Insider Weekends: Insiders Significantly Increase Their Selling

Welcome to edition 554 of Insider Weekends. In a volatile week that saw GameStop lose more than 80% of its value and AMC dip 48%, the S&P 500 posted gains of 4.65% and the Nasdaq went up more than 6%. Insiders used this opportunity to nearly double their insider selling last week. Whether you look at the Buffett indicator of  total stock market capitalization divided by GDP  which stands at an all time high of nearly 190% or that the U.S. stock market represents more than 60% of world equities (Japan represented about 45% of global equities during its dual stock and real estate bubbles in the late 1980s), it is hard not to draw the same conclusion as GMO Capital’s Jeremy Grantham that we are in an epic bubble. It is also not surprising to see a cluster of insiders from the largest asset management company in the world, with $8.67 trillion in assets under management, sell stock last week.

Beyond equities, this epic bubble manifests itself in the form of GameStop shares going up several thousand percent in the span of a few weeks and then giving back most of those gains in 5 days, it manifests itself when a cryptocurrency that was created as a joke is now worth over $6 billion and through the extreme interest in trading by retail investors who are yet to experience a long bear market. The fact that an epic bubble exists does not mean it is likely to end anytime soon and there are still pockets of the market that offer opportunities. Stan Drunkenmiller discussed a “matrix” of strategies in his recent interview with Goldman Sachs and they provide good food for thought to navigate the market in the coming years.

Insider buying decreased last week with insiders purchasing $30.66 million of stock purchased compared to $30.78 million in the week prior. Selling increased significantly with insiders selling $2.19 billion of stock last week compared to $1.17 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 went up to 71.42. In other words, insiders sold more than 71 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 37.93.

Insider Sector Heat Map February 5, 2021

Insider Sector Heat Map February 5, 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. MSC Industrial Direct Co., Inc. (MSM): $85.64

Director Mitchell Jacobson acquired 67,796 shares of this metalworking and maintenance, repair, and operations (MRO) products distributor, paying $78.04 per share for a total amount of $5.29 million.

You can view the list of recent insider transactions for MSC Industrial Direct Co., Inc. here.

P/E: 21.31 Forward P/E: 16.69 Industry P/E: 24.69
P/S: 1.52 Price/Book: 4.25 EV/EBITDA: 12.16
Market Cap: $4.78B Avg. Daily Volume: 430,874 52 Week Range: $44.93 – $87.84

2. Harley-Davidson, Inc. (HOG): $33.69

President and CEO Jochen Zeitz acquired 30,800 shares of Harley-Davidson, paying $32.47 per share for a total amount of $1 million. Mr. Zeitz increased his stake by 13.82% to 253,720 shares with this purchase.

Mr. Zeitz was credited for turning around Puma during his 18 years at the company. He became the youngest CEO of a German public company at the age of 30 and Puma’s stock rose nearly 4,000% during his 13 year tenure as CEO. He joined Harley’s board in 2007 and was named CEO in March 2020. Just like Puma, he has his work cut out for him at Harley Davidson as the company reported revenue declines for 9 quarters in a row and has a leveraged balance sheet to boot.

There are some early positive signs that Mr. Zeitz’s five year turnaround plan may work. The company streamlined its product portfolio by reducing the number of models it plans to launch, reduced costs, exited 39 markets and increased operating cash flow in 2020 to $1.2 billion compared to $310 million in 2019. The market wasn’t particularly happy with 2020 results or elements of the turnaround plan and the stock dropped more than 17% early last week.

Mr. Zeitz purchased shares shortly after this drop from $40.15 to $33.26. He also purchased shares last May and last August at much lower prices and the CFO also picked up some shares for $19.02 last May.

Harley Davidson V-Rod

Harley Davidson V-Rod (no longer in production)

You can view the list of recent insider transactions for Harley-Davidson, Inc. here.

P/E: 4211.25 Forward P/E: 11.62 Industry P/E: 111.91
P/S: 1.27 Price/Book: 3 EV/EBITDA: 33.37
Market Cap: $5.16B Avg. Daily Volume: 2,239,772 52 Week Range: $14.31 – $43.47

3. Brown & Brown, Inc. (BRO): $44.77

Director James Charles Hays acquired 10,000 shares of this insurance brokerage, paying $43.38 per share for a total amount of $433,750. Mr. Hays increased his stake by 2.96% to 347,610 shares with this purchase.

