Insider Weekends: A Week Of Repeat Purchases

Welcome to edition 529 of Insider Weekends. Insider buying increased last week with insiders purchasing $283.47 million of stock compared to $172.17 million in the week prior. Selling decreased with insiders selling $3.58 billion of stock last week compared to $5.71 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 12.64. In other words, insiders sold almost 13 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 33.14.

I received a question via Twitter about whether the Sell/Buy ratio was unusually high last week and you can see my response below.

Twitter Question on August 9, 2020 Insider Sell Buy Ratio

Twitter Question on August 9, 2020 Insider Sell Buy Ratio

There is quite a bit of variability in the Sell/Buy ratio and the times when it stands out the most is when it hits extremes, like in mid-March when insider buying surpassed insider selling for the first time in over a decade as we discussed here. We wrote the following in that mid-March article,

The large and rapid drop in the markets has created some interesting opportunities and while I remain bearish for now, I am looking at several ideas on the long side that I hope to get into in the coming weeks. The fallacy of the human condition is that we expect things to continue as they are and a rapidly evolving future or Black Swan events are usually given low credence.

My biggest mistake during the 2008-2009 crisis was not about being unprepared for that bear market but remaining bearish long after the bottom in March 2009 and missing a generational opportunity on the long side. This time around I plan to hone my watch list using insider buying as a discovery tool and start nibbling on the long side even if it is a little early to do so. By no means does this mean that I think the bottom is in (it is nearly impossible to pick tops or bottoms) but this is the time to be nimble and have the mental flexibility to change your opinion based on hard data and not be influenced by the opinions of others (including mine). 

Even though the sell/buy ratio came down last week, over $3.5 billion worth of sales in a single week is still significant. Given the huge market rally off the March lows it is not surprising that Carl Icahn sold over $700 million of his Herbalife (HLF) position last week and both David Einhorn and Warren Buffett are buying gold miners.

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. AXIS Capital Holdings Limited (AXS): $46

Director Charles A. Davis acquired 1,254,440 shares of this insurance company, paying $44.27 per share for a total amount of $55.53 million. These shares were purchased indirectly by Trident Capital.

We reported on purchases by Mr. Davis in mid-June when he picked up over $80 million worth of AXIS Capital Holdings stock across several transactions. We wrote the following about his mid-June purchases,

Mr. Davis has been on AXIS Capital’s Board of Directors since the company’s inception in 2001. He is also the CEO of Stone Point Capital, a firm that raised its eighth private equity fund, Trident VIII, with $7 billion in total commitment. Before Stone Point, Mr. Davis was a partner at Goldman Sachs for 23 years.

He purchased 25,000 shares at an average price of $49.90 on Feb 28, 2018 for $1.25 million and then nearly two years later purchased nearly $20 million worth of stock in March 2020. This latest group of purchases are his biggest purchases of AXIS Capital stock as you can see here.

AXIS Capital operates in the insurance and reinsurance sectors and as one would expect was impacted by the COVID-19 situation. The company reported a large loss of $1.94 per share on revenue of $1.68 billion in Q1 2020 but Mr. Davis probably sees opportunity in a sector most others perceive as troubled.

You can view the list of recent insider transactions for AXIS Capital Holdings Limited here.

P/E: N/A Forward P/E: 9.64 Industry P/E: 14.94
P/S: 0.78 Price/Book: 0.82 EV/EBITDA: 45.06
Market Cap: $3.88B Avg. Daily Volume: 968,895 52 Week Range: $31.82 – $67.51

2. Red Rock Resorts, Inc. (RRR): $16.22

Shares of this resorts & casinos company were acquired by 2 insiders:

  • Director Frank J. Fertitta III acquired 1,649,000 shares, paying $14.12 per share for a total amount of $23.28 million. These shares were purchased indirectly by various trusts and entities.
  • Director Lorenzo J. Fertitta acquired 1,649,000 shares, paying $14.12 per share for a total amount of $23.28 million. These shares were purchased indirectly by various trusts and entities.

Since these purchases were through various trusts, it looks like the form 4 filings might be reporting the same purchases twice, one for each brother. If this is the case, then the purchases in total were $23.28 million.

This does appear to be a week of repeat purchases as we have reported on several of the companies that insiders bought last week. The Fertittas were active buyers of Red Rock Resorts stock last August and we wrote the following about those purchases,

This is the third week in a row purchases by the Fertitta brothers, Frank and Lorenzo, made our top 5 list. With this latest purchase they have bumped up their stake in the company to over 47.12 million shares representing 67% of total shares outstanding.

Red Rock Resorts (Station Casinos in a former life) went public in April 2016 at a price of $19.50. The Fertittas started buying stock this August after the stock dipped below $19. Despite a recent bounce back from levels the stock had not seen since its IPO, the stock is still down 36% over the last year thanks to a string of earnings misses during the last four quarters.

The stock dropped below $3 during the March lows and it is interesting that the Fertittas waited this long before buying the stock. They closed their casinos on March 17th and they remained closed until June. It is possible that these purchases reflect their optimism about business conditions following the reopening of their casinos.

You can view the list of recent insider transactions for Red Rock Resorts, Inc. here.

