. Troupe sold 86 shares for $375.48, generating $32,291 from the sale.

You can view the list of recent insider transactions for The Boston Beer Company, Inc. here.

P/E: 37 Forward P/E: 31.19 Industry P/E: 25.00
P/S: 3.77 Price/Book: 6.09 EV/EBITDA: 20.46
Market Cap: $4.42B Avg. Daily Volume: 138,314 52 Week Range: $231.86 – $444.65

3. Franklin Resources, Inc. (BEN): $25.09

Vice Chairman Rupert H. Johnson Jr. sold 400,000 shares of this asset management company for $26.26, generating $10.51 million from the sale.

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

P/E: 10.68 Forward P/E: 10 Industry P/E: 18.37
P/S: 2.17 Price/Book: 1.26 EV/EBITDA: 5.53
Market Cap: $12.52B Avg. Daily Volume: 3,234,231 52 Week Range: $24.87 – $35.82

4. Apartment Investment and Management Company (AIV): $51.38

Chairman & CEO Terry Considine sold 100,000 shares of this residential REIT for $51.14, generating $5.11 million from the sale. 32,675 of these shares were sold indirectly by Mr. Considine’s spouse.

You can view the list of recent insider transactions for Apartment Investment and Management Company here.

P/E: 22.47 Forward P/E: 205.52 Industry P/E: 36.52
P/S: 8.41 Price/Book: 4.49 EV/EBITDA: 23.01
Market Cap: $7.65B Avg. Daily Volume: 978,619 52 Week Range: $42.81 – $55.49

5. Morningstar, Inc. (MORN): $151.92

Executive Chairman Joseph D. Mansueto sold 26,841 shares of this independent investment research services provider for $151.65, generating $4.07 million from the sale.

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

P/E: 39.26 Forward P/E: 53.49 Industry P/E: 18.37
P/S: 5.86 Price/Book: 6.24 EV/EBITDA: 25.81
Market Cap: $6.5B Avg. Daily Volume: 84,976 52 Week Range: $99.67 – $163.94

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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