Insider Weekends: The Mood Turns Significantly Darker

Welcome to edition 511 of Insider Weekends. The S&P 500 gave back some of the gains from the optimism surrounding the $2 trillion stimulus package and ended last week down a little over 2%. I wrote about a COVID-19 playbook for premium subscribers discussing four scenarios and my perceived probabilities of those scenarios playing out. I wrote the following in that post,

The Superforecasters featured in Philip E. Tetlock and Dan Gardner’s excellent book Superforecasting: The Art and Science of Prediction were only right about 66% of the time. It is possible that this situation plays out very differently from the scenarios I have outlined above or that my probabilities are wildly off. As I look at the current turn of events and my portfolio, I realize that the actions taken in the next few weeks are likely to have a significant impact on returns several years down the line. 

In conversations I have had with entrepreneurs, scientists and folks in private equity since writing that post, I was surprised to hear just how many of them think this is not a one quarter event and that the pain is likely to extend to two quarters or into next year if there is a second wave on infections. The mood has become significantly darker with the bleak news of rising deaths coming out of New York and unemployment claims over a two week period hitting nearly 10 million. The St. Louis Fed expects 47 million Americans will lose their jobs, which translates to a 32.1% unemployment rate, eclipsing the 24.9% unemployment rate we saw during the peak of the Great Depression.

There are also silver linings with New York’s Governor speculating that the state may be at the apex for new infections and some models showing California peaking in late April. There is no denying that lock downs are likely to remain in place for several weeks or even several months after we hit the apex of new infections. Companies, consumers and families are likely to behave differently in the future as they adjust to this new normal. However if you take the long view and look out a few years or several decades like Benjamin Franklin did when setting up trusts for the cities of Boston and Philadelphia, this could be a generational buying opportunity once the dust settles. As I wrote a couple of weeks ago, I have started unwinding some of the hedges I put in place in early February and have started nibbling slowly on the long side by starting both new positions as well as adding to a select few existing positions.

Insider buying decreased last week with insiders purchasing $92.24 million of stock compared to $117.91 million in the week prior. Selling decreased with insiders selling $387.38 million of stock last week compared to $442.67 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 went up to 4.19. In other words, insiders sold more than 4 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 3.75. 

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. MGM Resorts International (MGM): $10.58

Shares of this resorts & casinos company were acquired by 5 insiders:

  • Director Keith A. Meister acquired 1,600,000 shares, paying $11.69 per share for a total amount of $18.7 million. These shares were purchased indirectly through funds.
  • Director Paul J. Salem acquired 522,000 shares, paying $11.30 per share for a total amount of $5.9 million. Mr. Salem increased his stake by 65.25% to 1,322,000 shares with this purchase.
  • President and acting CEO William Hornbuckle acquired 49,800 shares, paying $11.97 per share for a total amount of $596,344. Mr. Hornbuckle increased his stake by 50.34% to 148,730 shares with this purchase. These shares were purchased indirectly by Mr. Hornbuckle’s spouse.
  • Chief Financial Officer Corey Ian Sanders acquired 24,991 shares, paying $12.00 per share for a total amount of $299,885. These shares were purchased indirectly through a trust.
  • Director Mary Chris Jammet acquired 1,550 shares, paying $12.00 per share for a total amount of $18,606. Ms. Jammet increased her stake by 8.75% to 19,266 shares with this purchase.

MGM Resorts has seen its stock lose more than 2/3rd of its value over the last few weeks. Considering the amount of debt the company carries on its balance sheet and that casinos in Macau are expecting a big decline in customers for a third month in a row, these insider purchases could be premature. The company managed to survive the Great Recession following the bursting of the housing bubble but the stock dipped into the low single digits before rebounding.

You can view the list of recent insider transactions for MGM Resorts International here.

P/E: 2.73 Forward P/E: 9.12 Industry P/E: 15.36
P/S: 0.42 Price/Book: 0.69 EV/EBITDA: 8.62
Market Cap: $5.21B Avg. Daily Volume: 18,191,658 52 Week Range: $5.9 – $34.64

2. SYNNEX Corporation (SNX): $67.63

Director Matthew Miau acquired 52,000 shares of this business process services provider, paying $74.20 per share for a total amount of $3.86 million. These shares were purchased indirectly by Silver Star Developments Limited.

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

P/E: 6.5 Forward P/E: 5.2 Industry P/E: 24.27
P/S: 0.14 Price/Book: 0.89 EV/EBITDA: 4.9
Market Cap: $3.44B Avg. Daily Volume: 463,830 52 Week Range: $52.06 – $153.07

3. Accelerate Diagnostics, Inc. (AXDX): $7.49

Director Jack W. Schuler acquired 450,000 shares of this in vitro diagnostics company, paying $8.22 per share for a total amount of $3.69 million. These shares were purchased indirectly through a trust.

