Insider Weekends: Insiders Become Less Enthusiastic About Stocks

Welcome to edition 531 of Insider Weekends. Insider buying decreased last week with insiders purchasing $78.79 million of stock compared to $129.31 million in the week prior. This level of insider buying stands out for three reasons:

  1. We have not seen insider buying drop to these levels since mid-June.
  2. We are not in the midst of an earnings related quiet period at most companies when insider activity tends to drop.
  3. Nearly half of the buying last week was on account of continued purchases of the insurer AXIS Capital by Mr. Davis as discussed below.

Selling increased significantly with insiders selling $3.07 billion of stock last week compared to $2.09 billion in the week prior. Quite clearly insiders appear to be less enthusiastic about stocks now than they were in mid-March when during a two week period they purchased $1.22 billion worth of stock on the open market. Given the huge rally in the market, it is not surprising to see insiders grow skittish about buying at these levels. I tweeted earlier this week that we are now in “magic money” territory after a big rally in several SaaS stocks and have partially scaled back some positions in the sector including Twilio (TWLO), Zoom (ZM) and Workday (WDAY). With bond yields at historical lows and cash yielding next to nothing, this rally is being driven as much by TINA (There Is No Alternative) as it is by liquidity from the Feb or stimulus programs by various governments.

Magic Money Territory

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 more than doubled to 38.91. In other words, insiders sold almost 39 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 16.18.

Insider Sector Heat Map August 28, 2020

Insider Sector Heat Map August 28, 2020 (click to enlarge)

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): $48.37

Director Charles A. Davis acquired 775,142 shares of this insurance company, paying $45.41 per share for a total amount of $35.19 million. These shares were purchased indirectly by Trident Capital.

This latest purchase by Mr. Davis follows a $61 million purchase we wrote about last week. The stock has been rising in lock step with his purchases but natural disasters as a result of extreme weather events have given me pause. We wrote the following about AXIS Capital last week,

AXIS Capital was also at the top of our list last week and this is the fourth time since mid-June the stock has made our list because of insider purchases by Mr. Davis. This insurance and reinsurance company was impacted by the COVID-19 crisis in Q1 2020 when it reported a larger than expected loss of $1.94 per share. Things improved in Q2 with the company reporting earnings of 84 cents per share. Heading into the third quarter with multiple wildfires in California and the hurricane season spinning up on the East coast, the rest of the year is likely to remain challenging for AXIS Capital.

Mr. Davis on account of his long tenure on AXIS Capital’s Board of Directors is probably looking beyond the current issues besetting the company. He 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.

The company does appear to be trading at an attractive valuation of 0.76 times tangible book value and has a long fifteen year history of raising its dividend. The current $1.64 annual dividend works out to a yield of 3.64%.

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

P/E: N/A Forward P/E: 10.14 Industry P/E: 15.17
P/S: 0.82 Price/Book: 0.86 EV/EBITDA: 46.77
Market Cap: $4.08B Avg. Daily Volume: 1,033,281 52 Week Range: $31.82 – $67.51

2. Red Rock Resorts, Inc. (RRR): $18.065

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

  • Vice President Lorenzo J. Fertitta acquired 290,000 shares, paying $16.94 per share for a total amount of $4.91 million. These shares were purchased indirectly by various trusts and entities.
  • Chief Executive Officer Frank J. Fertitta acquired 290,000 shares, paying $16.94 per share for a total amount of $4.91 million. These shares were purchased indirectly by various trusts and entities.

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

P/E: N/A Forward P/E: 129.04 Industry P/E: 923.76
P/S: 1.5 Price/Book: 4.62 EV/EBITDA: 15.69
Market Cap: $2.12B Avg. Daily Volume: 2,549,192 52 Week Range: $2.76 – $27.91

3. Live Oak Bancshares, Inc. (LOB): $20.74

Chief Executive Officer James S. Mahan III acquired 130,480 shares of this regional bank, paying $20.18 per share for a total amount of $2.63 million. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for Live Oak Bancshares, Inc. here.

P/E: 129.63 Forward P/E: 13.38 Industry P/E: 13.00
P/S: 4.43 Price/Book: 1.53 EV/EBITDA: N/A
Market Cap: $840.66M Avg. Daily Volume: 192,603 52 Week Range: $7.57 – $21.03

4. Kennedy-Wilson Holdings, Inc. (KW): $14.36

Shares of this multifamily and commercial real estate investment company were acquired by 2 insiders:

  • Chief Executive Officer William J. McMorrow acquired 75,000 shares, paying $14.07 per share for a total amount of $1.06 million. These shares were purchased indirectly through a trust.
  • Director Stanley R. Zax acquired 15,000 shares, paying $14.39 per share for a total amount of $215,850. Mr. Zax increased his stake by 4.63% to 338,800 shares with this purchase.

