Welcome to edition 570 of Insider Weekends. This Memorial Day weekend, as we remember those that served and lost their lives, we are still at war with an invisible enemy that has devastated several lives, livelihoods and families. While the U.S. and many other countries have turned a corner, there are several other countries like Japan, India, Malaysia and Brazil that are still in the throes of battle. When I wrote the following on February 9, 2020, little did I imagine that this virus would still be with us.
With the novel coronavirus risk continuing to unfold, I am surprised insider were not selling even more. Beyond the direct impact to the second largest economy in the world, we are now starting to see second order effects due to the impact on the global supply-chain. It was not surprising to hear that a large number of car manufacturers had extended factory closures in China but the second order effects became evident when Hyundai suspended car production in South Korea due to a shortage of parts.
For those that were invested during the SARS pandemic and the Ebola epidemic, it may seem like we will get through this one relative unscathed just like we did the last ones but it is probably a good idea to take risk down a notch or buy some protection in case the infection continues to spread across the globe.
Insider selling ticked up a little that month but did not provide a strong sell signal. Insider buying however provided a strong buy signal in March 2020 very close to the market bottom as we discussed here and a week later in an article titled Insider Buying Once Again Surpasses Insider Selling. Buying protection early last year and then switching to the long side to avoid fighting the Fed made a huge difference last year. I have been buying protection again the last several weeks due to heightened insider selling and more importantly lackluster insider buying as Jesse Felder detailed in his article Insiders Are Sending A Pretty Clear Signal About The Stock Market (And The Economy) last month.
Insider buying increased last week with insiders purchasing $78.75 million of stock purchased compared to $42.36 million in the week prior. Selling decreased to $1.63 billion compared to $1.65 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 20.75. In other words, insiders sold almost 21 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week when the ratio stood at 38.87.
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. PennyMac Financial Services, Inc. (PFSI): $62.61
Director Farhad Nanji acquired 200,712 shares of this mortgage finance company, paying $62.42 per share for a total amount of $12.53 million. These shares were purchased indirectly by MFN Partners, LP.
I spent even more time this weekend looking at PennyMac Financial Services to see if it could be a candidate for the spotlight idea for our June 2021 Premium Newsletter but couldn’t get excited about the company at this juncture. Clearly Mr. Nanji knows more than I do because his purchases have put PennyMac on our list for a third week in a row. We wrote the following about his purchases and the company last week,
PennyMac remains on the top of our list for a second week in a row and this is the third time in two months we have written about Mr. Nanji’s purchases of this mortgage company. Since early March, he indirectly purchased 2.6 million shares of the company for $158.64 million. His average purchase price was $60.99.
What is interesting is that he has not always been a buyer of the stock. He made a 12,460 share direct purchase for $20.20 way back in 2013 and did not buy shares directly or indirectly until this March. He was actually a seller last June and August. The stock has nearly doubled in the last year thanks to the tailwinds of favorable housing conditions and attractive mortgage rates. While other mortgage companies like Rocket Companies (RKT) and Federal National Mortgage Association (FNMA) have seen their stock decline in the last month, PennyMac bucked the trend and continues to show positive momentum.
The company is also buying back its own stock and repurchased 4.7 million shares in Q1 2021 and an additional 270,000 shares last month. This level of insider buying and buybacks by the company is perplexing considering the industry is at a cyclical peak and the company saw declines in production, servicing and investment management revenue in Q1 2021 on a sequential quarter basis compared to Q4 2020.
You can view the list of recent insider transactions for PennyMac Financial Services, Inc. here.
|P/E: 2.79||Forward P/E: 5.8||Industry P/E: 10.76|
|P/S: 1||Price/Book: 1.21||EV/EBITDA: N/A|
|Market Cap: $4.18B||Avg. Daily Volume: 843,903||52 Week Range: $33.15 – $70.99|
2. Morphic Holding, Inc. (MORF): $49.36
Director Timothy A. Springer acquired 130,000 shares of this biotech company, paying $46.28 per share for a total amount of $6.02 million. These shares were purchased indirectly by TAS Partners LLC.
