Insider Weekends: Farhad Nanji Buys $55 Million Worth Of PennyMac

In a week where we experienced a bifurcated market with the S&P 500 and the Dow Jones Industrial Average both registering a gain of 1% and the Nasdaq and the Russell 2000 index of small cap stocks dropping nearly 2%, insiders stepped up their insider buying. It was surprising to see this spike in insider buying especially so close to the end of the first quarter when most companies are in their earnings related quiet periods. A big part of the insider buying was driving by IPO related buying in three companies and a long-term director of mortgage lender PennyMac Financial Services (PFSI), Farhad Nanji, buying nearly $55 million worth of stock through his investment firm MFN Partners Management. The firm is a Harvard backed investment management company with a value oriented focus and over $2 billion in AUM.

While the 2% drop in the Nasdaq last week and the 0.7% gain year-t0-date may not appear to be much, underneath the surface a lot of tech stocks have dropped sharply, giving back anywhere from 20% to 50% of their gains from their all-time highs.

Tweet by Tobias Carlisle

Tweet by Tobias Carlisle

Incidentally I own four of the names mentioned in that Tweet. Although I took profits in each of them during their meteoric rise upwards, the recent drop has impacted my portfolio. Diversification and a timely hedge helped mute some of the impact from this rotation.

The big winners recently have been retail and small cap stocks that have been rising on growing optimism of a reopening as you can see from the YTD and the six month charts below. The rise of the Russell 2000 over the last six months and the last year has been remarkable. Despite a large run-up from its lows last March, insiders of a retail company top our list of insider purchases this week.

S&P 500, DJIA, Nasdaq and Russell 2000 YTD

S&P 500, DJIA, Nasdaq and Russell 2000 YTD

S&P 500, DJIA, Nasdaq and Russell 2000 6 Months Chart

S&P 500, DJIA, Nasdaq and Russell 2000 6 Months Chart

Welcome to edition 561 of Insider Weekends. Insider buying increased last week with insiders purchasing $154.4 million of stock purchased compared to $100.17 million in the week prior. Selling decreased with insiders selling $2.2 billion of stock last week compared to $3.55 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 14.27. 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 an unusually high 35.42.

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. Designer Brands Inc. (DBI): $15.75

Shares of this shoe retailer were acquired by 2 insiders:

  • Executive Chairman Jay L. Schottenstein acquired 902,623 shares, paying $13.99 per share for a total amount of $12.63 million. These shares were purchased indirectly by Schottenstein RVI, LLC.
  • Director Joseph A. Schottenstein acquired 273,099 shares, paying $14.11 per share for a total amount of $3.85 million. These shares were purchased indirectly by Schottenstein Realty LLC.

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

P/E: N/A Forward P/E: 14.58 Industry P/E: 37.00
P/S: 0.51 Price/Book: 4.69 EV/EBITDA: -6.64
Market Cap: $1.14B Avg. Daily Volume: 2,074,948 52 Week Range: $3.61 – $17.15

2. Apartment Investment and Management Company (AIV): $5.92

Director Terry Considine acquired 300,000 shares of this residential REIT, paying $5.72 per share for a total amount of $1.72 million. These shares were purchased indirectly by a retirement plan for which the reporting person is the trustee.

It is interesting to see Mr. Considine continue buying shares of AIV. We wrote the following about the company last week,

AIMCO split into two companies last December when it spun off its apartments portfolio into a separate REIT called Apartment Income REIT Corp. (AIRC). The remaining AIMCO business is now focused on development and redevelopment. The move was opposed by the activist investor Jonathan Litt but the company proceeded with this split-off.

You can view the list of recent insider transactions for Apartment Investment and Management Company here.

P/E: N/A Forward P/E: 22.77 Industry P/E: 74.31
P/S: 5.8 Price/Book: 1.77 EV/EBITDA: 30.69
Market Cap: $883.31M Avg. Daily Volume: 5,232,645 52 Week Range: $3.28487 – $6.48

3. Cortexyme, Inc. (CRTX): $33.63

Director David Lamond acquired 50,000 shares of this biotech company, paying $33.77 per share for a total amount of $1.69 million. These shares were purchased indirectly by a trust.

