Happy Holidays and welcome to edition 548 of Insider Weekends. Insider buying decreased in a holiday shortened week with insiders purchasing $111.67 million of stock compared to $182.84 million in the week prior. Considering the short week and the fact that we are getting to the end of the quarter earnings-related quiet period, I am surprised by this level of insider buying. Selling also decreased with insiders selling $1.69 billion of stock last week compared to $3.42 billion in the week prior.
Market participants who stayed the course this year, did much better than those that were impacted by this horrendous pandemic both in terms of loss of lives and loss of livelihoods. I certainly hope 2021 turns out much better for those that suffered through the many challenges this year. Insiders as a group provided a strong buy signal this March but their buying has moderated significantly in recent weeks with notable weakness in late November and early December when I would normally expect strong buying.
There were some outstanding buying opportunities this year but at this stage of the market cycle, I am finding it increasingly difficult to find interesting new ideas outside of one narrow sector (housing) to which I already have exposure in multiple ways (a flooring company, a home builder, a mortgage lender, etc.). Hopefully insider buying in the coming weeks will help us discover companies that are worth exploring further.
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 15.09. In other words, insiders sold more than 15 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 18.71.
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. Odonate Therapeutics, Inc. (ODT): $17.25
Chief Executive Officer Kevin C. Tang acquired 275,784 shares of this pharmaceutical company, paying $15.16 per share for a total amount of $4.18 million. These shares were purchased indirectly by Tang Capital Partners, LP.
You can view the list of recent insider transactions for Odonate Therapeutics, Inc. here.
|P/E: N/A||Forward P/E: -5.15||Industry P/E: 40.55|
|P/S: N/A||Price/Book: 4.01||EV/EBITDA: -3.91|
|Market Cap: $664.66M||Avg. Daily Volume: 369,103||52 Week Range: $12.56 – $46.5|
2. Jack Henry & Associates, Inc. (JKHY): $157.69
Director Thomas A. Wimsett acquired 8,900 shares of this technology solutions and payment processing services provider, paying $156.35 per share for a total amount of $1.39 million. Mr. Wimsett increased his stake by 37.17% to 32,841 shares with this purchase.
Mr. Wimsett has over 30 years of experience in the payments industry and has served on Jack Henry’s board since 2012. This is his largest open market purchase since he joined the Board of Directors.
The company has been consistently growing both its top line and bottom line in the mid to high single digits. At the mid-point of its earnings guidance of $3.75 to $3.85 per share for fiscal 2021, the stock is trading at over 41 times fiscal 2021 earnings. Net income margins are attractive at over 20% in fiscal Q1 2021 (ended September 2020) compared to 17.48% net margins for full fiscal 2020 (ended June 2020). The company has no debt and has $195.3 million in cash on the balance sheet. Despite these attractive characteristics, I find it hard to get excited about a company growing revenue in the single digits that is trading at 41 times next year’s earnings.
You can view the list of recent insider transactions for Jack Henry & Associates, Inc. here.
|P/E: 40.55||Forward P/E: 35.52||Industry P/E: 61.07|
|P/S: 7.03||Price/Book: 7.79||EV/EBITDA: 26.62|
|Market Cap: $12.03B||Avg. Daily Volume: 496,393||52 Week Range: $123.64 – $200.98|
3. NetApp, Inc. (NTAP): $65.8
EVP Finance & Operations, CFO Michael J. Berry acquired 15,000 shares of this data management solutions company, paying $63.89 per share for a total amount of $958,329. Mr. Berry increased his stake by 66.47% to 37,568 shares with this purchase.
Mr. Berry joined NetApp in March of this year following stints as the CFO of a number of software security companies including McAfee, FireEye (FEYE) and Solarwinds (SWI). Traditionally compared to a hardware company on account of its data storage and management devices and valued as such (2.7 times revenue), the company is emphasizing the fact that it derives 70% of its revenue from its cloud software and maintenance services and only 30% from hardware. The company also indicated that 80% of its engineers were in software roles.
After a string of five quarters where the company saw its revenue decline, it turned the corner in the last two quarters with positive revenue growth during the pandemic. The stock has had a nice run-up in the last month and it is trading close to a 52 week high. If the market rerates the company as a software company like it did with enterprise virtualization company Nutanix (NTNX), there is room for further multiple expansion for NetApp. This assumes revenue growth can continue once the pandemic ends.
