Insider selling is usually not a strong signal because insiders sell for a variety of reasons including the need to diversify their investments, to fund a large purchase, paying for a child’s education, etc. This has been confirmed by academic research over several decades and aligns with what I have seen during the last 12 years of tracking insider transactions every week. The only times I pay attention to insider selling is when insiders as a group are selling significantly more than usual as we outlined in the article Insider Weekends: The Pied Piper Is Heading Out Of Town last November and when insiders are selling despite a big recent decline in the stock.
The selling by Airbnb (ABNB) insiders despite the recent pullback in the stock caught my eye. Co-founder Joe Gebbia has been selling shares consistently over the last several months but he significantly increased his selling last week as outlined below. Airbnb has been near the top of my watchlist of 40 “broken growth” stocks and while I have started nibbling slowly, valuations still remain stretched especially in light of recent geopolitical events. We wrote the following in late January 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.
The only reason I am nibbling and scaling into positions slowly is because almost no one can call a top or bottom with any consistency. I made the mistake of staying bearish for too long after the Great Recession in 2008-2009 and missed some generational buying opportunities. Thankfully I did not repeat that mistake coming out of March 2020, but this certainly feels like a market more like the one we saw after the dot-com bubble burst and not like the quick pullback and rebound during the pandemic.
I discussed Airbnb in an article titled Airbnb: Worth More Than Marriott, Hilton And Hyatt Combined last November and wrote the following,
Revenue growth year-over-year at Airbnb was a stunning 46.70% as remote work allowed folks to live out their travel dreams in far flung locales where they could rent out Airbnb’sfor several weeks or months.
Airbnb has benefited from organic growth from macroeconomic tailwinds as well as through several tuck-in acquisitions. All good things must come to an end and the forward growth rate for Airbnb is expected to moderate to about 15%. This is still well above all its competitors, which, with the exception of Booking Holdings, are expected to see revenue decline by low single digits.
Considering Airbnb’s growth rate, margins and a strong balance sheet, one would expect it to trade at a significant premium to the group. Interestingly the stock is marginally cheaper than both Marriott and Hilton with an EV/sales ratio of 22.55.
If the company grows revenue just 10% in 2022 to $6.5 billion and generates EBITDA of $3 billion, the company is trading at a 2022 EV/EBITA of 40.
With the recent pullback in the stock, Airbnb now trades at a trailing EV/sales of 14.11 and a forward EV/sales of 10.66. Paying 11 times 2022 sales for an asset-light company with very high gross margins and double digit revenue growth is not unusual, especially considering McDonald’s (MCD) trades at a forward EV/sales of 9. However I would like to see insiders slow down their sales or exercise options without immediately selling them, as a signal that the insiders are starting to find the stock attractive.
Beyond Airbnb, the other noteworthy insider transactions last week were was the cluster buying of B. Riley (RILY) by its founder Bryant Riley and a group of five other insiders as well as the cluster purchase of the specialty insurance and reinsurance company James River Group (JRVR) by four insiders. James River Group trades for a little over 1.5 times tangible book value, the lowest it has traded on that metric in the last five years. The stock is also just below its December 2014 IPO price of $21 per share.
Welcome to edition 609 of Insider Weekends. Insider buying decreased last week with insiders purchasing $133.06 million of stock compared to $154.36 million in the week prior. Selling more than doubled to $1.97 billion compared to $815.51 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 14.82. In other words, insiders sold almost 15 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 5.28.
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Notable Insider Buys:
1. Asana, Inc. (ASAN): $45.44
President, CEO, & Chair Dustin A. Moskovitz acquired 750,000 shares of this work management platform, paying $50.51 per share for a total amount of $37.88 million. Mr. Moskovitz increased his stake by 3.93% to 19,839,676 shares with this purchase.
You can view the list of recent insider transactions for Asana, Inc. here.
|P/E: N/A||Forward P/E: -46.37||Industry P/E: 52.59|
|P/S: 26||Price/Book: 34.19||EV/EBITDA: -40.25|
|Market Cap: $8.71B||Avg. Daily Volume: 4,468,714||52 Week Range: $25.41 – $145.79|
2. B. Riley Financial, Inc. (RILY): $64.33
Shares of B. Riley Financial were acquired by 6 insiders:
You can view the list of recent insider transactions for B. Riley Financial, Inc. here.
|P/E: 4.26||Forward P/E: N/A||Industry P/E: 13.53|
|P/S: 1.12||Price/Book: 2.68||EV/EBITDA: N/A|
|Market Cap: $1.79B||Avg. Daily Volume: 275,377||52 Week Range: $51.79 – $91.24|
3. OPKO Health, Inc. (OPK): $3.06
CEO & Chairman Phillip Frost M.D. acquired 850,000 shares of this medical devices and drug development company, paying $3.09 per share for a total amount of $2.63 million. These shares were purchased indirectly by Frost Gamma Investments Trust.
