Welcome to edition 507 of Insider Weekends. The Coronavirus has reached our shores and appears to be spreading across multiple states leading to several large companies including Apple (APPL), Twitter (TWTR) and Palantir asking their corporate employees or employees at West Coast offices to work from home. We are also seeing universities like Stanford and University of Washington shift classes online and there have been at least a couple of K-12 school closures in Northern California.
The markets shrugged off a 50 basis point drop in interest rates and the S&P 500 almost ended flat for the week, although with several large swings in both directions all week long. We wrote the following in our last Insider Weekends article,
With community spread in the U.S., we have now gone past the risk of second order effects and are now going to experience first order impact, whether perceived or real. I expect to see further market declines and if that does transpire, there would be some interesting opportunities in the weeks ahead. I started positioning my portfolio for these events a couple of weeks ago and will elaborate more in a premium post this week.
At risk of missing some opportunities on the long side, I would prefer to stay patient and wait for the situation to unfold. Insiders on the other hand have stepped up their buying as they usually do in downturns. They are probably early this time but their buying will bring some interesting opportunities to light.
My opinion has not changed and the next few weeks are likely to remain challenging. Futures are pointing to a very red open on Monday.
Insider buying increased last week with insiders purchasing $278.69 million of stock compared to $199.55 million in the week prior. Selling also increased with insiders selling $1.52 billion of stock last week compared to $1.42 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 5.44. In other words, insiders sold more than 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 7.13.
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. American Homes 4 Rent (AMH): $28.94
Shares of this residential REIT were acquired by 2 insiders:
- Director Wayne B. Hughes acquired 1,077,464 shares, paying $28.31 per share for a total amount of $30.5 million.
- Director Tamara Hughes Gustavson acquired 1,074,240 shares, paying $28.31 per share for a total amount of $30.41 million. These shares were purchased indirectly by various trusts and entities.
We have written about American Homes 4 Rent several times in the past and I elaborated on the opportunity in a premium post in September 2018 when the stock was trading at $22.49. A small excerpt from that post is given below,
American Homes 4 Rent (AMH) with its portfolio of 52,049 single-family homes across 22 states was conceived during the depths of the last housing recession by billionaire B. Wayne Hughes. His impeccable timing in scooping up homes very close to the bottom could have been luck but was probably more on account of his decades long-experience with real estate as the founder and CEO of the largest self-storage company Public Storage (PSA). He retired as CEO of PSA in 2002 and stepped down as Chairman in 2011, just in time to start American Homes 4 Rent. The Seattle Times wrote an article about the company in 2013 and we started noticing his insider purchases of AMH in late 2014.
When scaling back my long positions a couple of weeks ago, I looked at my position in American Homes 4 Rent and decided to retain the full position. It does not come as a surprise to me that the stock not only did not decline with the broader market but appreciated over the course of the last month. Instead of resting on its laurels the company entered into a $253 million partnership with investors advised by J.P. Morgan to construct new homes for rent.
Low interest rates should prove to be a tailwind to the company given the $2.9 billion in debt on its balance sheet. The key risk is a recession, which is a possibility depending on how long this COVID-19 situation takes to resolve.
You can view the list of recent insider transactions for American Homes 4 Rent here.
|P/E: 101.19||Forward P/E: 93.35||Industry P/E: 35.02|
|P/S: 7.61||Price/Book: 1.63||EV/EBITDA: 21.45|
|Market Cap: $8.7B||Avg. Daily Volume: 1,734,855||52 Week Range: $22.04 – $29.89|
2. Energy Transfer LP (ET): $10.21
CEO Kelcy L. Warren acquired 4,300,000 shares of this oil & gas midstream company, paying $10.65 per share for a total amount of $45.8 million. Mr. Warren increased his stake by 10.11% to 46,828,477 shares with this purchase.
You can view the list of recent insider transactions for Energy Transfer LP here.
|P/E: 7.51||Forward P/E: 6.54||Industry P/E: 12.90|
|P/S: 0.51||Price/Book: 1.26||EV/EBITDA: 9.03|
|Market Cap: $27.46B||Avg. Daily Volume: 19,826,185||52 Week Range: $9.91 – $15.87|
3. Kinder Morgan, Inc. (KMI): $19.33
Executive Chairman Richard D. Kinder acquired 300,000 shares of this oil & gas midstream company, paying $19.51 per share for a total amount of $5.85 million. Mr. Kinder increased his stake by 0.12% to 244,039,120 shares with this purchase.
You can view the list of recent insider transactions for Kinder Morgan, Inc. here.
|P/E: 20.09||Forward P/E: 19.14||Industry P/E: 12.90|
|P/S: 3.31||Price/Book: 1.3||EV/EBITDA: 12.53|
|Market Cap: $43.78B||Avg. Daily Volume: 13,880,731||52 Week Range: $18.4 – $22.58|
4. Newell Brands Inc. (NWL): $13.98
Shares of this marketer of consumer and commercial products were acquired by 2 insiders:
- Director Brett Icahn acquired 320,902 shares, paying $15.97 per share for a total amount of $5.12 million. Mr. Icahn increased his stake by 78.65% to 728,928 shares with this purchase.
