Insider Weekends: Jordan Kaplan’s First Insider Purchase Of Douglas Emmett

Welcome to edition 536 of Insider Weekends. Insider buying decreased last week with insiders purchasing $119.27 million of stock compared to $138.44 million in the week prior. It was interesting to see that three out of the five companies in our top five insider buys were from the hard hit energy sector and each of these companies has lost more than half their value in the last year. Selling also decreased with insiders selling $1.69 billion of stock last week compared to $2.17 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 14.23. In other words, insiders sold more than 14 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 15.69.

Insider Sector Heat Map October 2, 2020

Insider Sector Heat Map October 2, 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. Continental Resources, Inc. (CLR): $12.3

Executive Chairman Harold Hamm acquired 769,235 shares of this crude oil and natural gas company, paying $12.68 per share for a total amount of $9.75 million. Mr. Hamm increased his stake by 6.26% to 13,062,904 shares with this purchase.

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

P/E: N/A Forward P/E: 55.91 Industry P/E: N/A
P/S: 1.45 Price/Book: 0.72 EV/EBITDA: 4.68
Market Cap: $4.49B Avg. Daily Volume: 3,226,804 52 Week Range: $6.9 – $36.2

2. Douglas Emmett, Inc. (DEI): $26.43

Chief Executive Officer, President Jordan L. Kaplan acquired 39,300 shares of this office and apartment REIT, paying $25.38 per share for a total amount of $997,382. Mr. Kaplan increased his stake by 1.44% to 2,771,890 shares with this purchase.

Santa Monica based Douglas Emmett owns and operates approximately 18.3 million square feet of Class A office space and 4,209 apartment units in Los Angeles and Honolulu. Mr. Kaplan has been with the company since its inception and in the last 10 years, we have not seen him sell a single share. He has exercised options without selling them multiple times in the past and these are his first open market purchases as you can see here.

The COVID-19 situation is going to be especially difficult for retail REITs and office REITs. Douglas Emmett has not been immune to its effects despite its focus on high-end class A office spaces. Q2 2020 funds from operations (FFO) at 41 cents per share were below estimates of 50 cents and well below the 54 cents the company generated in Q2 2019.

The REIT has increased its dividends every year since 2011 and did not suspend its dividend this year despite the pandemic. With a  payout ratio of 58%, the 28 cents per quarter dividend may not be in trouble even if FFO remains at the Q2 2020 levels or a little lower. However the road to recovery might be long based on what we are seeing with the second wave of COVID-19 in Great Britain and NYC shutting down schools and non-essential businesses in parts of the city.

An important statistic when it comes to Douglas Emmett’s business was the distribution of revenue between office and apartments. The apartments side of the business is likely to be more resilient and could provide opportunity for growth for the company even as the office side of the business shrinks. You can find this information on page 8 of the Q2 2020 10-Q filing and a snapshot is given below.

Douglas Emmett Income Distribution

Douglas Emmett Income Distribution

Unfortunately the apartments side of the business only represents about 15% of total revenue. While I like how well this company is run, the low payout ratio and the insider buying, I am concerned about macro economic issues that are likely to impact the business in the near term and will be adding the company to my growing watch list.

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

P/E: 14.12 Forward P/E: 94.39 Industry P/E: 45.54
P/S: 4.91 Price/Book: 1.87 EV/EBITDA: 18.5
Market Cap: $4.64B Avg. Daily Volume: 1,282,737 52 Week Range: $23.16 – $45.59

3. PBF Energy Inc. (PBF): $5.98

Shares of this petroleum refining and logistics company were acquired by 3 insiders:

  • Chief Executive Officer Thomas J. Nimbley acquired 50,000 shares, paying $5.92 per share for a total amount of $296,195. Mr. Nimbley increased his stake by 13.23% to 427,857 shares with this purchase.
  • Senior Vice President Thomas O’Connor acquired 25,000 shares, paying $5.86 per share for a total amount of $146,388. Mr. O’Connor increased his stake by 20.33% to 147,995 shares with this purchase.
  • Chief Financial Officer, SVP Erik C. Young acquired 21,893 shares, paying $5.87 per share for a total amount of $128,471. Mr. Young increased his stake by 23.60% to 114,675 shares with this purchase. 6,893 of these shares were acquired under a 401(k) plan.

You can view the list of recent insider transactions for PBF Energy Inc. here.