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

P/E: 26.49 Forward P/E: 22.84 Industry P/E: 16.34
P/S: 4.86 Price/Book: 3.37 EV/EBITDA: 17.18
Market Cap: $12.67B Avg. Daily Volume: 1,025,080 52 Week Range: $30.7 – $48.76

4. Alliance Data Systems Corporation (ADS): $84.86

Director John C. Gerspach acquired 6,000 shares of this data-driven marketing and loyalty solutions provider, paying $68.46 per share for a total amount of $410,753. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for Alliance Data Systems Corporation here.

P/E: 19.01 Forward P/E: 6.21 Industry P/E: 63.43
P/S: 0.93 Price/Book: 2.69 EV/EBITDA: 28.58
Market Cap: $4.21B Avg. Daily Volume: 1,093,345 52 Week Range: $20.51 – $107

5. Crown Castle International Corp. (REIT) (CCI): $162.26

Director Kevin A. Stephens acquired 2,000 shares of this cellular towers REIT, paying $164.15 per share for a total amount of $328,310. Mr. Stephens increased his stake by 95.88% to 4,086 shares with this purchase.

You can view the list of recent insider transactions for Crown Castle International Corp. (REIT) here.

P/E: 69.05 Forward P/E: 57.95 Industry P/E: 56/56
P/S: 11.98 Price/Book: 7.39 EV/EBITDA: 26.76
Market Cap: $69.98B Avg. Daily Volume: 2,243,575 52 Week Range: $114.18 – $180

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

Notable Insider Sales:

1. DocuSign, Inc. (DOCU): $250.37

President and CEO Daniel D. Springer sold 356,479 shares of this cloud based software provider for $229.61, generating $81.85 million from the sale. 190,136 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 DocuSign, Inc. here.

P/E: N/A Forward P/E: 223.55 Industry P/E: 61.65
P/S: 36.92 Price/Book: 109.62 EV/EBITDA: -351.84
Market Cap: $47.89B Avg. Daily Volume: 3,631,812 52 Week Range: $64.88 – $290.23

2. Guardant Health, Inc. (GH): $162.59

Chairman, President and COO Amirali Talasaz sold 402,804 shares of this precision oncology company for $157.34, generating $63.38 million from the sale. 52,199 of these shares were sold indirectly by Talasaz Investments, L.P.

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

P/E: N/A Forward P/E: -100.36 Industry P/E: 22.66
P/S: 59.91 Price/Book: 14.87 EV/EBITDA: -85.47
Market Cap: $16.25B Avg. Daily Volume: 1,075,367 52 Week Range: $55.9 – $168.52

3. Facebook, Inc. (FB): $268.1

Shares of Facebook were sold by 2 insiders:

  • COB and CEO Mark Zuckerberg sold 226,362 shares for $265.33, generating $60.06 million from the sale. These shares were sold indirectly by various entities.
  • VP and General Counsel Jennifer Newstead sold 310 shares for $265.53, generating $82,314 from the sale.

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

P/E: 26.57 Forward P/E: 19.84 Industry P/E: 38.68
P/S: 8.88 Price/Book: 5.95 EV/EBITDA: 18.03
Market Cap: $763.46B Avg. Daily Volume: 18,581,422 52 Week Range: $137.1 – $304.67

4. BlackRock, Inc. (BLK): $726.33

Shares of this asset management company were sold by 6 insiders:

  • Chairman and CEO Laurence Fink sold 27,400 shares for $728.77, generating $19.97 million from the sale.
  • Senior Managing Director Richard J. Kushel sold 6,055 shares for $727.14, generating $4.4 million from the sale.
  • Chief Operating Officer Robert L. Goldstein sold 3,759 shares for $733.88, generating $2.76 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Senior Managing Director Mark McCombe sold 3,253 shares for $730.76, generating $2.38 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • CFO & Senior Managing Director Gary Shedlin sold 3,206 shares for $730.41, generating $2.34 million from the sale.
  • Senior Managing Director Mark Wiedman sold 1,500 shares for $730.30, generating $1.09 million from the sale.

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

P/E: 22.8 Forward P/E: 17.72 Industry P/E: 20.37
P/S: 6.84 Price/Book: 3.27 EV/EBITDA: 18.56
Market Cap: $110.79B Avg. Daily Volume: 657,796 52 Week Range: $323.98 – $788

5. Medallia, Inc. (MDLA): $44.33

Director Borge Hald sold 550,000 shares for $40.69 of this Software-as-a-Service platform provider, generating $22.38 million from the sale. 200,000 of these shares were sold indirectly by a trust.

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

P/E: N/A Forward P/E: -1477.67 Industry P/E: 61.65
P/S: 14.52 Price/Book: 14.78 EV/EBITDA: -60.48
Market Cap: $6.67B Avg. Daily Volume: 1,620,879 52 Week Range: $16.04 – $48.27

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.

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