Insider Weekends: Activist Investors Add To Their Avid Technology Stake

Welcome to edition 519 of Insider Weekends. Insider buying almost doubled last week with insiders purchasing $209.6 million of stock compared to $107.94 million in the week prior. Selling also increased with insiders selling $1.47 billion of stock last week compared to $1.33 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 7.02. In other words, insiders sold more than 7 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 12.31. 

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. Avid Technology, Inc. (AVID): $7.06

Director Christian Asmar acquired 1,049,073 shares of this technology hardware, software and peripherals company, paying $6.12 per share for a total amount of $6.42 million. These shares were purchased indirectly by Impactive Capital GP LLC.

Mr. Asmar is the cofounder of New York based activist hedge fund Impactive Capital, which has nearly $400 million in assets under management. Prior to starting Impactive Capital, he was at Blue Harbour Group, a $3 billion activist investment firm where he was a Managing Director and Investing Partner. He has served on Avid’s Board of Directors since October 2019. With this round of purchases, Avid Technologies is most likely the top holding for Impactive Capital with nearly 15% of capital allocated to this position.

This is the first insider purchase we have seen at the company since a director purchased 80,000 shares in December 2017. For several years a large number of insiders have also been exercising options without selling them.

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

2. Jazz Pharmaceuticals plc (JAZZ): $119.32

Director Seamus Mulligan acquired 50,000 shares of this biotech company, paying $111.08 per share for a total amount of $5.55 million. Mr. Mulligan increased his stake by 4.53% to 1,152,788 shares with this purchase.

Jazz Pharmaceuticals took a pretty large hit in early May after the company reported disappointing first quarter results with earnings of $0.45 that missed analyst estimates by a large margin and revenue of $535 million that grew 5.22% year-over-year. The company also reduced its outlook for 2020 and now expects to earn between $150 million to $240 million or $2.70 to $4.30 per share.

The only other insider purchase we have seen at Jazz was a 50,000 purchase by Mr. Mulligan in November 2018.

You can view the list of recent insider transactions for Jazz Pharmaceuticals plc here.

3. New Mountain Finance Corporation (NMFC): $9.5

Director Steven B. Klinsky acquired 272,861 shares of this business development company (BDC), paying $9.15 per share for a total amount of $2.49 million. Mr. Klinsky increased his stake by 3.92% to 7,240,751 shares with this purchase. 72,861 of these shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for New Mountain Finance Corporation here.

4. Mercury General Corporation (MCY): $40.23

Chairman of the Board George Joseph acquired 63,500 shares of this insurance company, paying $39.27 per share for a total amount of $2.49 million. Mr. Joseph increased his stake by 0.32% to 19,612,934 shares with this purchase.

This is the third week in a row Mercury General made our list. We wrote the following after a purchase by Mr. Joseph two weeks ago,

Mercury General is mostly focused on automobile insurance and in this period when their customers are driving less, their risk of claims has also gone down. This is why other companies like All State and Geico have voluntarily reduced their insurance premiums. When I called Geico they told me that they will be reducing my premium by 15% and then reduced it an additional 10% after hearing I was not driving one of my cars very much.

The current environment is favorable for Mercury General on the risk side of the equation but they will take a hit on their assets, which are likely to yield less in this market. The company earned $1.07 per share in Q1 2020, beating estimates by 23 cents and growing its revenue by 4.12% to $954.22 million. The stock is trading near its 52 week low and also a multi-year low. The dividend yield is 6.64% with a 32 year history of growing its dividends. A payout ratio of over 88% is too rich for my liking.

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

5. Armada Hoffler Properties, Inc. (AHH): $8.62

Director John W. Snow acquired 125,000 shares of this diversified REIT, paying $7.99 per share for a total amount of $999,358. Mr. Snow increased his stake by 202.70% to 186,667 shares with this purchase.

You can view the list of recent insider transactions for Armada Hoffler Properties, Inc. here.

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

Notable Insider Sales:

1. Fortive Corporation (FTV): $60.98

Shares of this scientific & technical instruments company were sold by 2 insiders:

• Director Mitchell P. Rales sold 428,040 shares for $62.44, generating $26.73 million from the sale.
• Senior Vice President William W. Pringle sold 5,000 shares for $62.86, generating $314,300 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 Fortive Corporation here.

2. NVIDIA Corporation (NVDA): $355.02

Shares of this semiconductor company were sold by 4 insiders:

• EVP, Worldwide Field Operations Ajay K. Puri sold 39,118 shares for $354.52, generating $13.87 million from the sale.
• Director Mark L. Perry sold 12,208 shares for $333.31, generating $4.07 million from the sale.
• Director Persis Drell sold 1,700 shares for $322.39, generating $548,063 from the sale.
• Director Brooke A. Seawell sold 629 shares for $366.27, generating $230,384 from the sale.

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

3. Alteryx, Inc. (AYX): $143.94

Shares of this software application company were sold by 3 insiders:

• Director Jeff Horing sold 105,819 shares for $146.01, generating $15.45 million from the sale. Theses shares were sold indirectly by various trusts and entities.
• Director Kimberly Alexy sold 2,000 shares for $151.24, generating $302,480 from the sale.
• President & Chief Revenue Officer Robert Scott Jones sold 222 shares for $151.24, generating $33,575 from the sale.

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

4. Advanced Drainage Systems, Inc. (WMS): $44.34

EVP Robert M. Klein sold 250,000 shares of this building products & equipment company for $44.79, generating $11,196,742 from the sale.

You can view the list of recent insider transactions for Advanced Drainage Systems, Inc. here.

5. Uber Technologies, Inc. (UBER): $36.32

SVP, Marketing and Public Affairs Jill Hazelbaker sold 300,409 shares of Uber for $34.54, generating $10.38 million from the sale.

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

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 and Plus 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.