Welcome to edition 515 of Insider Weekends. Investors that tuned in to the Berkshire Hathaway annual shareholders meeting this weekend were probably not encouraged by what they heard. Not only was Warren Buffett selling all his airline stocks during this crisis, he has increased his overall cash position. The buyer of last resort has not stepped in. Some of that is related to the quick actions of the Federal Reserve and Jerome Powell’s broad based buying.
The news that Gilead Sciences (GILD) antiviral medication Remdesivir showed promising results and was granted emergency authorization by the FDA is a big positive but the market was still weak towards the end of last week. This weakness is probably because of the long-term impact of this crisis on unemployment, small businesses and a services oriented economy. The second order effects the market appeared to ignore for a few weeks appear to be manifesting themselves. States and countries that are opening up are not seeing a surge in business as was initially expected and customers are choosing not to visit certain businesses like restaurants. The airlines and other companies in the travel industry are likely to remain in a downtrend and any bottom fishing in this pool might be futile. However one insider appears to disagree as discussed in the Delta Air Lines portion of this post.
We wrote the following last week and my opinion that the risks outweigh rewards right now has not changed. That does not mean I have not been nibbling on the long side and started a new position last week that I plan to add to in the coming months as discussed in our first special situations newsletter we published for premium subscribers.
It is possible that the market is more focused on the positive impact of all these stimulus programs, the fact that several countries in Europe are planning on opening their economies in stages and perceiving these job losses as short-term. The S&P 500 is dominated by a few large companies like Amazon that have done well through this downturn and does not truly represent the damage that has been done. The Russell 2000 index of small companies also held up well last week and it will be interesting to see how it behaves in the near future. I continue to feel the risk remains to the downside.
Insider buying decreased last week with insiders purchasing $14.96 million of stock compared to $23.82 million in the week prior. Selling increased with insiders selling $1.39 billion of stock last week compared to $1.02 million in the week prior. Insider transactions are generally muted during earnings season and I am not surprised the insiders are not buying much. The spike in insider selling could be perceived as mildly bearish as that usually declines along with the insider buying during earnings related quiet periods.
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 significantly to 93.27. In other words, insiders sold more than 93 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 42.73.
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. The Simply Good Foods Company (SMPL): $18.35
Chairman of the Board James (Jim) M. Kilts acquired 87,862 shares of this packaged foods company, paying $16.88 per share for a total amount of $1.48 million. Mr. Kilts increased his stake by 10.06% to 961,268 shares with this purchase.
Mr. Kilts has been consistently buying shares of Simply Good Foods during this crisis and we have written about the company multiple times this year. The company first showed up on our radar in January after a cluster of purchases by insiders.
You can view the list of recent insider transactions for The Simply Good Foods Company here.
|P/E: 65.3||Forward P/E: 18.17||Industry P/E: 22.28|
|P/S: 2.66||Price/Book: 1.46||EV/EBITDA: 20.49|
|Market Cap: $1.75B||Avg. Daily Volume: 1,516,193||52 Week Range: $14.08 – $31.34|
2. Accelerate Diagnostics, Inc. (AXDX): $10.32
Director Jack W. Schuler acquired 86,622 shares of this diagnostics & research company, paying $9.91 per share for a total amount of $858,058. 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: -9.3||Industry P/E: 41.09|
|P/S: 63.07||Price/Book: N/A||EV/EBITDA: -8.43|
|Market Cap: $586.32M||Avg. Daily Volume: 424,520||52 Week Range: $4.53 – $24|
3. Unity Bancorp, Inc. (UNTY): $15.47
Director Robert H. Dallas II acquired 20,000 shares of this regional bank, paying $15.28 per share for a total amount of $305,550. These shares were purchased indirectly by Dallas Financial Holdings, LLC.
You can view the list of recent insider transactions for Unity Bancorp, Inc. here.
|P/E: 7.33||Forward P/E: 7.85||Industry P/E: 7.78|
|P/S: 2.6||Price/Book: 1.02||EV/EBITDA: N/A|
|Market Cap: $168.36M||Avg. Daily Volume: 20,630||52 Week Range: $8.76 – $24.7|
4. Delta Air Lines, Inc. (DAL): $24.12
Director Jeanne P. Jackson acquired 25,510 shares of this airline, paying $22.72 per share for a total amount of $579,585. These shares were purchased indirectly through a trust.
It was surprising to see an insider of Delta Air Lines buy stock even as they look for a bailout from the government and Warren Buffett was selling Berkshire’s position in not just Delta but all airline stocks they hold. Ms. Jackson who has served on the board of Delta since 2017 is not the only insider of an airline buying stock. We have also seen insider purchases at American Airlines, JetBlue, Allegiant and Spirit. Most of these purchases have been relatively small purchases. The insiders of United, Alaska, Hawaiian and Southwest have not been buying.
I sold my position in Alaska Airlines in February and have been watching the sector closely. Industries in turmoil usually see bankruptcies and widespread insider buying before they bottom in my experience. This situation is unlike anything we have seen before and it still feels too early to start positions in capital intensive businesses like airlines.
