Insider Weekends: A Week Of Repeats With Purchases Of Vertex And B. Riley

Welcome to edition 579 of Insider Weekends. Insider buying increased significantly last week with insiders purchasing $247.78 million of stock purchased compared to $60.2 million in the week prior. Selling also increased significantly to $3.85 billion compared to $1.49 billion in the week prior.

Coming off an earnings related quiet period, we were expecting a rebound in insider transactions but this pace of buying was surprising. Several companies where we have seen insider buying in the past, saw insiders buy again last week. Vertex Pharmaceuticals (VRTX) and American Assets Trust (AAT) both made the top 5 list last week and we also saw insider buying by the CEO of B. Riley Financial (RILY) but the size of his purchases were not large enough to make our list. Two of these three stocks have done very well since insiders starting buying.

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 14.07 In other words, insiders sold more than 14 times as much stock as they purchased. The Sell/Buy ratio this week was favorable compared to the prior week when the ratio stood at 24.79.

Insider Sector Heat Map Aug 6, 2021

Insider Sector Heat Map Aug 6, 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. Sun Communities, Inc. (SUI): $196.26

Chairman & CEO Gary A. Shiffman acquired 234,934 shares of this residential REIT, paying $194.20 per share for a total amount of $45.62 million. Mr. Shiffman increased his stake by 29.03% to 1,044,184 shares with this purchase.

Sun Communities owns and operates over 300 manufactured home communities and RV resorts. The company both rents and sells single family homes in its communities. Mr. Shiffman has been a director and executive at the company since its inception in 1993. In the 11 years that we have been tracking insider transactions, we have not seen an open market purchase by Mr. Shiffman. In fact, he was a seller of the stock as recently as this May as you can see here.

In addition to this purchase, he also received 48,000 shares through a distribution from a grantor retained annuity trust and required 47,640 shares from the same trust by substituting assets of equal value. He also gifted 44,000 shares to irrevocable trusts for the benefit of his spouse, children and grandchildren.

At the mid-point of its FY2021 FFO guidance of $6.25 to $6.37 a share, the stock trades at over 31 times FFO and sports a forward yield of just 1.69%.

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

P/E: 92.88 Forward P/E: 82.46 Industry P/E: 62.16
P/S: 12.56 Price/Book: 3.47 EV/EBITDA: 33.37
Market Cap: $22.75B Avg. Daily Volume: 470,315 52 Week Range: $135.01 – $199.11

2. Colfax Corporation (CFX): $48.05

Director Mitchell P. Rales acquired 250,200 shares of this diversified technology company, paying $46.19 per share for a total amount of $11,56 million. Mr. Rales increased his stake by 27.20% to 1,170,201 shares with this purchase. 200 of these shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for Colfax Corporation here.

P/E: 73.14 Forward P/E: 19.53 Industry P/E: 26.27
P/S: 2.04 Price/Book: 1.59 EV/EBITDA: 15.56
Market Cap: $7.15B Avg. Daily Volume: 1,334,817 52 Week Range: $26.45 – $50.26

3. Vertex Pharmaceuticals Incorporated (VRTX): $200.67

Director Bruce I. Sachs acquired 15,000 shares of this biotech company, paying $197.91 per share for a total amount of $2.97 million. Mr. Sachs increased his stake by 57.23% to 41,210 shares with this purchase.

Vertex Pharmaceuticals caught my attention after Mr. Sachs’ first insider purchase in November 2020 when he purchased $3.26 million worth of stock. The company was the subject of our December 2020 Special Situations Newsletter where we wrote the following about his purchase,

Bruce I. Sachs, the lead independent director of the company’s Board since 1998 purchased 15,000 shares for $3,260,465 at an average price of $217.36.

Mr. Sachs joined the Board of Vertex in 1998 and is the Board’s lead independent director. From 1993 to 1998, Mr. Sachs has held executive positions in Xylogics, Inc., Bay Networks, Inc., and Stratus Computer, Inc.

