Market volatility remained elevated last week with big swings in both directions and the Nasdaq dragged down by single-day drops of 25% or more in stocks like PayPal (PYPL) and Meta Platforms (FB). It certainly did not feel like the S&P 500 closed up for the week given the carnage underneath the surface, especially in tech stocks. Expectations of a challenging market were one of the reasons we wrote about a company that acts as a market maker and benefits from volatility in December and the company is up more than 12% in our model portfolio despite the general market decline.
In my article titled “Positions For 2022: A Changing Of The Guard” at the start of the year, I wrote the following,
I think there are opportunities in certain sectors and heightened risks in others. I’m about 75% invested after scaling back on several positions and would be more comfortable at the 60% to 65% level at this stage of the market. The rest of the portfolio does not have to be in low yielding cash but can instead be in relatively safe merger arbitrage positions to generate yield and to provide ballast during rough seas.
I have been very tempted to start buying after this recent pullback but have been showing restraint. I did write cash secured put options on Doximity (DOCS) and have been considering starting a new position in AirBnB (ABNB) or adding to my position in Twitter (TWTR), which took another hit after the disappointment results from Meta Platforms. We wrote the following two weeks weeks ago in our Insider Weekends post discussing the RV manufacturer Thor Industries,
What we saw in the markets this week was particularly worrisome because the sell off was broad-based and even asset classes with low correlations between them appeared to be down. We are currently seeing mean reversion in full swing. As market participants who have invested through multiple cycles know, mean reversion often overshoots the mean. In other words, stocks can go from “strong buy” to “screaming buy” to “how can it get any cheaper” before they bottom. We haven’t yet approached the screaming buy phase yet as folks are already lining up to buy the dip, which has worked very well during the last decade.
I don’t think we see the quick rebound this time like we did after the COVID-19 related drop in early 2020. With monetary stimulus and quantitative easing out of the picture, all we have left now is fiscal stimulus in the form of the Build Back Better infrastructure plan, which still needs to win approval in the Senate.
Last week we saw an eclectic mix of insider purchases with a cluster of insider purchases at the utility NextEra Energy (NEE) and the cable company Charter Communication (CHTR) seeing its first insider purchase in over four years. Four different insiders including both the CEO and CFO of NextEra Energy acquired shares after a rare large drop in the stock that saw it dip below the $70 level. The drop in the stock was a result of Q4 2021 revenue of $5.05 billion coming in well below expectations of $5.79 billion and the sudden departure of its Chairman and CEO Jim Robo.
Mr. Robo has been with NextEra for 20 years and has served as its CEO since July 2012. He has been credited with transforming a sleepy electric utility into the clean energy juggernaut it is perceived as now. The company has been growing its dividend for 26 consecutive years and has an impressive 5 year dividend CAGR of 12%. The current yield is 2% with a 61% payout ratio. The company has been afforded a valuation premium compared to its peers and currently trades at a forward P/E of 27 and a forward EV/EBITDA of 16.49, not exactly the kind of valuation you would expect from a regulated utility in a rising interest rate environment. With $54 billion in net debt on the balance sheet and management changes on the horizon, I would approach NextEra with caution despite insider enthusiasm.
Another heavily indebted company that saw insider buying was Charter Communication, which saw its CEO purchase $1.63 million worth of stock. While we saw several insiders exercise options without selling them, which we view as a positive signal, this is the first open market insider purchase since October 2017. For a company with a market cap of $124 billion, Charter has an astounding $91 billion in net debt on its balance sheet. This accumulation of debt appears to be part of an intentional capital allocation strategy during a low interest rate environment with the company acquiring its larger rival Time Warner Cable in 2015 for $78.7 billion and the acquisition of Bright House Networks for $10.4 billion. The company has also been a notable cannibal having purchased over a third of its shares outstanding in the last four years as you can see below.
Charter Communications has been growing its revenue in the mid to high single digits but generating big gains in earnings year-over-year. The company current trades at a forward EV/EBITDA of 9.25 and a forward P/E of 20. In a bandwidth hungry world, Charter could remain a steady performer unless disrupted by something like SpaceX’s Starlink satellite internet system that is now available to consumers.
Welcome to edition 605 of Insider Weekends. Insider buying increased last week with insiders purchasing $176.12 million of stock compared to $140.34 million in the week prior. Selling also increased to $917.47 million compared to $301.25 million 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 5.21. In other words, insiders sold more than 5 times as much stock as they purchased. The Sell/Buy ratio this week was unfavorable compared to the prior week when the ratio stood at 2.15.
