The semiconductor industry was a classic cyclical industry with demand driving pricing up and companies making capital investments to meet that demand. This would eventually lead to increased supply which exceeded demand and a big decline in prices combined with a drop in capital investments. In recent years, investors have argued that the traditional cyclical dynamics may no longer apply since demand appears to be constantly increasing as semiconductors find their way into more and more devices. Cross-border consolidation within the industry has often been blocked by regulators concerned about maintaining access to a critical resource within their country. Whether the industry returns to its cyclical roots remains to be seen but many of the semiconductor stocks that have appreciated significantly in the last couple of years appear to be now cooling off.
In this environment, it was interesting to see Bruce Evans spend $1.32 million to acquire 8,001 shares of semiconductor company Analog Devices (ADI) at an average price of $164.98 per share. Mr. Evans has been an independent Director on Analog Devices’ board since June 2015 and this is his second largest insider purchase of the company since he joined the Board of Directors. Mr. Evans is currently a Senior Advisor to Summit Partners, a venture capital firm with $42 billion in assets under managements that he has been involved with for 35 years. He is the Chairman of the Board of Trust at Vanderbilt University and has served on 35 boards including that of 14 public companies. When an independent board member that has been involved in the company for several years and has several decades of experience buys shares, I take note.
In the case of Analog Devices, Mr. Evans’ purchase of Analog Devices comes just weeks after the company’s massive $21 billion acquisition of fellow semiconductor company Maxim Integrated closed. The deal, which was announced in July 2020, took 402 days to complete because of regulatory reviews in the U.S., China, South Korea and the European Union. Both companies sported best in class gross margins and if deal synergies are realized, it will help the combined company improve its net margin over time.
The combined company is expected to generate $8.2 billion in revenue from over 125,000 customers and $2.7 billion in free cash flow. The stock hasn’t done much during the last six months but managed to eke out a small gain compared to peers like Micron (MU), NXP Semiconductors (NXPI) and Infineon Technologies (IFNNY), which have posted negative returns during the last six months. Texas Instruments (TXI) was essentially flat during the last six months, has comparable gross margins to ADI, better net margins and a higher dividend yield. ADI has best in class levered FCF margins of 31.66% and is expected to return $1 billion in FCF generated from the business to its investors through dividends and share buybacks. Even though the company has announced several buybacks over the years, shares outstanding haven’t changed much during the last three years. ADI’s current annual dividend of $2.76/share works out to a dividend yield of 1.64% and a payout ratio of just 43%. The dividend is likely to increase over time and if this semiconductor cycle continues its upward trend, I can see why Mr. Evans is buying stock on the open market.
Welcome to edition 588 of Insider Weekends. Insider buying increased last week with insiders purchasing $65.59 million of stock purchased compared to $43.05 million in the week prior. Selling on the other hand increased to $2.69 billion compared to $1.99 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 41.07. In other words, insiders sold over 41 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 46.11.
Notable Insider Buys:
1. Asana, Inc. (ASAN): $105.45
President, CEO, & Chair Dustin A. Moskovitz acquired 503,833 shares of this work management platform, paying $99.96 per share for a total amount of $50.37 million. Mr. Moskovitz increased his stake by 10.69% to 5,217,748 shares with this purchase.
You can view the list of recent insider transactions for Asana, Inc. here.
|P/E: N/A||Forward P/E: -107.6||Industry P/E: 61.60|
|P/S: 66.09||Price/Book: 69.38||EV/EBITDA: -87.91|
|Market Cap: $19.39B||Avg. Daily Volume: 2,280,270||52 Week Range: $20.57 – $124.85|
2. Designer Brands Inc. (DBI): $13.72
Executive Chairman Jay L. Schottenstein acquired 197,070 shares of this shoe retailer, paying $13.99 per share for a total amount of $2.76 million. These shares were purchased indirectly by Jubilee Limited Partnership.
This appears to be a week of repeat purchases as we have seen insider purchases at both Asana and Designer Brands in recent weeks. We wrote about Mr. Schottenstein’s purchase of DBI two weeks ago in an article titled Designer Brands Sees Significant Insider Buying after he purchased $19 million worth of stock.
You can view the list of recent insider transactions for Designer Brands Inc. here.
|P/E: N/A||Forward P/E: 10.09||Industry P/E: 19.82|
|P/S: 0.36||Price/Book: 3.22||EV/EBITDA: 40.09|
|Market Cap: $1B||Avg. Daily Volume: 1,384,481||52 Week Range: $4.31 – $20.48|
3. Analog Devices, Inc. (ADI): $168.62
Director Bruce R. Evans acquired 8,001 shares of this semiconductor company, paying $164.98 per share for a total amount of $1.32 million. Mr. Evans increased his stake by 8.66% to 100,358 shares with this purchase.