You can view the list of recent insider transactions for OPKO Health, Inc. here.
|P/E: N/A||Forward P/E: -306||Industry P/E: 87.64|
|P/S: 1.17||Price/Book: 1.18||EV/EBITDA: 31.57|
|Market Cap: $2.09B||Avg. Daily Volume: 5,615,183||52 Week Range: $2.79 – $5.25|
4. AbCellera Biologics Inc. (ABCL): $8.53
Shares of this biotech company were acquired by 2 insiders:
You can view the list of recent insider transactions for AbCellera Biologics Inc. here.
|P/E: 17.77||Forward P/E: 34.12||Industry P/E: 32.12|
|P/S: 6.44||Price/Book: 2.36||EV/EBITDA: 8.61|
|Market Cap: $2.42B||Avg. Daily Volume: 2,211,255||52 Week Range: $7.42 – $39.19|
5. James River Group Holdings, Ltd. (JRVR): $20.74
Shares of this specialty insurance and reinsurance services provider were acquired by 4 insiders:
You can view the list of recent insider transactions for James River Group Holdings, Ltd. here.
|P/E: N/A||Forward P/E: 8.43||Industry P/E: 10.06|
|P/S: 1||Price/Book: 1.07||EV/EBITDA: -4.62|
|Market Cap: $776.68M||Avg. Daily Volume: 345,506||52 Week Range: $19.76 – $51.02|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. Walmart Inc. (WMT): $142.82
Shares of Walmat were sold by 2 insiders:
You can view the list of recent insider transactions for Walmart Inc. here.
|P/E: 29.33||Forward P/E: 19.59||Industry P/E: 25.69|
|P/S: 0.69||Price/Book: 4.75||EV/EBITDA: 12.2|
|Market Cap: $396.17B||Avg. Daily Volume: 9,062,042||52 Week Range: $127.81 – $152.57|
2. Airbnb, Inc. (ABNB): $142.7
Shares of Airbnb were sold by 2 insiders:
You can view the list of recent insider transactions for Airbnb, Inc. here.
|P/E: N/A||Forward P/E: 69.95||Industry P/E: 1,288.80|
|P/S: 15.31||Price/Book: 18.93||EV/EBITDA: 158.73|
|Market Cap: $91.74B||Avg. Daily Volume: 6,354,206||52 Week Range: $129.71 – $215.49|
3. Bunge Limited (BG): $108.32
Director Paul J. Fribourg sold 690,000 shares of this agribusiness and food company for $107.98, generating $74.5 million from the sale. These shares were sold indirectly by Continental Grain.
You can view the list of recent insider transactions for Bunge Limited here.
|P/E: 7.94||Forward P/E: 12.35||Industry P/E: 21.12|
|P/S: 0.26||Price/Book: 2.19||EV/EBITDA: 7.92|
|Market Cap: $15.31B||Avg. Daily Volume: 1,147,132||52 Week Range: $71.73 – $109.83|
4. Arista Networks, Inc. (ANET): $118.55
Shares of this networking company were sold by 7 insiders:
You can view the list of recent insider transactions for Arista Networks, Inc. here.
|P/E: 45.08||Forward P/E: 28.43||Industry P/E: 22.80|
|P/S: 12.36||Price/Book: 9.17||EV/EBITDA: 33.99|
|Market Cap: $36.43B||Avg. Daily Volume: 2,221,652||52 Week Range: $66.935 – $148.57|
5. American National Group, Inc. (ANAT): $189
Shares of this diversified insurance company were sold by 3 insiders:
You can view the list of recent insider transactions for American National Group, Inc. here.
|P/E: 7.27||Forward P/E: N/A||Industry P/E: 10.06|
|P/S: 1.16||Price/Book: 0.73||EV/EBITDA: 1.6|
|Market Cap: $5.08B||Avg. Daily Volume: 101,313||52 Week Range: $96.07 – $195.89|
You can view the full list of sales from this Insider Sales page.
Disclaimer: I hold a long position in B. Riley (RILY). 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.