Welcome to edition 503 of Insider Weekends. Insider buying increased significantly last week with insiders purchasing $177.87 million of stock compared to $31.09 million in the week prior. Selling also increased significantly with insiders selling $5.4 billion of stock last week compared to $614.24 million in the week prior.
When I first looked at that $5.4 billion sale number, I was not sure if it was a mistake and I double checked our data. In the ten years that we have been writing about insider transactions, I have never seen this level of insider selling in a week. To be fair a disproportionate amount of the sales were related to Jeff Bezos’ $4.06 billion sale of Amazon.com (AMZN). Taking those sales out of the equation, the selling was on par with what we normally see, excluding earnings related quiet periods.
With the novel coronavirus risk continuing to unfold, I am surprised insider were not selling even more. Beyond the direct impact to the second largest economy in the world, we are now starting to see second order effects due to the impact on the global supply-chain. It was not surprising to hear that a large number of car manufacturers had extended factory closures in China but the second order effects became evident when Hyundai suspended car production in South Korea due to a shortage of parts.
For those that were invested during the SARS pandemic and the Ebola epidemic, it may seem like we will get through this one relative unscathed just like we did the last ones but it is probably a good idea to take risk down a notch or buy some protection in case the infection continues to spread across the globe.
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 30.37. In other words, insiders sold almost more than 30 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 19.75.
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): $25.56
Shares of this independent oil & gas company were acquired by 2 insiders:
- Director Randa Duncan Williams acquired 400,000 units, paying $25.83 per unit for a total amount of $10.33 million. These shares were purchased indirectly through a trust.
- Co-Chief Executive Officer Aj Teague acquired 20,031 units, paying $25.47 per unit for a total amount of $510,102. Mr. Teague increased his stake by 1.13% to 1,785,413 shares with this purchase.
After taking a short one month break from buying units of Enterprise Product Partners, Ms. Williams is back at it and starting purchasing after the company announced fourth quarter 2019 results on January 30, 2020. Not only are the insiders of EPD buying units along with insiders of other energy pipeline companies, the company is also buying back its own units.
We wrote the following in December about insider buying at midstream companies,
The entire sector has been hard hit in the last five years as you can see from the chart below and some of the larger midstream companies have used the downturn to increase their acquisitions, including those of bankrupt smaller companies, which is often a sign that the bottom is near.
One way to avoid betting on a single midstream company, increasing the distribution yield and not worry about K-1 tax forms, is to consider an instrument like the Alerian MLP ETF (AMLP). It has over $7 billion in assets under management, is fairly liquid (average daily volume of 21 million shares traded over a three month period), sports a dividend of 10% and has an expense ratio of 0.85%. The ETF gives you exposure to both Enterprise Product Partners (its top holding) and NuStar Energy but does not include Kinder Morgan as KMI is no longer a master limited partnership (MLP) but has a traditional C corporation structure.
Besides paying an expense ratio that is higher than most ETFs, the other downside of the AMLP ETF is a concentrated portfolio of just 22 positions and MLP companies increasingly choosing to convert into C corporations thanks to the lower corporate tax rate that went into effect in 2018. The ETF has performed worse than EPD, KMI and NS over the last 5 years and especially during the last year.
You can view the list of recent insider transactions for Enterprise Products Partners L.P. here.
|P/E: 12.26||Forward P/E: 11.16||Industry P/E: 14.49|
|P/S: 1.67||Price/Book: 2.28||EV/EBITDA: 11.13|
|Market Cap: $54.74B||Avg. Daily Volume: 5,741,040||52 Week Range: $25.04 – $30.87|
2. AT&T Inc. (T): $38.45
Director Stephen J. Luczo acquired 100,000 shares of AT&T, paying $37.60 per share for a total amount of $3.76 million. These shares were purchased indirectly through a trust.
Mr. Luczo, the Chairman of the Board of Seagate Technology (STX), was appointed to AT&T’s board in November 2019. Since new directors often tend to buy shares of the companies they join, I would not read much into this purchase.
You can view the list of recent insider transactions for AT&T Inc. here.
|P/E: 17.23||Forward P/E: 10.04||Industry P/E: 24.43|
|P/S: 1.54||Price/Book: 1.53||EV/EBITDA: 8.73|
|Market Cap: $280.28B||Avg. Daily Volume: 30,036,538||52 Week Range: $29.46 – $39.7|
3. Unifi, Inc. (UFI): $23.01
Shares of this textile manufacturing company were acquired by 2 insiders:
- Director Kenneth G. Langone acquired 48,000 shares, paying $22.35 per share for a total amount of $1.07 million. Mr. Langone increased his stake by 3.82% to 1,303,683 shares with this purchase.
- Executive Chairman Albert P. Carey acquired 21,900 shares, paying $22.77 per share for a total amount of $498,663. Mr. Carey increased his stake by 61.93% to 57,263 shares with this purchase.
