Insider Weekends: Long Serving Director of Berkshire Hathaway Buys Shares

Welcome to edition 550 of Insider Weekends. Insider buying decreased last week with insiders purchasing $53.65 million of stock compared to $92.47 million in the week prior. Selling almost doubled with insiders selling $2.32 billion of stock last week compared to $1.22 billion in the week prior.

Insider activity has some seasonal effects where it ebbs and flows depending on whether companies are in earnings related quiet periods or not. We tend to see a significant slowdown in activity during the first month of each quarter and an increase in activity in the second month. When I saw this big spike in insider selling, I checked the data for every week of January for the last nine years and we have not seen this level of insider selling in a single week since 2012. Granted a big part of the spike last week was Carl Icahn selling $600 million worth of Herbalife (HLF) stock but even after excluding that sale, the level of insider selling far exceeds what we have seen in a single January week in the past nine years. I wrote the following in the conclusion to the U.S. Mergers and Acquisitions: A 2020 Report last night and this insider activity echoes that sentiment:

“As investors most of us came out of 2020 significantly ahead of where we started the year but the size of the current bubble has me very worried about 2021.”

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 43.32. In other words, insiders sold more than 43 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 13.17.

Insider Sector Heat Map January 8, 2021

Insider Sector Heat Map January 8, 2021

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. Berkshire Hathaway (BRK-B): $234.03

Director Ronald L. Olson acquired 4,000 shares of this company, paying $222.33 per share for a total amount of $889,335. Mr. Olson increased his class B stake by 19% to 5,446 directly owned shares and 19,886 indirectly owned shares with this purchase.

It is interesting to see an insider of Berkshire Hathaway buy shares even as the company was buying back its own shares. According to this Bloomberg article,

“Berkshire Hathaway Inc. spent the third quarter buying back about $9 billion of its own stock, more than it had repurchased in any full year in its history. The buying spree takes the total repurchases in the first nine months of 2020 to $16 billion”

We track these kinds of situations where both the insider and the company are buying shares in a screen called the “Double Dipper”. We limit this screen to management insider purchases but I am inclined to include Director purchases in the screen based on what I am seeing with this Berkshire Hathaway purchase. I tweeted the following about this purchase last week and you can read more about Mr. Olson here.

Berkshire Hathaway Insider Purchase Tweets

Berkshire Hathaway Insider Purchase Tweets

You can view the list of recent insider transactions for Berkshire Hathaway here.

P/E: 15.85 Forward P/E: 21.69 Industry P/E: 15.40
P/S: 2.02 Price/Book: 1.99 EV/EBITDA: 7.20
Market Cap: $549.38B Avg. Daily Volume: 5,178,663 52 Week Range: $159.50 – $234.99

2. Perrigo Company plc (PRGO): $44.64

EVP & President CSCA Richard S. Sorota acquired 7,513 shares of this drug manufacturer, paying $43.48 per share for a total amount of $326,665.

I have been following Perrigo and other generic drug companies for several years but have stayed away from the group because of company specific problems (TEVA) or the price fixing lawsuits most of the generic drug companies have had to face. With Perrigo attempting to rebrand itself as a consumer products company and Mylan recently merging with Pfizer’s Upjohn generic drugs division in a spinoff called Viatris (VTRS), maybe the group deserves another look.

We mentioned Perrigo in May 2018 after Starboard Value got involved with the company and we wrote the following:

We normally tend to exclude purchases by funds but decided to make an exception in this case on account of activist investor Starboard Value’s excellent track record and because Perrigo is their top holding. Fortune magazine once called Starboard Value’s Jeff Smith “the most feared man in corporate america”. Over the last year while other value managers like David Einhorn and Bill Ackman have struggled, Starboard Value has continued to perform well as you can see from the chart below.

Starboard Value vs. SP500

Starboard Value vs. SP500

Perrigo has had a tough few years along with the rest of the generic drug industry as you can see from the following 5 year chart of Perrigo, where the company has underperformed the S&P 500 by almost 100%. An EV/EBITDA of over 12 with low single digit net profit margins does not put the company in solid value territory but Starboard Value clearly (sees) something more in the company and claimed Perrigo was their best idea last September.

Perrigo vs. SP500

Perrigo vs. SP500

At the time we wrote that article, Perrigo had already lost more than half its value from a peak of over $200 per share in 2015. Unfortunately for Starboard Value, this proved to be just as much of a value trap as Macy’s did and the stock dropped an additional 41% since May 2018.

You can view the list of recent insider transactions for Perrigo Company plc here.

P/E: N/A Forward P/E: 10.41 Industry P/E: 41.89
P/S: 1.2 Price/Book: 1.05 EV/EBITDA: 9.96
Market Cap: $6.09B Avg. Daily Volume: 946,317 52 Week Range: $40.01 – $63.86

3. Atlantic Union Bankshares Corporation (AUB): $35.83

Director Frank Russell Ellett acquired 4,000 shares of this regional bank, paying $32.70 per share for a total amount of $130,802. Mr. Ellett increased his stake by 45.93% to 12,708 shares with this purchase.

You can view the list of recent insider transactions for Atlantic Union Bankshares Corporation here.

