Welcome to edition 517 of Insider Weekends. The S&P 500 declined more than 2% last week as investors digested first quarter earnings numbers, another 3 million U.S. workers filed for unemployment benefits, some small businesses permanently closed shop and JCPenny filed for bankruptcy. I was surprised and dismayed to hear that after 33 years in business and with 50 locations, San Francisco Bay Area based Specialty’s Cafe decided to close permanently on account of the COVID-19 crisis. This was a mainstay for lunch for many Bay Area employees and while it is a single data point, it paints a grim picture for a V shaped recovery and indicates that the current stimulus programs may not have been enough for some small businesses to survive this downturn. Companies like JCPenny were already well on their way to insolvency and this crisis simply accelerated the inevitable outcome for some leveraged businesses.
Jay Powell is right that a recovery from this crisis will depend a lot on the discovery of an effective vaccine and that a recovery could take until the end of 2021. I certainly hope that it does not take that long and looking at various past outbreaks like SARS, MERS, Ebola and even the 1994 Plague in India, while they were very scary as they were unfolding, for the most part the acute phase of the outbreaks only lasted a few months. I have not changed my mind that the risk continues to remain to the downside. That said, certain companies and industries have been so hard hit that it is difficult to ignore the bargains they represent if we can expect some return to normalcy in the next year or two. There are also companies that may benefit from the new normal as working remotely becomes more acceptable. I have also been adding to select existing positions and starting new positions while attempting to hedge some of my long exposure.
It is not surprising that insiders are doing the same and stepped up their purchases significantly last week by purchasing $305.64 million of stock compared to $50.88 million in the week prior. Selling also increased with insiders selling $2.89 billion of stock last week compared to $1.72 billion in the week prior. Most of the management insider buying appears to be concentrated in the financial sector as you can see from the sector heat map below.
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 9.48. In other words, insiders sold more than 9 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 33.78.
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. Mercury General Corporation (MCY): $37.97
Shares of this insurance company were acquired by 3 insiders:
- Chairman of the Board George Joseph acquired 416,293 shares, paying $35.95 per share for a total amount of $14.97 million. Mr. Joseph increased his stake by 2.20% to 19,300,742 shares with this purchase.
- CEO/President Gabriel Tirador acquired 3,000 shares, paying $34.81 per share for a total amount of $104,445. Mr. Tirador increased his stake by 7.77% to 41,594 shares with this purchase.
- VP/Marketing Brandt Minnich acquired 1,000 shares, paying $36.44 per share for a total amount of $36,440. Mr. Minnich increased his stake by 61.27% to 2,632 shares with this purchase.
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.
|P/E: 46.7||Forward P/E: 11.01||Industry P/E: 9.45|
|P/S: 0.57||Price/Book: 1.29||EV/EBITDA: 16.94|
|Market Cap: $2.1B||Avg. Daily Volume: 396,119||52 Week Range: $33.45 – $65.22|
2. Aon Plc (AON): $191.67
Director Lester B. Knight acquired 70,000 shares of this insurance brokerage, paying $195.00 per share for a total amount of $13.65 million. These shares were purchased indirectly by various trusts.
You can view the list of recent insider transactions for Aon Plc here.
|P/E: 27.78||Forward P/E: 16.99||Industry P/E: 9.45|
|P/S: 3.99||Price/Book: 13.98||EV/EBITDA: 15.99|
|Market Cap: $44.29B||Avg. Daily Volume: 1,964,993||52 Week Range: $143.93 – $238.19|
3. Upwork Inc. (UPWK): $13.72
Director Gregory C. Gretsch acquired 542,996 shares of this online talent marketplace, paying $9.95 per share for a total amount of $5.4 million. 113,998 of these shares were purchased indirectly through a trust.
You can view the list of recent insider transactions for Upwork Inc. here.
|P/E: N/A||Forward P/E: -114.33||Industry P/E: 32.00|
|P/S: 5.01||Price/Book: 6.09||EV/EBITDA: -64.24|
|Market Cap: $1.58B||Avg. Daily Volume: 2,294,322||52 Week Range: $5.14 – $17.75|
4. Harley-Davidson, Inc. (HOG): $19.66
Shares of Harley-Davidson were acquired by 2 insiders:
- Chairman and Acting President Jochen Zeitz acquired 148,870 shares, paying $20.66 per share for a total amount of $3.08 million. Mr. Zeitz increased his stake by 5725.77% to 151,470 shares with this purchase.
- SVP & CFO John A. Olin acquired 13,500 shares, paying $19.02 per share for a total amount of $256,774. Mr. Olin increased his stake by 19.55% to 82,557 shares with this purchase.
You can view the list of recent insider transactions for Harley-Davidson, Inc. here.
|P/E: 8.44||Forward P/E: 8.74||Industry P/E: 15.76|
|P/S: 0.57||Price/Book: 1.78||EV/EBITDA: 13.11|
|Market Cap: $3.01B||Avg. Daily Volume: 3,632,117||52 Week Range: $14.31 – $40.89|
5. New Mountain Finance Corporation (NMFC): $7.91
Shares of this asset management company were acquired by 3 insiders:
- Director Steven B. Klinsky acquired 150,000 shares, paying $8.11 per share for a total amount of $1.22 million. Mr. Klinsky increased his stake by 2.24% to 6,840,751 shares with this purchase. 50,000 of these shares were purchased indirectly through a trust.