You can view the list of recent insider transactions for Unifi, Inc. here.
|P/E: 121.11||Forward P/E: 23.97||Industry P/E: 27.49|
|P/S: 0.59||Price/Book: 1.08||EV/EBITDA: 13.33|
|Market Cap: $419.41M||Avg. Daily Volume: 85,158||52 Week Range: $15.9 – $27.85|
4. La Jolla Pharmaceutical Company (LJPC): $7.77
Director Kevin C. Tang acquired 169,770 shares of this biotech company, paying $6.76 per share for a total amount of $1.15 million. These shares were purchased indirectly by a Limited Partnership.
You can view the list of recent insider transactions for La Jolla Pharmaceutical Company here.
|P/E: N/A||Forward P/E: -4.16||Industry P/E: 271.56|
|P/S: 10.07||Price/Book: N/A||EV/EBITDA: -2.28|
|Market Cap: $201.31M||Avg. Daily Volume: 1,365,156||52 Week Range: $2.3 – $13.9|
5. Ashland Global Holdings Inc. (ASH): $79.7
Chairman and CEO Guillermo Novo acquired 12,900 shares of this specialty chemical solutions provider, paying $78.35 per share for a total amount of $1.01 million.
You can view the list of recent insider transactions for Ashland Global Holdings Inc. here.
|P/E: 8.49||Forward P/E: 21.54||Industry P/E: 30.59|
|P/S: 1.96||Price/Book: 1.32||EV/EBITDA: 13.61|
|Market Cap: $4.8B||Avg. Daily Volume: 623,066||52 Week Range: $70.5 – $81.22|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. Amazon.com, Inc. (AMZN): $2079.28
Shares of Amazon were sold by 2 insiders:
- Chairman, CEO and President Jeffrey P. Bezos sold 2,000,000 shares for $2035.51, generating $4.07 billion from the sale.
- CEO Amazon Web Services Andrew R. Jassy sold 6,945 shares for $2019.57, generating $14.03 million from the sale.
This sale by Mr. Bezos is significant as it represents about 3.2% of his estimated $126 billion net worth. He has been funding his space exploration company Blue Origin and diversifying his holdings but this level of insider selling in a single week is unusual. He also sold nearly $1 billion worth of stock last August and $1.84 billion worth of stock last July as you can see here.
You can view the list of recent insider transactions for Amazon.com, Inc. here.
|P/E: 90.36||Forward P/E: 51.68||Industry P/E: 49.86|
|P/S: 3.69||Price/Book: 16.69||EV/EBITDA: 29.22|
|Market Cap: $1.04T||Avg. Daily Volume: 3,494,145||52 Week Range: $1586 – $2098.53|
2. Apollo Global Management, Inc. (APO): $47.36
Senior Managing Director Marc J. Rowan sold 681,666 shares of this asset management company for $47.33, generating $32,265,847 from the sale. These shares were sold indirectly by RWN Management, LLC.
You can view the list of recent insider transactions for Apollo Global Management, Inc. here.
|P/E: 12.77||Forward P/E: 15.33||Industry P/E: 17.69|
|P/S: 6.74||Price/Book: 8.14||EV/EBITDA: N/A|
|Market Cap: $19.1B||Avg. Daily Volume: 2,057,790||52 Week Range: $27.69 – $52.67|
3. Uber Technologies, Inc. (UBER): $40.63
Shares of Uber were sold by 2 insiders:
- Director Garrett Camp sold 510,000 shares for $37.68, generating $19.22 million from the sale. These shares were sold indirectly by Expa-1, LLC.
- Chief Technology Officer Thuan Pham sold 20,000 shares for $38.59, generating $771,752 from the sale. 1,601 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 Uber Technologies, Inc. here.
|P/E: N/A||Forward P/E: -25.39||Industry P/E: 42.98|
|P/S: 4.94||Price/Book: 4.92||EV/EBITDA: -8.23|
|Market Cap: $69.83B||Avg. Daily Volume: 31,396,275||52 Week Range: $25.58 – $47.08|
4. Facebook, Inc. (FB): $212.33
Shares of Facebook were sold by 2 insiders:
- Director Peter Thiel sold 53,602 shares for $210.56, generating $11.29 million from the sale. These shares were sold indirectly by Rivendell One LLC.
- VP and General Counsel Jennifer Newstead sold 260 shares for $206.50, generating $53,690 from the sale.
You can view the list of recent insider transactions for Facebook, Inc. here.
|P/E: 33.02||Forward P/E: 19.5||Industry P/E: 34.66|
|P/S: 8.56||Price/Book: 5.99||EV/EBITDA: 18.89|
|Market Cap: $605.24B||Avg. Daily Volume: 14,191,561||52 Week Range: $159.28 – $224.2|
5. The Charles Schwab Corporation (SCHW): $47.31
Chairman Charles R. Schwab sold 220,000 shares of this asset management company for $45.73, generating $10.06 million from the sale. These shares were sold indirectly by a trust.
You can view the list of recent insider transactions for The Charles Schwab Corporation here.
|P/E: 17.72||Forward P/E: 17.02||Industry P/E: 17.69|
|P/S: 5.67||Price/Book: 3.29||EV/EBITDA: N/A|
|Market Cap: $60.77B||Avg. Daily Volume: 10,083,354||52 Week Range: $34.58 – $51.65|
You can view the full list of sales from this Insider Sales page.
Disclaimer: I hold a long position in Alerian MLP ETF (AMLP). 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.