Welcome to edition 537 of Insider Weekends. Insider buying decreased last week with insiders purchasing $60.83 million of stock compared to $119.27 million in the week prior. This is the second week in a row we have seen a decline in insider buying. This decline in buying is probably a combination of the market once again approaching all time highs and earnings related quiet periods at a lot of companies. Selling increased with insiders selling $1.74 billion of stock last week compared to $1.69 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 went up to 28.61. In other words, insiders sold almost 29 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 14.23.
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. Element Solutions Inc (ESI): $12.21
Director Sir Martin E. Franklin acquired 500,000 shares of this specialty chemicals company, paying $11.50 per share for a total amount of $5.75 million. These shares were purchased indirectly through a trust.
This was not an open market purchase but was part of a purchase from the company’s Co-founder and former Director Nicolas Berggruen. The company repurchased 1.5 million shares from him and Sir Martin Franklin purchased half a million shares. Element Solutions was formerly known as Platform Specialty Products (PAH) and renamed itself in July 2018 after completing the sale of its agricultural solutions business to UPL Corporation for $4.2 billion. This sale explains the nearly 50% drop in revenue I noticed from Q3 2018 to Q2 2019. Unfortunately revenue continued to decline after Q2 2019, albeit at a slower pace. The COVID-19 situation accelerated the revenue decline in Q2 2020.
The company appointed its EVP of Operations and Strategy as its new CEO in July 2020. Element Solutions is probably feeling more optimistic about the rest of this year because on September 9, the company revised its Q3 EBITDA and full year free cash flow (FCF) guidance upwards. The company now expects to generate $200 million in FCF for 2020. With an enterprise value of $4.38 billion, that works out to 22 times FCF and is not terribly attractive in light of their revenue decline in recent years.
We wrote about a turnaround situation in our October Special Situations Newsletter but realize that turnarounds rarely turn around. I would like to see their new CEO get a couple of quarters under his belt before I would get interested in taking another look at Element Solutions.
You can view the list of recent insider transactions for Element Solutions Inc here.
|P/E: 40.7||Forward P/E: 12.85||Industry P/E: 129.16|
|P/S: 1.73||Price/Book: 1.41||EV/EBITDA: 11.02|
|Market Cap: $3.04B||Avg. Daily Volume: 1,866,544||52 Week Range: $5.35 – $12.74|
2. Selecta Biosciences, Inc. (SELB): $2.02
Shares of this biotech company were acquired by 2 insiders:
- Director Timothy A. Springer acquired 3,185,394 shares, paying $1.71 per share for a total amount of $5.45 million. These shares were purchased indirectly by TAS Partners LLC.
- Director Timothy C. Barabe acquired 50,000 shares, paying $1.68 per share for a total amount of $83,985. Mr. Barabe increased his stake by 41.32% to 171,013 shares with this purchase.
You can view the list of recent insider transactions for Selecta Biosciences, Inc. here.
|P/E: N/A||Forward P/E: -8.42||Industry P/E: N/A|
|P/S: 32.53||Price/Book: N/A||EV/EBITDA: -3.11|
|Market Cap: $216.43M||Avg. Daily Volume: 1,659,104||52 Week Range: $1.28 – $4.83|
3. Liquidity Services, Inc. (LQDT): $11
Chairman of the Board and CEO William P. Angrick II acquired 94,567 shares of this e-commerce marketplace provider, paying $7.67 per share for a total amount of $725,792. These shares were purchased indirectly through a trust.
Liquidity Services is in the business of acquiring used or surplus equipment from businesses and the government and selling them through their e-commerce platform. The company did well for a number of years following the Great Recession and then lost its way as the economy prospered. The disruption from COVID-19 could provide a much needed tail wind to Liquidity Services in the quarters ahead and the stock had already been on an upward trajectory before this CEO purchase. The size of the CEO purchase stood out enough to me that I tweeted out this purchase the evening the form 4 was filed with the SEC.
Little did I expect that the stock would go up 26% in the next three trading sessions. The market clearly liked this vote of confidence from the CEO. Mr. Angrick has been an active buyer of the stock since February of this year as you can see here. He has spent $9.15 million purchasing 1.79 million shares this year and the stock made it to our top 5 insider purchases list multiple times this year.
You can view the list of recent insider transactions for Liquidity Services, Inc. here.
|P/E: N/A||Forward P/E: 137.5||Industry P/E: 73.16|
|P/S: 1.79||Price/Book: 3.4||EV/EBITDA: -40.11|
|Market Cap: $374.5M||Avg. Daily Volume: 307,153||52 Week Range: $3.01 – $11.19|
4. Medtronic plc (MDT): $108.68
Director Richard H. Anderson acquired 4,607 shares of this medical devices company, paying $108.52 per share for a total amount of $499,952. Mr. Anderson increased his stake by 4.75% to 101,673 shares with this purchase.