- EVP, CAO and Director Adam Weinstein acquired 35,000 shares, paying $7.69 per share for a total amount of $269,000. Mr. Weinstein increased his stake by 17.14% to 239,158 shares with this purchase.
- Director David Ogens acquired 20,000 shares, paying $8.08 per share for a total amount of $161,600. Mr. Ogens increased his stake by 27.85% to 91,809 shares with this purchase.
You can view the list of recent insider transactions for New Mountain Finance Corporation here.
|P/E: N/A||Forward P/E: 6.33||Industry P/E: 15.96|
|P/S: 2.67||Price/Book: 0.71||EV/EBITDA: N/A|
|Market Cap: $765.9M||Avg. Daily Volume: 1,561,222||52 Week Range: $4.62 – $14.45|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. Beyond Meat, Inc. (BYND): $134.16
Shares of this plant-based “meat” products company were sold by 5 insiders:
- Director Donald Thompson sold 357,876 shares for $121.95, generating $43,64 million from the sale.
- CFO & Treasurer Mark Joseph Nelson sold 100,000 shares for $128.35, generating $12.83 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
- Chief Growth Officer Charles Muth sold 85,009 shares for $128.11, generating $10.89 million from the sale. 35,009 of these shares were sold as a result of exercising options immediately prior to the sale.
- Director Christopher Isaac Stone sold 55,000 shares for $129.27, generating $7.11 million from the sale.
- Chief Innovation Officer Dariush Ajami sold 17,000 shares for $125.97, generating $2.14 million from the sale. 15,000 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 Beyond Meat, Inc. here.
|P/E: N/A||Forward P/E: 227.39||Industry P/E: 23.35|
|P/S: 23.54||Price/Book: 21.17||EV/EBITDA: 362.05|
|Market Cap: $8.35B||Avg. Daily Volume: 8,136,093||52 Week Range: $48.18 – $239.71|
2. Apollo Global Management, Inc. (APO): $40.69
Senior Managing Director Marc J. Rowan sold 1,373,240 shares of this private equity firm for $43.76, generating $60,095,497 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: N/A||Forward P/E: 14.85||Industry P/E: 15.96|
|P/S: 13.81||Price/Book: 3699.09||EV/EBITDA: N/A|
|Market Cap: $9.31B||Avg. Daily Volume: 2,999,261||52 Week Range: $19.46 – $52.67|
3. Guardant Health, Inc. (GH): $97.5
Shares of this precision oncology company were sold by 3 insiders:
- Chairman, President and COO Amirali Talasaz sold 298,413 shares for $89.51, generating $26.71 million from the sale. 8,512 of these shares were sold as a result of exercising options immediately prior to the sales.
- Chief Financial Officer Derek A. Bertocci sold 22,775 shares for $92.44, generating $2.11 million from the sale.
- Director Stanley J. Meresman sold 6,500 shares for $86.50, generating $562,250 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 Guardant Health, Inc. here.
|P/E: N/A||Forward P/E: -88.64||Industry P/E: 23.64|
|P/S: 37.6||Price/Book: 11.74||EV/EBITDA: -97.58|
|Market Cap: $9.22B||Avg. Daily Volume: 1,303,146||52 Week Range: $55.9 – $112.22|
4. YETI Holdings, Inc. (YETI): $26.93
Director Roy J. Seiders sold 965,797 shares of this outdoor and recreation market product designer for $28.01, generating $27.06 million from the sale. These shares were sold indirectly by RJS Ice 2, LP.
You can view the list of recent insider transactions for YETI Holdings, Inc. here.
|P/E: 41.56||Forward P/E: 21.04||Industry P/E: 57.46|
|P/S: 2.51||Price/Book: 17.78||EV/EBITDA: 22.02|
|Market Cap: $2.34B||Avg. Daily Volume: 2,726,476||52 Week Range: $15.28 – $38.61|
5. Electronic Arts Inc. (EA): $118.13
Shares of Electronic Arts were sold by 6 insiders:
- Director Jay C. Hoag sold 150,094 shares for $116.26, generating $17.45 million from the sale. These shares were sold indirectly by various trusts and entities.
- Director Lawrence F. Probst III sold 24,684 shares for $116.62, generating $2.88 million from the sale.
- COO & CFO Blake J. Jorgensen sold 5,200 shares for $117.92, generating $613,183 from the sale.
- General Counsel & Corp Sect’y Jacob J. Schatz sold 3,053 shares for $117.60, generating $359,048 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
- EVP Worldwide Business Affairs Joel Linzner sold 2,000 shares for $116.40, generating $232,800 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
- Director Luis A. Ubinas sold 1,138 shares for $116.40, generating $132,467 from the sale.
You can view the list of recent insider transactions for Electronic Arts Inc. here.
|P/E: 11.47||Forward P/E: 23.82||Industry P/E: 66.19|
|P/S: 6.18||Price/Book: 4.59||EV/EBITDA: 18.04|
|Market Cap: $34.22B||Avg. Daily Volume: 4,123,296||52 Week Range: $85.69 – $120.19|
You can view the full list of sales from this Insider Sales page.
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.