You can view the list of recent insider transactions for Morphic Holding, Inc. here.
|P/E: N/A||Forward P/E: -20.83||Industry P/E: N/A|
|P/S: 41.95||Price/Book: 4.83||EV/EBITDA: -27|
|Market Cap: $1.79B||Avg. Daily Volume: 447,873||52 Week Range: $19.14 – $93|
3. Bumble Inc. (BMBL): $47.72
Director Amy Griffin acquired 117,500 shares of this online dating and social networking platform, paying $42.81 per share for a total amount of $5.03 million. These shares were purchased indirectly by Ms. Griffin’s spouse.
It is interesting to see a third insider of Bumble purchase shares and this time at a price below where it went public. We wrote the following about the first two insiders who purchased shares in February,
Ms. Herd was an executive at Tinder, which she joined in 2012 when it was still being incubated inside IAC. She left Tinder in 2014 and founded Bumble. Tinder is now a part of Match Group (MTCH), which includes numerous dating related properties including Match, OkCupid, PlentyOfFish, etc.
The meteoric rise of Match Group over the last year and especially after its complete spin-off from IAC generated a lot of interest in Bumble during its IPO. After revising its IPO price upwards, the stock debuted at $43 on February 11th and hit an intraday high of $79.60 before settling down to close at $70.55. The company consists of the Bumble dating app with 12.3 million monthly active users (MAU) and a dating focused social networking platform called Badoo with 24.3 million MAU. Bumble has a “first mover advantage”, where it quite literally allows women on the platform to make the first move to contact a potential date.
Most of the growth is currently coming from the Bumble app which saw paid users grow 49% in 2019 and 30% in the first nine months of 2020. Including the slower growing Badoo, brought down the overall growth rate for 202o to 19%. I was quite surprised by the performance of Match Group during this pandemic when people tended to stay away from family and friends, let alone strangers. While Match Group did not reveal its year-to-date subscriber growth numbers when reporting Q3 results, they grew revenue 18% to $640 million and net income by 14% to $200 million in Q3 2020. Revenue for the nine months ended September 30, 2020 was $1.74 billion for Match Group (16% growth YoY) and $417 million for Bumble.
The big drop in growth stocks over the last few weeks saw Bumble dip below its IPO price of $43 and Ms. Griffin made an opportunistic purchase. The company expects to grow revenue 27% this year to a range of $724 to $734 million. At the midpoint of that range, the company is trading at 10 times sales compared to 14 times sales for The Match Group (MTCH).
You can view the list of recent insider transactions for Bumble Inc. here.
|P/E: N/A||Forward P/E: N/A||Industry P/E: 33.34|
|P/S: 13.9||Price/Book: N/A||EV/EBITDA: 68.95|
|Market Cap: $8.81B||Avg. Daily Volume: 2,035,684||52 Week Range: $38.91 – $84.8|
4. Clene Inc. (CLNN): $11.4
Shares of this biotech company were acquired by 2 insiders:
- Director David J. Matlin acquired 207,684 shares, paying $9.63 per share for a total amount of $1.99 million. Mr. Matlin increased his stake by 17.73% to 1,378,897 shares with this purchase.
- Director Alison Mosca acquired 51,921 shares, paying $9.63 per share for a total amount of $499,999.
You can view the list of recent insider transactions for Clene Inc. here.
|P/E: N/A||Forward P/E: N/A||Industry P/E: N/A|
|P/S: 1977.36||Price/Book: N/A||EV/EBITDA: -21.83|
|Market Cap: $690.1M||Avg. Daily Volume: 136,400||52 Week Range: $6.23 – $17.5|
5. Forum Energy Technologies, Inc. (FET): $25.54
Director John A. Carrig acquired 50,000 shares of this oil & gas equipment & services company, paying $22.28 per share for a total amount of $1.11 million.