P/E: 14.87 Forward P/E: 12.27 Industry P/E: 17.00
P/S: 4.95 Price/Book: 1.14 EV/EBITDA: N/A
Market Cap: $2.82B Avg. Daily Volume: 243,622 52 Week Range: $18.55 – $37.49

4. Barnes & Noble Education, Inc. (BNED): $4.86

Director Zachary Levenick acquired 20,000 shares of this operator of University bookstores, paying $4.73 per share for a total amount of $94,600. These shares were purchased indirectly by THG Securities Advisors LLC.

You can view the list of recent insider transactions for Barnes & Noble Education, Inc. here.

P/E: N/A Forward P/E: -48.6 Industry P/E: 37.94
P/S: 0.15 Price/Book: 0.63 EV/EBITDA: -24.78
Market Cap: $238.45M Avg. Daily Volume: 378,484 52 Week Range: $1.11 – $5.84

5. Arlington Asset Investment Corp. (AAIC): $3.97

President and CEO Rock J. Tonkel Jr. acquired 20,000 shares of this mortgage REIT, paying $3.86 per share for a total amount of $77,170. Mr. Tonkel increased his stake by 3.65% to 568,326 shares with this purchase.

You can view the list of recent insider transactions for Arlington Asset Investment Corp. here.

P/E: N/A Forward P/E: N/A Industry P/E: N/A
P/S: -3.38 Price/Book: N/A EV/EBITDA: N/A
Market Cap: $132.71M Avg. Daily Volume: 238,971 52 Week Range: $1.4 – $6.77

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

Notable Insider Sales:

1. Arista Networks, Inc. (ANET): $306.12

Shares of this networking solutions company were sold by 5 insiders:

  • President and CEO Jayshree Ullal sold 229,857 shares for $284.39, generating $65.37 million from the sale. These shares were sold indirectly through a trust. 4,857 of these shares were sold as a result of exercising options immediately prior to the sale.
  • SVP, Chief Operating Officer Anshul Sadana sold 3,650 shares for $284.64, generating $1.04 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Director Charles H. Giancarlo sold 1,665 shares for $284.77, generating $474,150 from the sale. These shares were sold indirectly through a trust.
  • SVP and General Counsel Marc Taxay sold 751 shares for $290.76, generating $218,361 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Director Ann Mather sold 417 shares for $290.76, generating $121,247 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 Arista Networks, Inc. here.

P/E: 34.25 Forward P/E: 31.08 Industry P/E: 30.53
P/S: 10.43 Price/Book: 7.51 EV/EBITDA: 27.83
Market Cap: $23.16B Avg. Daily Volume: 689,561 52 Week Range: $156.63 – $307.22

2. Facebook, Inc. (FB): $267.57

Shares of Facebook were sold by 2 insiders:

  • COB and CEO Mark Zuckerberg sold 226,789 shares for $270.52, generating $61.35 million from the sale. These shares were sold indirectly by various entities.
  • VP and General Counsel Jennifer Newstead sold 310 shares for $268.40, generating $83,204 from the sale.

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

P/E: 30.48 Forward P/E: 25.51 Industry P/E: 40.24
P/S: 9.65 Price/Book: 6.48 EV/EBITDA: 23.75
Market Cap: $762.12B Avg. Daily Volume: 18,271,752 52 Week Range: $137.1 – $304.67

3. Medpace Holdings, Inc. (MEDP): $141.76

President & CEO August J. Troendle sold 195,346 shares of this clinical contract research organization for $140.06, generating $27.36 million from the sale. These shares were sold indirectly by Medpace Investors, LLC.

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

P/E: 43.1 Forward P/E: 33.91 Industry P/E: 47.35
P/S: 5.66 Price/Book: 6.37 EV/EBITDA: 29.54
Market Cap: $5.07B Avg. Daily Volume: 243,523 52 Week Range: $58.72 – $150.57

4. Select Medical Holdings Corporation (SEM): $30.59

Executive Chairman and Co-Founder Robert A. Ortenzio sold 640,000 shares of this hospital operator for $29.97, generating $19.18 million from the sale. 256,000 of these shares were sold indirectly through a trust.

You can view the list of recent insider transactions for Select Medical Holdings Corporation here.

P/E: 19.23 Forward P/E: 18.65 Industry P/E: N/A
P/S: 0.76 Price/Book: 3.97 EV/EBITDA: 12.96
Market Cap: $4.12B Avg. Daily Volume: 477,338 52 Week Range: $10 – $31.3

5. Palo Alto Networks, Inc. (PANW): $366.55

Shares of this software infrastructure company were sold by 4 insiders:

  • Director Mark D. McLaughlin sold 40,000 shares for $349.94, generating $13.99 million from the sale. These shares were sold indirectly through a trust.
  • EVP, Chief Technology Officer Nir Zuk sold 12,000 shares for $349.87, generating $4.19 million from the sale.
  • President Amit K. Singh sold 1,378 shares for $350.22, generating $482,602 from the sale.
  • Chief Accounting Officer Jean Compeau sold 900 shares for $347.36, generating $312,628 from the sale.

You can view the list of recent insider transactions for Palo Alto Networks, Inc. here.

P/E: N/A Forward P/E: 53.05 Industry P/E: 59.40
P/S: 9.91 Price/Book: 46.71 EV/EBITDA: 1163.09
Market Cap: $35.49B Avg. Daily Volume: 1,136,779 52 Week Range: $125.47 – $375

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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