P/E: N/A Forward P/E: -3.86 Industry P/E: N/A
P/S: 0.04 Price/Book: 0.31 EV/EBITDA: -1049.93
Market Cap: $718.49M Avg. Daily Volume: 5,081,950 52 Week Range: $5.19 – $34.91

4. Phillips 66 Partners LP (PSXP): $22.81

Director Phillip David Bairrington acquired 15,000 shares of this oil & gas midstream company, paying $21.70 per share for a total amount of $325,474. Mr. Bairrington increased his stake by 55.04% to 42,253 shares with this purchase.

You can view the list of recent insider transactions for Phillips 66 Partners LP here.

P/E: 5.47 Forward P/E: 6.3 Industry P/E: N/A
P/S: 4.87 Price/Book: 2.41 EV/EBITDA: 16.33
Market Cap: $5.21B Avg. Daily Volume: 813,471 52 Week Range: $19 – $65.22

5. Steelcase Inc. (SCS): $11.49

Senior VP, Americas Eddy F. Schmitt acquired 30,000 shares of this integrated furniture settings company, paying $10.04 per share for a total amount of $301.200.

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

P/E: 9.91 Forward P/E: 15.55 Industry P/E: 109.55
P/S: 0.37 Price/Book: 1.22 EV/EBITDA: 4.85
Market Cap: $1.319B Avg. Daily Volume: 981,037 52 Week Range: $7.02 – $23.02

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

Notable Insider Sales:

1. salesforce.com, inc. (CRM): $247.85

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

  • Chairman of the Board & CEO Marc Benioff sold 75,000 shares for $247.56, generating $18.57 million from the sale.
  • President and CLO Amy E. Weaver sold 5,800 shares for $253.16, generating $1.47 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Co-Founder and CTO Parker Harris sold 5,000 shares for $246.46, generating $1.23 million 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 salesforce.com, inc. here.

P/E: 95.66 Forward P/E: 65.92 Industry P/E: 58.50
P/S: 11.64 Price/Book: 5.85 EV/EBITDA: 106.28
Market Cap: $225.54B Avg. Daily Volume: 7,839,926 52 Week Range: $115.29 – $284.5

2. BeiGene, Ltd. (BGNE): $283.28

Shares of this biotech company were sold by 4 insiders:

  • Chief Executive Officer John Oyler sold 54,303 shares for $280.39, generating $15.23 million from the sale.
  • Director Xiaodong Wang sold 5,000 shares for $280.42, generating $1.4 million from the sale.
  • President & GM China Xiaobin Wu sold 4,000 shares for $280.35, generating $1.12 million from the sale.
  • CMO, Hematology Jane Huang sold 1,500 shares for $280.38, generating $420,568 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 BeiGene, Ltd. here.

P/E: N/A Forward P/E: -21.84 Industry P/E: N/A
P/S: 113.48 Price/Book: 8.72 EV/EBITDA: -13.75
Market Cap: $25.5B Avg. Daily Volume: 281,646 52 Week Range: $114.41 – $287.74

3. Paycom Software, Inc. (PAYC): $331.53

President and CEO Chad R. Richison sold 45,000 shares of this software application company for $311.29, generating $14.01 million from the sale.

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

P/E: 109.85 Forward P/E: 79.5 Industry P/E: N/A
P/S: 24.49 Price/Book: 32.59 EV/EBITDA: 74.5
Market Cap: $19.41B Avg. Daily Volume: 486,104 52 Week Range: $163.42 – $342

4. Morningstar, Inc. (MORN): $164.01

Executive Chairman Joseph D. Mansueto sold 84,035 shares of this independent investment research services provider for $157.51, generating $13.24 million from the sale.

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

P/E: 47.68 Forward P/E: 57.75 Industry P/E: 18.39
P/S: 5.42 Price/Book: 6.48 EV/EBITDA: 26.97
Market Cap: $7.04B Avg. Daily Volume: 85,592 52 Week Range: $102.59 – $178.57

5. RealPage, Inc. (RP): $58.07

Chairman & CEO Stephen T. Winn sold 150,000 shares of this software application company for $58.66, generating $8.79 million from the sale. These shares were sold indirectly by Seren Capital Management, L.L.C.

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

P/E: 116.37 Forward P/E: 27.78 Industry P/E: 58.50
P/S: 5.52 Price/Book: 3.68 EV/EBITDA: 35.77
Market Cap: $5.92B Avg. Daily Volume: 792,539 52 Week Range: $36.91 – $69.79

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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