You can view the list of recent insider transactions for Medtronic plc here.
|P/E: 33.34||Forward P/E: 18.84||Industry P/E: 62.93|
|P/S: 5.23||Price/Book: 2.9||EV/EBITDA: 23.55|
|Market Cap: $146.09B||Avg. Daily Volume: 4,562,313||52 Week Range: $72.13 – $122.15|
5. Amazon.com, Inc. (AMZN): $3286.65
Director Indra K. Nooyi acquired 100 shares of Amazon, paying $3,194.54 per share for a total amount of $319,454. Mr. Nooyi increased her stake by 13.64% to 833 shares with this purchase.
You can view the list of recent insider transactions for Amazon.com, Inc. here.
|P/E: 126.23||Forward P/E: 73.96||Industry P/E: 73.16|
|P/S: 5.12||Price/Book: 22.33||EV/EBITDA: 42.1|
|Market Cap: $1.65T||Avg. Daily Volume: 4,958,149||52 Week Range: $1626.03 – $3552.25|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. Paycom Software, Inc. (PAYC): $366
President and CEO Chad R. Richison sold 270,000 shares of this human capital management software application company for $337.32, generating $91.08 million from the sale.
You can view the list of recent insider transactions for Paycom Software, Inc. here.
|P/E: 121.27||Forward P/E: 87.77||Industry P/E: 58.90|
|P/S: 27.04||Price/Book: 35.98||EV/EBITDA: 82.28|
|Market Cap: $21.42B||Avg. Daily Volume: 491,533||52 Week Range: $163.42 – $368.43|
2. Smartsheet Inc. (SMAR): $54.28
Shares of this productivity software application company were sold by 3 insiders:
- Director Brent Frei sold 500,000 shares for $50.19, generating $25.09 million from the sale.
- Chief Revenue Officer Michael Arntz sold 15,000 shares for $50.60, generating $759,002 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
- Chief Marketing Officer Anna Griffin sold 900 shares for $50.23, generating $45,208 from the sale.
You can view the list of recent insider transactions for Smartsheet Inc. here.
|P/E: N/A||Forward P/E: -123.36||Industry P/E: 58.90|
|P/S: 20.04||Price/Book: 12.91||EV/EBITDA: -59.25|
|Market Cap: $6.55B||Avg. Daily Volume: 1,739,332||52 Week Range: $30.91 – $60.8|
3. salesforce.com, inc. (CRM): $265.98
Shares of this software application company were sold by 3 insiders:
- Chair of the Board & CEO Marc Benioff sold 75,000 shares for $254.53, generating $19.09 million from the sale.
- Pres/Chief Engineering Officer Srinivas Tallapragada sold 5,000 shares for $254.43, generating $1.27 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 $253.28, generating $1.27 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: 102.66||Forward P/E: 70.74||Industry P/E: 58.90|
|P/S: 12.49||Price/Book: 6.28||EV/EBITDA: 114.17|
|Market Cap: $242.04B||Avg. Daily Volume: 7,714,187||52 Week Range: $115.29 – $284.5|
4. Natera, Inc. (NTRA): $73.58
Shares of this biotech company were sold by 3 insiders:
- Executive Chairman Matthew Rabinowitz sold 250,000 shares for $71.62, generating $17.91 million from the sale. These shares were sold indirectly through a trust.
- Chief Executive Officer Steven Leonard Chapman sold 11,185 shares for $71.24, generating $796,819 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
- Chief Operating Officer Robert Alan Schueren sold 1,987 shares for $74.26, generating $147,555 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 Natera, Inc. here.
|P/E: N/A||Forward P/E: -32.41||Industry P/E: N/A|
|P/S: 18.1||Price/Book: 19.28||EV/EBITDA: -37.87|
|Market Cap: $6.18B||Avg. Daily Volume: 779,864||52 Week Range: $16.87 – $74.47|
5. Goosehead Insurance, Inc (GSHD): $93.71
Director Robyn Mary Elizabeth Jones sold 196,056 shares of this insurance company for $86.20, generating $16.89 million from the sale.
You can view the list of recent insider transactions for Goosehead Insurance, Inc here.
|P/E: 493.21||Forward P/E: 110.25||Industry P/E: 15.38|
|P/S: 40.72||Price/Book: 1338.71||EV/EBITDA: 146.23|
|Market Cap: $3.45B||Avg. Daily Volume: 165,909||52 Week Range: $37.26 – $115.11|
You can view the full list of sales from this Insider Sales page.
Disclaimer: I hold a long position in Liquidity Services. 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.