You can view the list of recent insider transactions for Kennedy-Wilson Holdings, Inc. here.

P/E: 16.19 Forward P/E: -51.29 Industry P/E: N/A
P/S: 3.51 Price/Book: 1.64 EV/EBITDA: 31.1
Market Cap: $2.06B Avg. Daily Volume: 508,379 52 Week Range: $10.98 – $23.5

5. Camping World Holdings, Inc. (CWH): $31.62

Chief Executive Officer Marcus Lemonis acquired 35,450 shares of this outdoor and camping retailer, paying $31.00 per share for a total amount of $1.09 million. Mr. Lemonis increased his stake by 7.41% to 514,011 shares with this purchase.

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

P/E: N/A Forward P/E: 13.07 Industry P/E: 45.47
P/S: 0.56 Price/Book: 142.43 EV/EBITDA: 10.82
Market Cap: $2.8B Avg. Daily Volume: 2,552,218 52 Week Range: $3.4 – $42.49

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

Notable Insider Sales:

1. Fortive Corporation (FTV): $72.83

Director Steven M. Rales sold 5,000,000 shares of this scientific & technical Instruments company for $70.88, generating $354.39 million from the sale.

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

P/E: 49.24 Forward P/E: 20.12 Industry P/E: 25.13
P/S: 3.43 Price/Book: 3.32 EV/EBITDA: 18.85
Market Cap: $24.55B Avg. Daily Volume: 2,460,701 52 Week Range: $37.31 – $80.61

2. L Brands, Inc. (LB): $29.67

Director Leslie H. Wexner sold 3,000,000 shares of this apparel chain for $29.70, generating $89,100,002 from the sale. These shares were sold indirectly through a trust.

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

P/E: N/A Forward P/E: 14.54 Industry P/E: 45.47
P/S: 0.73 Price/Book: N/A EV/EBITDA: 11.12
Market Cap: $8.24B Avg. Daily Volume: 7,054,775 52 Week Range: $8 – $31.33

3. Vivint Solar, Inc. (VSLR): $30.52

Shares of this solar energy company were sold by 5 insiders:

  • Director Todd R. Pedersen sold 874,999 shares for $27.37, generating $23.95 million from the sale. These shares were sold indirectly through a trust.
  • CFO and EVP Dana C. Russell sold 221,348 shares for $28.07, generating $6.21 million from the sale. 122,221 of these shares were sold as a result of exercising options immediately prior to the sale.
  • Chief Revenue Officer Paul S. Dickson sold 99,905 shares for $27.12, generating $2.71 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • CCO; EVP, Capital Markets Thomas G. Plagemann sold 92,731 shares for $27.57, generating $2.56 million from the sale. 86,786 of these shares were sold as a result of exercising options immediately prior to the sale.
  • Director David F. D’Alessandro sold 58,767 shares for $27.17, generating $1.59 million from the sale.

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

P/E: N/A Forward P/E: 254.33 Industry P/E: 38.14
P/S: 10.12 Price/Book: 28.05 EV/EBITDA: -58.4
Market Cap: $3.83B Avg. Daily Volume: 2,903,192 52 Week Range: $3.17 – $30.71

4. W.W. Grainger, Inc. (GWW): $365.98

Director Susan Slavik Williams sold 87,000 shares of this maintenance, repair, and operating (MRO) products distributor for $349.82, generating $30.43 million from the sale. These shares were sold indirectly through a trust.

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

P/E: 32.02 Forward P/E: 20.41 Industry P/E: 17.52
P/S: 1.69 Price/Book: 10.16 EV/EBITDA: 15.13
Market Cap: $19.61B Avg. Daily Volume: 327,506 52 Week Range: $200.61 – $366.53

5. Silgan Holdings Inc. (SLGN): $38.21

Shares of this packaging & containers company were sold by 2 insiders:

  • Director Greg D. Horrigan sold 800,000 shares for $36.40, generating $29.12 million from the sale.
  • President – Silgan Containers Thomas James Snyder sold 24,061 shares for $37.56, generating $903,616 from the sale.

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

P/E: 16.91 Forward P/E: 13.31 Industry P/E: 26.09
P/S: 0.93 Price/Book: 3.89 EV/EBITDA: 11.06
Market Cap: $4.24B Avg. Daily Volume: 589,328 52 Week Range: $24.65 – $38.99

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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