Notable Insider Buys:
1. Asana, Inc. (ASAN): $48.11
President, CEO, & Chair Dustin A. Moskovitz acquired 1,250,000 shares of this work management platform, paying $48.15 per share for a total amount of $60.19 million. Mr. Moskovitz increased his stake by 8.15% to 16,589,676 shares with this purchase.
You can view the list of recent insider transactions for Asana, Inc. here.
|P/E: N/A||Forward P/E: -49.09||Industry P/E: 56.34|
|P/S: 26.78||Price/Book: 36.2||EV/EBITDA: -38.07|
|Market Cap: $8.97B||Avg. Daily Volume: 4,112,880||52 Week Range: $25.41 – $145.79|
2. NextEra Energy, Inc. (NEE): $76.01
Shares of this regulated electric company were acquired by 4 insiders:
- Chairman, President & CEO James L. Robo acquired 64,691 shares, paying $77.26 per share for a total amount of $4.99 million. Mr. Robo increased his stake by 5.65% to 1,209,774 shares with this purchase.
- EVP, Finance & CFO Rebecca J. Kujawa acquired 7,000 shares, paying $71.83 per share for a total amount of $502,810. Ms. Kujawa increased her stake by 15.71% to 51,547 shares with this purchase.
- Director Sherry S. Barrat acquired 2,000 shares, paying $71.57 per share for a total amount of $143,150. Mr. Barrat increased his stake by 1.82% to 111,674 shares with this purchase.
- Director Amy B. Lane acquired 700 shares, paying $71.64 per share for a total amount of $50,148. Ms. Lane increased her stake by 1.90% to 37,555 shares with this purchase.
You can view the list of recent insider transactions for NextEra Energy, Inc. here.
|P/E: 41.99||Forward P/E: 25.17||Industry P/E: 22.11|
|P/S: 8.74||Price/Book: 4.09||EV/EBITDA: 29.22|
|Market Cap: $149.14B||Avg. Daily Volume: 9,221,832||52 Week Range: $68.33 – $93.73|
3. Taysha Gene Therapies, Inc. (TSHA): $7.94
Shares of this biotech company were acquired by 3 insiders:
- Director Paul B. Manning acquired 201,602 shares, paying $7.80 per share for a total amount of $1.57 million. Mr. Manning increased his stake by 10.67% to 2,091,704 shares with this purchase. These shares were purchased indirectly by BKB Growth Investments, LLC.
- Director Sukumar Nagendran acquired 10,000 shares, paying $8.01 per share for a total amount of $80,100. Mr. Nagendran increased his stake by 52.01% to 29,226 shares with this purchase.
- Director Phillip B. Donenberg acquired 3,000 shares, paying $7.78 per share for a total amount of $23,340. Mr. Donenberg increased his stake by inf% to 3,000 shares with this purchase.
You can view the list of recent insider transactions for Taysha Gene Therapies, Inc. here.
|P/E: N/A||Forward P/E: -1.58||Industry P/E: 142.83|
|P/S: N/A||Price/Book: 2.18||EV/EBITDA: -1.21|
|Market Cap: $305.48M||Avg. Daily Volume: 196,308||52 Week Range: $6.57 – $31.6|
4. Charter Communications, Inc. (CHTR): $608.92
Chief Operating Officer Christopher L. Winfrey acquired 2,750 shares of this cable services provider, paying $591.96 per share for a total amount of $1.63 million. Mr. Winfrey increased his stake by 5.91% to 49,256 shares with this purchase.
You can view the list of recent insider transactions for Charter Communications, Inc. here.
|P/E: 24.88||Forward P/E: 15.94||Industry P/E: 17.10|
|P/S: 2.04||Price/Book: 7.49||EV/EBITDA: 9.85|
|Market Cap: $105.19B||Avg. Daily Volume: 1,255,253||52 Week Range: $549.59 – $825.62|
5. Western Alliance Bancorporation (WAL): $97.91
Shares of this regional bank were acquired by 2 insiders:
- President and CEO Kenneth Vecchione acquired 5,600 shares, paying $97.88 per share for a total amount of $548,112. Mr. Vecchione increased his stake by 1.75% to 326,387 shares with this purchase.