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

P/E: N/A Forward P/E: -6.81 Industry P/E: 32.70
P/S: 44.24 Price/Book: N/A EV/EBITDA: -6.22
Market Cap: $411.3M Avg. Daily Volume: 356,963 52 Week Range: $4.53 – $24

4. Union Pacific Corporation (UNP): $138.57

Director William J. DeLaney III acquired 15,000 shares of this railroads company, paying $138.20 per share for a total amount of $2.07 million. Mr. DeLaney increased his stake by 300.00% to 20,000 shares with this purchase.

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

P/E: 16.54 Forward P/E: 13.73 Industry P/E: 33.61
P/S: 4.41 Price/Book: 5.29 EV/EBITDA: 11.25
Market Cap: $95.65B Avg. Daily Volume: 4,636,817 52 Week Range: $105.08 – $188.96

5. OPKO Health, Inc. (OPK): $1.16

CEO & Chairman Phillip Frost M.D. acquired 1,405,517 shares of this medical devices and drug development  company, paying $1.23 per share for a total amount of $1.73 million. These shares were purchased indirectly by Frost Gamma Investments Trust.

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

P/E: N/A Forward P/E: -6.11 Industry P/E: 510.37
P/S: 0.86 Price/Book: 0.48 EV/EBITDA: -11.49
Market Cap: $777M Avg. Daily Volume: 13,394,853 52 Week Range: $1.1185 – $2.91

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

Notable Insider Sales:

1. Workday, Inc. (WDAY): $116.08

Director David A. Duffield sold 407,442 shares of this software application company for $122.75, generating $50.01 million from the sale.

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

P/E: N/A Forward P/E: 42.52 Industry P/E: 37.27
P/S: 7.42 Price/Book: 10.83 EV/EBITDA: -117.53
Market Cap: $26.93B Avg. Daily Volume: 2,526,150 52 Week Range: $107.75 – $226.83

2. Guardant Health, Inc. (GH): $60.49

Chief Executive Officer Helmy Eltoukhy sold 281,196 shares of this precision oncology company for $70.16, generating $19.73 million from the sale.

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

P/E: N/A Forward P/E: -54.01 Industry P/E: 18.77
P/S: 26.63 Price/Book: 7.14 EV/EBITDA: -74.78
Market Cap: $5.71B Avg. Daily Volume: 1,252,711 52 Week Range: $55.9 – $112.22

3. FactSet Research Systems Inc. (FDS): $253.11

Shares of this integrated financial information provider were sold by 3 insiders:

  • Director Philip A. Hadley sold 52,564 shares for $256.82, generating $13.49 million from the sale.
  • Director James J. McGonigle sold 2,500 shares for $252.30, generating $630,750 from the sale.
  • Chief Executive Officer Frederick Philip Snow sold 1,769 shares for $248.86, generating $440,233 from the sale.

You can view the list of recent insider transactions for FactSet Research Systems Inc. here.

P/E: 26.82 Forward P/E: 24.36 Industry P/E: 12.54
P/S: 6.55 Price/Book: 13.62 EV/EBITDA: 20.89
Market Cap: $9.59B Avg. Daily Volume: 413,800 52 Week Range: $195.22 – $310.25

4. NexPoint Residential Trust, Inc. (NXRT): $21.69

President James D. Dondero sold 411,356 shares of this residential REIT for $25.00, generating $10.28 million from the sale. These shares were sold indirectly by Highland Capital Management, L.P.

You can view the list of recent insider transactions for NexPoint Residential Trust, Inc. here.

P/E: 5.38 Forward P/E: -80.33 Industry P/E: 24.44
P/S: 3.03 Price/Book: 1.28 EV/EBITDA: 23.04
Market Cap: $548.69M Avg. Daily Volume: 327,787 52 Week Range: $21.06 – $52.87

5. RealPage, Inc. (RP): $49.97

Chairman President & CEO Stephen T. Winn sold 150,000 shares of this software application company for $50.36, generating $7.55 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: 83.28 Forward P/E: 22.41 Industry P/E: 37.74
P/S: 4.79 Price/Book: 3.94 EV/EBITDA: 32.84
Market Cap: $4.73B Avg. Daily Volume: 739,758 52 Week Range: $36.91 – $65.92

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: I hold a long position in Workday (WDAY). 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.

Leave A Comment

You must be logged in to post a comment.