- Chief Accounting Officer Robert Andrew Schmidt acquired 2,500 shares, paying $15.07 per share for a total amount of $37,670.
You can view the list of recent insider transactions for Newell Brands Inc. here.
|P/E: 55.48||Forward P/E: 8.58||Industry P/E: 18.82|
|P/S: 0.61||Price/Book: 1.19||EV/EBITDA: 9.46|
|Market Cap: $5.92B||Avg. Daily Volume: 3,748,063||52 Week Range: $13.04 – $20.99|
5. Planet Fitness, Inc. (PLNT): $64.35
Shares of this fitness centers operator were acquired by 2 insiders:
- Chief Executive Officer Christopher Rondeau acquired 45,000 shares, paying $65.61 per share for a total amount of $2.95 million. These shares were purchased indirectly through a trust.
- President & CFO Dorvin D. Lively acquired 15,000 shares, paying $60.50 per share for a total amount of $907,556. Mr. Lively increased his stake by 106.97% to 29,022 shares with this purchase.
You can view the list of recent insider transactions for Planet Fitness, Inc. here.
|P/E: 45.64||Forward P/E: 27.62||Industry P/E: 21.26|
|P/S: 8.71||Price/Book: N/A||EV/EBITDA: 23.25|
|Market Cap: $5.56B||Avg. Daily Volume: 1,185,770||52 Week Range: $56.14 – $88.77|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. SBA Communications Corporation (SBAC): $285.57
Shares of this wireless communications operator were sold by 7 insiders:
- Executive VP/General Counsel Thomas P. Hunt sold 57,964 shares for $293.79, generating $17.03 million from the sale.
- EVP – Site Leasing Jason V. Silberstein sold 57,883 shares for $292.00, generating $16.9 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
- EVP; Pres. – International Kurt L. Bagwell sold 30,000 shares for $291.06, generating $8.73 million from the sale.
- Chief Executive Officer & Pres Jeffrey Stoops sold 24,744 shares for $278.99, generating $6.9 million from the sale.
- EVP – Operations Mark R. Ciarfella sold 8,620 shares for $300.74, generating $2.59 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
- Director Brian C. Carr sold 5,524 shares for $290.85, generating $1.61 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
- Director Kevin L. Beebe sold 1,999 shares for $302.63, generating $604,966 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 SBA Communications Corporation here.
|P/E: 223.1||Forward P/E: 97.13||Industry P/E: 35.02|
|P/S: 15.87||Price/Book: N/A||EV/EBITDA: 34.2|
|Market Cap: $31.96B||Avg. Daily Volume: 737,826||52 Week Range: $183.27 – $309.85|
2. Microsoft Corporation (MSFT): $161.57
Shares of Microsoft were sold by 3 insiders:
- Chief Executive Officer Satya Nadella sold 280,174 shares for $168.47, generating $47.2 million from the sale.
- Chief Accounting Officer Frank H. Brod sold 5,000 shares for $173.80, generating $869,000 from the sale.
- Director Emma N. Walmsley sold 54 shares for $164.58, generating $8,887 from the sale.
You can view the list of recent insider transactions for Microsoft Corporation here.
|P/E: 28.14||Forward P/E: 25.61||Industry P/E: 42.47|
|P/S: 9.15||Price/Book: 11.17||EV/EBITDA: 19.29|
|Market Cap: $1.23T||Avg. Daily Volume: 34,528,793||52 Week Range: $110.98 – $190.7|
3. Apollo Global Management, Inc. (APO): $40.5
Senior Managing Director Marc J. Rowan sold 1,110,096 shares of this asset management company for $42.63, generating $47.33 million 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: 10.92||Forward P/E: 13.32||Industry P/E: 15.01|
|P/S: 5.88||Price/Book: 6.96||EV/EBITDA: N/A|
|Market Cap: $16.65B||Avg. Daily Volume: 2,306,306||52 Week Range: $27.69 – $52.67|
4. Tellurian Inc. (TELL): $1.21
Director Charif Souki sold 17,988,677 shares of this natural gas company for $1.53, generating $27.49 million from the sale. These shares were sold indirectly through a trust.
You can view the list of recent insider transactions for Tellurian Inc. here.
|P/E: N/A||Forward P/E: -6.05||Industry P/E: 12.90|
|P/S: 10.27||Price/Book: 1.76||EV/EBITDA: -3.11|
|Market Cap: $295.6M||Avg. Daily Volume: 2,714,042||52 Week Range: $1.12 – $11.8|
5. BlackLine, Inc. (BL): $62.73
Chief Strategy Officer Mario Spanicciati sold 301,098 shares of this accounting software company for $63.42, generating $19.09 million from the sale. These shares were sold indirectly through a trust.
You can view the list of recent insider transactions for BlackLine, Inc. here.
|P/E: N/A||Forward P/E: 98.02||Industry P/E: 42.47|
|P/S: 12.22||Price/Book: 8.8||EV/EBITDA: -285.51|
|Market Cap: $3.53B||Avg. Daily Volume: 469,413||52 Week Range: $42.23 – $74.44|
You can view the full list of sales from this Insider Sales page.
Disclaimer: I hold a long position in AMH. 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.