You can view the list of recent insider transactions for Delta Air Lines, Inc. here.
|P/E: 4.44||Forward P/E: 6.91||Industry P/E: 6.92|
|P/S: 0.34||Price/Book: 1.07||EV/EBITDA: 4.38|
|Market Cap: $15.38B||Avg. Daily Volume: 37,870,839||52 Week Range: $19.1 – $63.44|
5. TrustCo Bank Corp NY (TRST): $6.18
Shares of this financial company were acquired by 5 insiders:
- Chairman, President & CEO Robert J. McCormick acquired 65,000 shares, paying $5.91 per share for a total amount of $384,150. Mr. McCormick increased his stake by 6.60% to 1,049,169 shares with this purchase.
- EVP & Chief Risk Officer Robert M. Leonard acquired 18,234 shares, paying $5.48 per share for a total amount of $99,922. Mr. Leonard increased his stake by 25.30% to 90,295 shares with this purchase.
- EVP & Chief Lending Officer Scot R. Salvador acquired 8,158 shares, paying $6.09 per share for a total amount of $49,682. Mr. Salvador increased his stake by 4.51% to 189,152 shares with this purchase.
- Director Lisa M. Lucarelli acquired 4,100 shares, paying $6.29 per share for a total amount of $25,789. Mr. Lucarelli increased his stake by 119.19% to 7,540 shares with this purchase.
- General Counsel and Secretary Michael James Hall acquired 2,500 shares, paying $5.56 per share for a total amount of $13,900. Mr. Hall increased his stake by 35.71% to 9,501 shares with this purchase.
You can view the list of recent insider transactions for TrustCo Bank Corp NY here.
|P/E: 10.58||Forward P/E: 11.24||Industry P/E: 10.41|
|P/S: 3.46||Price/Book: 1.09||EV/EBITDA: N/A|
|Market Cap: $595.96M||Avg. Daily Volume: 518,995||52 Week Range: $4.3 – $9.1|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. CSX Corporation (CSX): $65
Director Paul C. Hilal sold 700,000 shares of this railroad company for $68.31, generating $47.82 million from the sale. These shares were sold indirectly by an entity controlled by Paul C. Hilal.
You can view the list of recent insider transactions for CSX Corporation here.
|P/E: 15.66||Forward P/E: 15.7||Industry P/E: 38.27|
|P/S: 4.22||Price/Book: 4.19||EV/EBITDA: 10.31|
|Market Cap: $49.76B||Avg. Daily Volume: 5,953,536||52 Week Range: $46.81 – $80.62|
2. The Boston Beer Company, Inc. (SAM): $460.96
Shares of this beverages company were sold by 3 insiders:
- Chairman James C. Koch sold 70,000 shares for $451.30, generating $31.59 million from the sale.
- President and CEO David A. Burwick sold 11,021 shares for $467.55, generating $5.15 million from the sale.
- Director Jean Michel Valette sold 2,500 shares for $465.00, generating $1.16 million from the sale.
You can view the list of recent insider transactions for The Boston Beer Company, Inc. here.
|P/E: 53.53||Forward P/E: 36.13||Industry P/E: 21.00|
|P/S: 4.22||Price/Book: 7.26||EV/EBITDA: 27.1|
|Market Cap: $5.61B||Avg. Daily Volume: 183,744||52 Week Range: $290.02 – $474.95|
3. Ares Management Corporation (ARES): $32.67
Shares of this asset management company were sold by 3 insiders:
- Co-Founder & Co-Chair of PEG Bennett Rosenthal sold 286,492 shares for $35.52, generating $10.18 million from the sale. These shares were sold indirectly by BAR Holdings, LLC.
- Co-Founder, CEO and President Michael J. Arougheti sold 227,429 shares for $35.74, generating $8.13 million from the sale.
- Co-Founder & Co-Chair of PEG David B. Kaplan sold 227,131 shares for $35.74, generating $8.12 million from the sale. These shares were sold indirectly by Trently Holdings, LLC.
You can view the list of recent insider transactions for Ares Management Corporation here.
|P/E: 30.79||Forward P/E: 15.13||Industry P/E: 14.49|
|P/S: 4.58||Price/Book: 8.02||EV/EBITDA: 38.56|
|Market Cap: $8.09B||Avg. Daily Volume: 1,001,906||52 Week Range: $20.2 – $41.88|
4. Apollo Global Management, Inc. (APO): $39.56
Senior Managing Director Marc J. Rowan sold 575,343 shares of this private equity firm for $41.41, generating $23.83 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: 10.66||Forward P/E: 14.33||Industry P/E: 14.81|
|P/S: 3.23||Price/Book: 6.8||EV/EBITDA: N/A|
|Market Cap: $9.14B||Avg. Daily Volume: 2,941,028||52 Week Range: $19.46 – $52.67|
5. Okta, Inc. (OKTA): $148.84
Director Benjamin A. Horowitz sold 37,878 shares of this software security company for $155.72, generating $5.89 million from the sale. These shares were sold indirectly by a trust.
You can view the list of recent insider transactions for Okta, Inc. here.
|P/E: N/A||Forward P/E: -2976.8||Industry P/E: 33.38|
|P/S: 31.18||Price/Book: 45.03||EV/EBITDA: -102.69|
|Market Cap: $18.27B||Avg. Daily Volume: 2,072,226||52 Week Range: $88.66 – $158.94|
You can view the full list of sales from this Insider Sales page.
Disclaimer: I hold a long position in Gilead Sciences (GILD). 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.