You can view the list of recent insider transactions for NetApp, Inc. here.
|P/E: 21.45||Forward P/E: 15.13||Industry P/E: 37.77|
|P/S: 2.66||Price/Book: 39.47||EV/EBITDA: 12.84|
|Market Cap: $14.7B||Avg. Daily Volume: 2,180,193||52 Week Range: $34.66 – $67.63|
4. Guidewire Software, Inc. (GWRE): $127.21
Director Andrew William Fraser Brown acquired 6,000 shares of this software application company, paying $124.49 per share for a total amount of $746,930. These shares were purchased indirectly by various trusts.
You can view the list of recent insider transactions for Guidewire Software, Inc. here.
|P/E: N/A||Forward P/E: 385.49||Industry P/E: 60.16|
|P/S: 14.11||Price/Book: 6.42||EV/EBITDA: 1027.25|
|Market Cap: $10.65B||Avg. Daily Volume: 611,096||52 Week Range: $71.64 – $129.66|
5. First Internet Bancorp (INBK): $28.92
Chairman, President and CEO David B. Becker acquired 20,000 shares of this regional bank, paying $28.19 per share for a total amount of $563,800. Mr. Becker increased his stake by 6.19% to 343,309 shares with this purchase.
You can view the list of recent insider transactions for First Internet Bancorp here.
|P/E: 11.16||Forward P/E: 8.61||Industry P/E: 16.04|
|P/S: 3.39||Price/Book: 0.89||EV/EBITDA: N/A|
|Market Cap: $283.43M||Avg. Daily Volume: 30,220||52 Week Range: $10.47 – $29.74|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. Walmart Inc. (WMT): $143.5
Director Robson S. Walton sold 2,030,000 shares of Walmart for $144.92, generating $294.19 million from the sale. These shares were sold indirectly by a trust.
You can view the list of recent insider transactions for Walmart Inc. here.
|P/E: 20.71||Forward P/E: 24.96||Industry P/E: 22.23|
|P/S: 0.74||Price/Book: 4.99||EV/EBITDA: 12.28|
|Market Cap: $406B||Avg. Daily Volume: 6,993,646||52 Week Range: $102 – $153.66|
2. Facebook, Inc. (FB): $267.4
Shares of Facebook were sold by 2 insiders:
- COB and CEO Mark Zuckerberg sold 199,471 shares for $272.78, generating $54.41 million from the sale. These shares were sold indirectly by various entities.
- VP and General Counsel Jennifer Newstead sold 310 shares for $271.26, generating $84,091 from the sale.
You can view the list of recent insider transactions for Facebook, Inc. here.
|P/E: 30.46||Forward P/E: 25.49||Industry P/E: 39.10|
|P/S: 9.64||Price/Book: 6.47||EV/EBITDA: 23.73|
|Market Cap: $761.63B||Avg. Daily Volume: 18,564,793||52 Week Range: $137.1 – $304.67|
3. Lemonade, Inc. (LMND): $125.11
Co-Founder, President, Chief Operating Officer and Secretary Shai Wininger sold 398,496 shares of this insurance company for $121.30, generating $48.34 million from the sale.
You can view the list of recent insider transactions for Lemonade, Inc. here.
|P/E: N/A||Forward P/E: N/A||Industry P/E: 16.63|
|P/S: 60.46||Price/Book: N/A||EV/EBITDA: -54.81|
|Market Cap: $5.89B||Avg. Daily Volume: 2,021,225||52 Week Range: $44.11 – $137.3|
4. WW International, Inc. (WW): $28.24
Director Oprah Winfrey sold 658,680 shares of this weight management products and services provider for $26.30, generating $17.32 million from the sale. 180,375 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 WW International, Inc. here.
|P/E: 21.56||Forward P/E: 12.9||Industry P/E: N/A|
|P/S: 1.39||Price/Book: N/A||EV/EBITDA: 10.28|
|Market Cap: $1.92B||Avg. Daily Volume: 1,123,520||52 Week Range: $9.75 – $47.19|
5. PagerDuty, Inc. (PD): $46.06
Shares of this software application company were sold by 2 insiders:
- CTO & Co-Founder Dan Alexandru Solomon sold 305,680 shares for $45.17, generating $13.81 million from the sale.
- Senior VP, Legal and GC Stacey Giamalis sold 12,000 shares for $45.15, generating $541,777 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 PagerDuty, Inc. here.
|P/E: N/A||Forward P/E: -209.36||Industry P/E: 60.16|
|P/S: 18.85||Price/Book: 10.06||EV/EBITDA: -68.28|
|Market Cap: $3.77B||Avg. Daily Volume: 1,520,688||52 Week Range: $12.33 – $48.29|
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.