- Vice Chairman and CFO Dale Gibbons acquired 5,000 shares, paying $99.68 per share for a total amount of $498,400. Mr. Gibbons increased his stake by 2.15% to 237,332 shares with this purchase.
You can view the list of recent insider transactions for Western Alliance Bancorporation here.
|P/E: 11.82||Forward P/E: 8.68||Industry P/E: 10.86|
|P/S: 5.78||Price/Book: 2.4||EV/EBITDA: N/A|
|Market Cap: $10.44B||Avg. Daily Volume: 835,524||52 Week Range: $73.89 – $124.93|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. Alphabet Inc. (GOOG): $2860.32
Shares of Alphabet were sold by 3 insiders:
- Director Lawrence Page sold 27,778 shares for $2923.44, generating $81.21 million from the sale.
- Chief Executive Officer Sundar Pichai sold 3,000 shares for $2992.62, generating $8.98 million from the sale.
- VP, Chief Accounting Officer Amie Thuener O’toole sold 42 shares for $2755.81, generating $115,744 from the sale.
You can view the list of recent insider transactions for Alphabet Inc. here.
|P/E: 25.49||Forward P/E: 21.25||Industry P/E: 24.60|
|P/S: 7.35||Price/Book: 7.53||EV/EBITDA: 19.52|
|Market Cap: $1.89T||Avg. Daily Volume: 1,345,480||52 Week Range: $2002.02 – $3042|
2. Ares Management Corporation (ARES): $79.39
Co-Founder, CEO and President Michael J. Arougheti sold 440,226 shares of this asset management company for $79.02, generating $34.79 million from the sale. 101,394 of these shares were sold indirectly by Atticus Enterprises LLC.
You can view the list of recent insider transactions for Ares Management Corporation here.
|P/E: 42.3||Forward P/E: 24.5||Industry P/E: 14.77|
|P/S: 3.82||Price/Book: 7.75||EV/EBITDA: 31.99|
|Market Cap: $13.58B||Avg. Daily Volume: 684,864||52 Week Range: $47.25 – $90.08|
3. The Charles Schwab Corporation (SCHW): $91.9
Shares of Charles Schwab were sold by 3 insiders:
- Chairman Charles R. Schwab sold 239,980 shares for $89.97, generating $21.59 million from the sale. These shares were sold indirectly by a trust.
- MD, EVP, and CFO Peter B. Crawford sold 6,000 shares for $89.38, generating $536,264 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
- MD, EVP, and General Counsel Peter J. Morgan III sold 2,239 shares for $87.14, generating $195,104 from the sale.
You can view the list of recent insider transactions for The Charles Schwab Corporation here.
|P/E: 32.47||Forward P/E: 18.95||Industry P/E: 14.77|
|P/S: 9.38||Price/Book: 3.66||EV/EBITDA: N/A|
|Market Cap: $173.75B||Avg. Daily Volume: 6,887,217||52 Week Range: $54.98 – $95.62|
4. Horizon Therapeutics Public Limited Company (HZNP): $92.55
Chairman, President and CEO Timothy P. Walbert sold 125,000 shares of this biotech company for $91.48, generating $11.43 million from the sale. 25,000 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 Horizon Therapeutics Public Limited Company here.
|P/E: 39.32||Forward P/E: 15.77||Industry P/E: 142.83|
|P/S: 7.1||Price/Book: 4.71||EV/EBITDA: 36.27|
|Market Cap: $20.99B||Avg. Daily Volume: 1,493,130||52 Week Range: $79.81 – $120.54|
5. Upstart Holdings, Inc. (UPST): $98.63
Shares of this cloud- based artificial intelligence (AI) lending platform were sold by 2 insiders:
- Chief Executive Officer Dave Girouard sold 91,665 shares for $109.37, generating $10.03 million from the sale. 8,332 of these shares were sold indirectly by various trusts.
- General Counsel Alison Nicoll sold 7,500 shares for $108.26, generating $811,972 from the sale.
You can view the list of recent insider transactions for Upstart Holdings, Inc. here.
|P/E: 99.73||Forward P/E: 42.33||Industry P/E: 8.29|
|P/S: 12.74||Price/Book: 11.18||EV/EBITDA: 77.61|
|Market Cap: $8.08B||Avg. Daily Volume: 6,073,880||52 Week Range: $42.511 – $401.49|
You can view the full list of sales from this Insider Sales page.
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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.