P/E: N/A Forward P/E: 115.86 Industry P/E: 408.47
P/S: 1.35 Price/Book: 4.15 EV/EBITDA: 15.24
Market Cap: $1.9B Avg. Daily Volume: 2,858,525 52 Week Range: $2.76 – $27.91

3. Precigen, Inc. (PGEN): $4.45

Executive Chairman Randal J. Kirk acquired 1,209,384 shares of this biotech company, paying $4.42 per share for a total amount of $5.35 million. These shares were purchased indirectly through various trusts and entities.

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

P/E: N/A Forward P/E: N/A Industry P/E: N/A
P/S: 8.02 Price/Book: N/A EV/EBITDA: -7.22
Market Cap: $766.78M Avg. Daily Volume: 2,047,435 52 Week Range: $1.26 – $7.3

4. IAC/InterActiveCorp (IAC): $123.41

Director Michael D. Eisner acquired 40,555 shares of this media and internet services provider, paying $122.85 per share for a total amount of $4.98 million. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for IAC/InterActiveCorp here.

P/E: N/A Forward P/E: -251.86 Industry P/E: 39.81
P/S: 3.78 Price/Book: 2.26 EV/EBITDA: -339.59
Market Cap: $10.53B Avg. Daily Volume: 2,701,685 52 Week Range: $35.5797 – $136.019

5. Virtu Financial, Inc. (VIRT): $23.97

Chief Executive Officer Douglas A. Cifu acquired 100,000 shares of this market making and liquidity services provider, paying $22.45 per share for a total amount of $2.25 million. Mr. Cifu increased his stake by 51.88% to 292,755 shares with this purchase.

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

P/E: 7.41 Forward P/E: 10.61 Industry P/E: 19.38
P/S: 1.94 Price/Book: 2.27 EV/EBITDA: N/A
Market Cap: $4.63B Avg. Daily Volume: 1,449,507 52 Week Range: $14.94 – $26.82

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

Notable Insider Sales:

1. Paylocity Holding Corporation (PCTY): $131.64

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

  • Director Steven I. Sarowitz sold 242,000 shares for $129.67, generating $31.38 million from the sale. 42,000 of these shares were sold indirectly by the Julian Grace Foundation.
  • Chief Accounting Officer Andrew Cappotelli sold 2,111 shares for $132.69, generating $280,109 from the sale.
  • Sr. Vice President – Operations Mark S. Kinsey sold 635 shares for $126.53, generating $80,347 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 Paylocity Holding Corporation here.

P/E: 114.47 Forward P/E: 62.69 Industry P/E: 54.3m
P/S: 12.62 Price/Book: 18.02 EV/EBITDA: 78.85
Market Cap: $7.08B Avg. Daily Volume: 436,153 52 Week Range: $66.98 – $156

2. Inspire Medical Systems, Inc. (INSP): $108.06

Shares of this medical devices company were sold by 4 insiders:

  • Director Chau Quang Khuong sold 208,737 shares for $106.95, generating $22.32 million from the sale. These shares were sold indirectly by OrbiMed Private Investments.
  • CEO and President Timothy P. Herbert sold 80,000 shares for $105.66, generating $8.45 million from the sale. These shares were sold indirectly through a trust.

You can view the list of recent insider transactions for Inspire Medical Systems, Inc. here.

P/E: N/A Forward P/E: -49.8 Industry P/E: N/A
P/S: 35.62 Price/Book: 12.38 EV/EBITDA: -47.38
Market Cap: $2.9B Avg. Daily Volume: 340,887 52 Week Range: $40.53 – $119.26

3. Stryker Corporation (SYK): $188.37

Director Ronda E. Stryker sold 140,000 shares of this medical devices company for $186.14, generating $26.06 million from the sale. 100,000 of these shares were sold indirectly by a trust and 40,000 shares were sold by the reporting person’s husband.

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

P/E: 44.74 Forward P/E: 21.31 Industry P/E: 58.26
P/S: 5.03 Price/Book: 5.55 EV/EBITDA: 20.94
Market Cap: $70.75B Avg. Daily Volume: 1,536,581 52 Week Range: $124.54 – $226.3

4. Medpace Holdings, Inc. (MEDP): $126.95

Shares of this diagnostics & research company were sold by 3 insiders:

  • President & CEO August J. Troendle sold 160,352 shares for $124.00, generating $19.88 million from the sale. These shares were sold indirectly by Medpace Investors, LLC.
  • General Counsel & Corporate Secretary. Stephen P. Ewald sold 7,400 shares for $121.57, generating $899,618 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Executive VP, Operations Susan E. Burwig sold 7,000 shares for $126.00, generating $882,000 from the sale.

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

P/E: 44.87 Forward P/E: 28.02 Industry P/E: 48.21
P/S: 5.1 Price/Book: 6.06 EV/EBITDA: 29.35
Market Cap: $4.5B Avg. Daily Volume: 312,659 52 Week Range: $58.72 – $144.49

5. Regeneron Pharmaceuticals, Inc. (REGN): $612.57

Director Roy P. Vagelos sold 33,460 shares of this biotech company for $602.94, generating $20.17 million from the sale. These shares were sold indirectly by the reporting person’s spouse as trustee.

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

P/E: 23.72 Forward P/E: 18.27 Industry P/E: N/A
P/S: 7.5 Price/Book: 7.09 EV/EBITDA: 20.98
Market Cap: $65.17B Avg. Daily Volume: 1,204,034 52 Week Range: $271.37 – $664.64

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: 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.

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