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

P/E: N/A Forward P/E: -9.72 Industry P/E: N/A
P/S: N/A Price/Book: 5.77 EV/EBITDA: -10.67
Market Cap: $993.84M Avg. Daily Volume: 308,687 52 Week Range: $26.661 – $58.99

4. Advantage Solutions Inc. (ADV): $11.84

Shares of this advertising company were acquired by 5 insiders:

  • Director James M. Kilts acquired 64,463 shares, paying $10.89 per share for a total amount of $702,146.
  • Chief Executive Officer Tanya L. Domier acquired 27,250 shares, paying $11.07 per share for a total amount of $301,657.
  • CFO & COO Brian Stevens acquired 4,310 shares, paying $11.61 per share for a total amount of $50,039.
  • President & CCO Jill L. Griffin acquired 4,290 shares, paying $11.63 per share for a total amount of $49,893. Ms. Griffin increased her stake by 3.43% to 129,290 shares with this purchase.
  • CFO – North America Dean Kaye acquired 2,582 shares, paying $11.56 per share for a total amount of $29,848. Mr. Kaye increased his stake by 11.80% to 24,457 shares with this purchase.

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

P/E: N/A Forward P/E: N/A Industry P/E: N/A
P/S: 1.19 Price/Book: N/A EV/EBITDA: 14.45
Market Cap: $3.77B Avg. Daily Volume: 706,079 52 Week Range: $7.89 – $13.92

5. Limoneira Company (LMNR): $17.34

Director Jose De Jesus Loza acquired 42,560 shares of this agribusiness company focused on citrus fruits, paying $16.88 per share for a total amount of $718,393. Mr. Loza increased his stake by 15.50% to 317,128 shares with this purchase.

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

P/E: N/A Forward P/E: 29.9 Industry P/E: N/A
P/S: 1.9 Price/Book: 1.73 EV/EBITDA: -73.95
Market Cap: $306.66M Avg. Daily Volume: 68,487 52 Week Range: $10.91 – $19.37

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

Notable Insider Sales:

1. L Brands, Inc. (LB): $61.6

Director Leslie H. Wexner sold 3,050,000 shares of this apparel chain for $58.31, generating $177.85 million from the sale. These shares were sold indirectly through a trust.

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

P/E: 20.53 Forward P/E: 13.22 Industry P/E: 37.00
P/S: 1.45 Price/Book: N/A EV/EBITDA: 9.5
Market Cap: $17.17B Avg. Daily Volume: 4,351,696 52 Week Range: $8.8 – $64.12

2. Ulta Beauty, Inc. (ULTA): $303

Director Charles Heilbronn sold 427,033 shares of this beauty retailer for $305.47, generating $130.45 million from the sale. These shares were sold indirectly by Mousseluxe SARL.

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

P/E: 97.43 Forward P/E: 25.48 Industry P/E: 37.00
P/S: 2.77 Price/Book: 8.53 EV/EBITDA: 25.53
Market Cap: $17.07B Avg. Daily Volume: 820,504 52 Week Range: $153.29 – $351

3. Facebook, Inc. (FB): $283.02

Shares of Facebook were sold by 2 insiders:

  • COB and CEO Mark Zuckerberg sold 281,250 shares for $289.24, generating $81.35 million from the sale. These shares were sold indirectly by various entities.
  • Chief Financial Officer David M. Wehner sold 678 shares for $289.99, generating $196,613 from the sale. These shares were sold indirectly by Mr. Wehner’s spouse.

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

P/E: 28.05 Forward P/E: 20.9 Industry P/E: 39.40
P/S: 9.38 Price/Book: 6.29 EV/EBITDA: 19.1
Market Cap: $805.95B Avg. Daily Volume: 20,527,298 52 Week Range: $150.83 – $304.67

4. Copart, Inc. (CPRT): $107.43

Chairman of the Board Willis J. Johnson sold 608,384 shares of this online auctions and vehicle remarketing services provider for $107.21, generating $65.23 million from the sale.

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

P/E: 36.4 Forward P/E: 30.01 Industry P/E: 128.97
P/S: 11.11 Price/Book: 8.63 EV/EBITDA: 24.54
Market Cap: $25.39B Avg. Daily Volume: 1,218,430 52 Week Range: $61.51 – $130.96

5. XPO Logistics, Inc. (XPO): $123.21

Chief Executive Officer Jacobs S. Bradley sold 195,093 shares of this supply chain solutions provider for $119.78, generating $23,368,142 from the sale. These shares were sold indirectly by Jacobs Private Equity, LLC

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

P/E: 157.96 Forward P/E: 19.78 Industry P/E: 46.04
P/S: 0.77 Price/Book: 4.64 EV/EBITDA: 15.26
Market Cap: $12.59B Avg. Daily Volume: 1,046,609 52 Week Range: $43.82 – $131.42

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: I hold long positions in Designer Brands (DBI), Twitter (TWTR), Twilio (TWLO), Zillow (Z) and Zoom (ZM). 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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