He is a General Partner at Charles River Ventures, a venture capital firm he joined in 1999. CRV was founded in 1970 to commercialize research that came out of MIT. It has total assets of over $4 billion. Apart from Vertex Pharmaceuticals, Bruce Sachs holds 11 other board and advisor roles including Member of the Board of Directors at iControl Networks, and Member of the Board of Directors at Watercove Networks.

The insider purchase by an independent director of the company who has served on the board for well over 20 years is a strong positive signal. In many ways Vertex reminds me of Gilead Sciences, a company that benefited from its HIV drugs for a number of years and then enhanced its pipeline through acquisitions. The key difference with Vertex appears to be that its CF franchise is still growing rapidly while Gilead’s growth from both its HIV and Hep C drugs has moderated significantly.

The stock has unfortunately not done well since Mr. Sachs purchase as concerns about its pipeline beyond its Cystic Fibrosis (CF) franchise have dogged the stock. I wrote the following about the company in our last monthly newsletter,

Vertex Pharmaceuticals perked up a little after reporting Q2 revenue increased 18% year-over-year to $1.8 billion on account of sales of its cystic fibrosis
drug KAFTRIO in Europe and the continued strong performance of TRIKAFTA in the U.S. The company also raised its full-year 2021 guidance to $7.2 to $7.4 billion from its previous guidance of $6.7 to $6.9 billion in revenue. The key question for Vertex is the strength of its pipeline outside its cystic fibrosis franchise. The company currently has four drugs in phase 2 development for kidney disease, pain, sickle cell disease and beta thalassemia.

Despite the recent performance of the stock, I remain optimistic about the company long-term and have the stock in both our model portfolio as well as my personal portfolio.

You can view the list of recent insider transactions for Vertex Pharmaceuticals Incorporated here.

P/E: 26.46 Forward P/E: 16.18 Industry P/E: N/A
P/S: 7.79 Price/Book: 5.65 EV/EBITDA: 19.4
Market Cap: $52.06B Avg. Daily Volume: 2,284,990 52 Week Range: $185.33 – $283.45

4. American Assets Trust, Inc. (AAT): $37.93

Chairman & CEO Ernest S. Rady acquired 49,563 shares of this diversified REIT, paying $37.10 per share for a total amount of $1.84 million. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for American Assets Trust, Inc. here.

P/E: 125.18 Forward P/E: 44.62 Industry P/E: 62.16
P/S: 6.77 Price/Book: 1.83 EV/EBITDA: 18.79
Market Cap: $2.29B Avg. Daily Volume: 320,304 52 Week Range: $20.73 – $38.98

5. Kemper Corporation (KMPR): $65.75

Director Stuart B. Parker acquired 25,000 shares of this diversified insurance holding company, paying $61.62 per share for a total amount of $1.54 million. Mr. Parker increased his stake by 927.99% to 27,694 shares with this purchase.

You can view the list of recent insider transactions for Kemper Corporation here.

P/E: 15.57 Forward P/E: 9.89 Industry P/E: 10.77
P/S: 0.75 Price/Book: 0.97 EV/EBITDA: 7.58
Market Cap: $4.18B Avg. Daily Volume: 274,118 52 Week Range: $60 – $85.7

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

Notable Insider Sales:

1. Facebook, Inc. (FB): $363.51

Shares of Facebook were sold by 2 insiders:

  • COB and CEO Mark Zuckerberg sold 386,500 shares for $355.39, generating $137.34 million from the sale. These shares were sold indirectly by various entities.
  • VP and General Counsel Jennifer Newstead sold 250 shares for $352.85, generating $88,213 from the sale.