You can view the list of recent insider transactions for Analog Devices, Inc. here.
|P/E: 36.9||Forward P/E: 23.1||Industry P/E: 29.69|
|P/S: 13.93||Price/Book: 5.06||EV/EBITDA: 22.52|
|Market Cap: $90.62B||Avg. Daily Volume: 4,587,576||52 Week Range: $115.64 – $178.84|
4. MaxLinear, Inc. (MXL): $48.66
Chief Financial Officer and Chief Corporate Strategy Officer Steven G. Litchfield acquired 10,414 shares of this semiconductors company, paying $47.99 per share for a total amount of $499,730. Mr. Litchfield increased his stake by 9.10% to 124,801 shares with this purchase.
You can view the list of recent insider transactions for MaxLinear, Inc. here.
|P/E: N/A||Forward P/E: 18.09||Industry P/E: 29.69|
|P/S: 4.86||Price/Book: 8.58||EV/EBITDA: 44.51|
|Market Cap: $3.72B||Avg. Daily Volume: 453,875||52 Week Range: $23.42 – $55|
5. Ault Global Holdings, Inc. (DPW): $2.29
Executive Chairman Milton C. Ault III acquired 150,000 shares of this power system solutions manufacturer, paying $2.49 per share for a total amount of $373,845. These shares were purchased indirectly by Ault Alpha LP.
You can view the list of recent insider transactions for Ault Global Holdings, Inc. here.
|P/E: 3.71||Forward P/E: N/A||Industry P/E: 44.66|
|P/S: 1.54||Price/Book: 0.56||EV/EBITDA: 0.19|
|Market Cap: $135.7M||Avg. Daily Volume: 3,313,207||52 Week Range: $1.44 – $10.94|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. Facebook, Inc. (FB): $330.05
Shares of Facebook were sold by 2 insiders:
- COB and CEO Mark Zuckerberg sold 368,504 shares for $335.28, generating $123.55 million from the sale.
- Chief Legal Officer Jennifer Newstead sold 125 shares for $328.69, generating $41,086 from the sale.
You can view the list of recent insider transactions for Facebook, Inc. here.
|P/E: 24.51||Forward P/E: 20.46||Industry P/E: 29.97|
|P/S: 8.88||Price/Book: 6.75||EV/EBITDA: 16.88|
|Market Cap: $930.56B||Avg. Daily Volume: 15,272,530||52 Week Range: $244.61 – $384.33|
2. Alphabet Inc. (GOOG): $2801.12
Shares of Alphabet were sold by 3 insiders:
- Chief Executive Officer Sundar Pichai sold 3,000 shares for $2709.30, generating $8.13 million from the sale.
- Senior Vice President Prabhakar Raghavan sold 2,475 shares for $2712.93, generating $6.71 million from the sale.
- Director John L. Hennessy sold 200 shares for $2795.32, generating $559,063 from the sale. These shares were sold indirectly through a trust.
You can view the list of recent insider transactions for Alphabet Inc. here.
|P/E: 30.39||Forward P/E: 26.47||Industry P/E: 29.97|
|P/S: 8.48||Price/Book: 7.87||EV/EBITDA: 23.29|
|Market Cap: $1.87T||Avg. Daily Volume: 1,060,863||52 Week Range: $1514.62 – $2936.41|
3. HubSpot, Inc. (HUBS): $679.87
Shares of this cloud-based customer relationship management (CRM) platform were sold by 2 insiders:
- Chief Technology Officer Dharmesh Shah sold 20,000 shares for $658.23, generating $13.16 million from the sale.
- Chief Financial Officer Kathryn Bueker sold 600 shares for $640.00, generating $384,000 from the sale.
You can view the list of recent insider transactions for HubSpot, Inc. here.
|P/E: N/A||Forward P/E: 276.37||Industry P/E: 61.60|
|P/S: 29.79||Price/Book: 39.54||EV/EBITDA: -961.85|
|Market Cap: $31.96B||Avg. Daily Volume: 428,824||52 Week Range: $283.87 – $736.15|
4. Morningstar, Inc. (MORN): $272.97
Executive Chairman Joseph D. Mansueto sold 41,784 shares of this independent investment research services provider for $264.41, generating $11.05 million from the sale.
You can view the list of recent insider transactions for Morningstar, Inc. here.
|P/E: 49.29||Forward P/E: 96.12||Industry P/E: 15.81|
|P/S: 7.61||Price/Book: 8.71||EV/EBITDA: 31.18|
|Market Cap: $11.76B||Avg. Daily Volume: 81,504||52 Week Range: $176.75 – $288.54|
5. Medallia, Inc. (MDLA): $33.91
Director Borge Hald sold 312,000 shares of this enterprise Software-as-a-Service platform for $33.87, generating $10.57 million from the sale. These shares were sold indirectly by Mr. Hald’s spouse.
You can view the list of recent insider transactions for Medallia, Inc. here.
|P/E: N/A||Forward P/E: 1695.5||Industry P/E: 61.60|
|P/S: 10.41||Price/Book: 15.27||EV/EBITDA: -46.3|
|Market Cap: $5.46B||Avg. Daily Volume: 3,321,058||52 Week Range: $23.58 – $48.28|
You can view the full list of sales from this Insider Sales page.
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