You can view the list of recent insider transactions for Forum Energy Technologies, Inc. here.
|P/E: N/A||Forward P/E: -8.93||Industry P/E: N/A|
|P/S: 0.32||Price/Book: 0.38||EV/EBITDA: -2.67|
|Market Cap: $143.03M||Avg. Daily Volume: 65,328||52 Week Range: $5.6 – $26.79|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. Walmart Inc. (WMT): $142.03
Director Robson S. Walton sold 4,292,871 shares of Walmart for $142.25, generating $610.65 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: 32.88||Forward P/E: 22.65||Industry P/E: 30.14|
|P/S: 0.71||Price/Book: 5.1||EV/EBITDA: 11.22|
|Market Cap: $399.6B||Avg. Daily Volume: 8,941,992||52 Week Range: $117.01 – $153.66|
2. Facebook, Inc. (FB): $328.73
Shares of Facebook were sold by 2 insiders:
- COB and CEO Mark Zuckerberg sold 105,400 shares for $317.59, generating $33.47 million from the sale. These shares were sold indirectly by various entities.
- VP and General Counsel Jennifer Newstead sold 314 shares for $327.00, generating $102,678 from the sale.
You can view the list of recent insider transactions for Facebook, Inc. here.
|P/E: 28.17||Forward P/E: 21.64||Industry P/E: 33.34|
|P/S: 9.87||Price/Book: 6.99||EV/EBITDA: 19.39|
|Market Cap: $932.1B||Avg. Daily Volume: 19,875,400||52 Week Range: $207.11 – $333.78|
3. Squarespace, Inc. (SQSP): $52.63
Shares of this software company were sold by 3 insiders:
- Chief Executive Officer Anthony Casalena sold 259,898 shares for $53.00, generating $13.77 million from the sale. These shares were sold indirectly by a trust.
- Director Jonathan D. Klein sold 25,000 shares for $54.50, generating $1.36 million from the sale.
- General Counsel and Secretary Courtenay O’Connor sold 8,912 shares for $54.82, generating $488,556 from the sale.
You can view the list of recent insider transactions for Squarespace, Inc. here.
|P/E: N/A||Forward P/E: N/A||Industry P/E: N/A|
|P/S: 10.79||Price/Book: N/A||EV/EBITDA: 31.56|
|Market Cap: $7.16B||Avg. Daily Volume: 1,901,187||52 Week Range: $42.82 – $55.88|
4. Sun Communities, Inc. (SUI): $167.42
Chairman & CEO Gary A. Shiffman sold 73,000 shares of this residential REIT for $167.90, generating $12.26 million from the sale.
You can view the list of recent insider transactions for Sun Communities, Inc. here.
|P/E: 99.18||Forward P/E: 70.05||Industry P/E: 87.34|
|P/S: 12.37||Price/Book: 3.12||EV/EBITDA: 33.22|
|Market Cap: $18.72B||Avg. Daily Volume: 602,804||52 Week Range: $132.65 – $169.67|
5. XPEL, Inc. (XPEL): $82
Shares of this automotive products manufacturer were sold by 2 insiders:
- Director Mark Adams sold 101,726 shares for $81.77, generating $8.32 million from the sale.
- Senior Vice President/CFO Barry Wood sold 5,000 shares for $84.39, generating $421,950 from the sale.
You can view the list of recent insider transactions for XPEL, Inc. here.
|P/E: 202.97||Forward P/E: 167.35||Industry P/E: N/A|
|P/S: 12.41||Price/Book: 74.89||EV/EBITDA: 70.46|
|Market Cap: $2.26B||Avg. Daily Volume: 217,940||52 Week Range: $14.06 – $89.51|
You can view the full list of sales from this Insider Sales page.
Disclaimer: I hold a long position in Rocket Companies (RKT). 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.