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

P/E: 26.99 Forward P/E: 23.88 Industry P/E: 30.15
P/S: 9.78 Price/Book: 7.43 EV/EBITDA: 18.69
Market Cap: $1.02T Avg. Daily Volume: 15,862,832 52 Week Range: $244.13 – $377.55

2. Alphabet Inc. (GOOG): $2740.72

Shares of Alphabet were sold by 4 insiders:

  • Director Lawrence Page sold 27,776 shares for $2726.73, generating $75.74 million from the sale.
  • Chief Executive Officer Sundar Pichai sold 3,000 shares for $2717.87, generating $8.15 million from the sale.
  • VP, Chief Accounting Officer Amie Thuener O’toole sold 48 shares for $2720.00, generating $130,560 from the sale.
  • Director Ann Mather sold 18 shares for $2709.69, generating $48,774 from the sale.

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

P/E: 29.73 Forward P/E: 28.87 Industry P/E: N/A
P/S: 8.26 Price/Book: 7.7 EV/EBITDA: 22.76
Market Cap: $1.82T Avg. Daily Volume: 1,159,648 52 Week Range: $1406.55 – $2800.22

3. Align Technology, Inc. (ALGN): $693.67

Shares of the company that is known for its Invisalign product were sold by 8 insiders:

  • President and CEO Joseph M. Hogan sold 66,667 shares for $699.54, generating $46.64 million from the sale.
  • SVP Global HR Stuart A. Hockridge sold 9,286 shares for $703.66, generating $6.53 million from the sale. These shares were sold indirectly through a trust.
  • SVP, Global Operations Emory Wright sold 6,404 shares for $706.58, generating $4.52 million from the sale. These shares were sold indirectly through a trust.
  • Director Warren S. Thaler sold 5,000 shares for $701.90, generating $3.51 million from the sale.
  • Director George J. Morrow sold 5,000 shares for $707.34, generating $3.54 million from the sale. These shares were sold indirectly through a trust.
  • Director Raymond C. Larkin sold 2,500 shares for $675.00, generating $1.69 million from the sale.
  • Director Greg J. Santora sold 2,500 shares for $701.34, generating $1.75 million from the sale. These shares were sold indirectly through a trust.
  • SVP, Chief Legal & Regulatory Julie Ann Coletti sold 782 shares for $710.00, generating $555,220 from the sale.

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

P/E: 79.07 Forward P/E: 54.62 Industry P/E: 53.61
P/S: 15.8 Price/Book: 16.18 EV/EBITDA: 54.62
Market Cap: $54.89B Avg. Daily Volume: 597,642 52 Week Range: $289.52 – $714.15

4. Snap Inc. (SNAP): $75.98

Shares of this social media company were sold by 2 insiders:

  • Chief Executive Officer Evan Spiegel sold 647,570 shares for $75.02, generating $48.58 million from the sale.
  • General Counsel Michael J. O’Sullivan sold 6,000 shares for $74.93, generating $449,579 from the sale. These shares were sold indirectly through a trust.

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

P/E: N/A Forward P/E: 113.4 Industry P/E: 30.15
P/S: 35.95 Price/Book: 41.2 EV/EBITDA: -182.09
Market Cap: $120.13B Avg. Daily Volume: 18,026,110 52 Week Range: $20.68 – $79.18

5. Thermo Fisher Scientific Inc. (TMO): $538.2

Shares of this diagnostics & research company were sold by 3 insiders:

  • Chairman & CEO Marc N. Casper sold 40,000 shares for $537.54, generating $21.5 million from the sale.
  • Executive Vice President & COO Mark Stevenson sold 26,925 shares for $535.38, generating $14.42 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Director Jim P. Manzi sold 572 shares for $536.54, generating $306,899 from the sale.

You can view the list of recent insider transactions for Thermo Fisher Scientific Inc. here.

P/E: 24.93 Forward P/E: 27.2 Industry P/E: 37.55
P/S: 5.53 Price/Book: 5.74 EV/EBITDA: 16.84
Market Cap: $211.53B Avg. Daily Volume: 1,571,960 52 Week Range: $401.07 – $544.36

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 Vertex Pharmaceuticals (VRTX), B. Riley (RILY) and Gilead Sciences (GILD). 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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