Insider Weekends: “Adjusted” Insider Buying Increases Last Week

During a highly volatile week for markets, we saw insiders step up and purchase shares, although in aggregate it looked like both insider buying and selling declined compared to the prior week. The dip had to do with large purchases of Carvana (CVNA) in a secondary offering the prior week and large sales of Tesla (TSLA) by Elon Musk to fund the purchase of Twitter (TWTR) as discussed last week.

Once you adjust for both those unusual transactions, insider buying went up last week while insider selling edged up a little. I am not a fan of “adjusted EBITDA” numbers reported by most companies these days but sometimes you do have to adjust the numbers for extreme outlier events like the Tesla sales. Otherwise you end up drawing wrong conclusions like this opinion piece by Mark Hulbert. With earnings season waning and a market decline that has seen some companies drop 80% or 90% from their peaks, I would not be surprised to see insider buying pick up pace in the coming days. Some market participants are seeing the action last week as signs of capitulation but if this is anything like the bear market after the dot com bubble burst, we have a ways to go before the market stabilizes.

It behooves us to remember that insiders are usually early and that their time horizons may not match ours. I discussed this in one of two Twitter threads that discusses signals and noise as it relates to insider transactions last week.

1. Introduction to insider transactions and “signaling” by company insiders
2. Strategies to benefit from insider purchases

B. Riley (RILY) topped our list once again after a cluster of six insiders purchased shares. We have written about B. Riley several times over the years and it remains a top 3 position for me in my personal portfolio despite the recent pull back in the stock. A drop in its cyclical businesses like investment banking and its exposure to a portfolio of public securities hurt the company but it also has operating businesses and counter-cyclical businesses like a restructuring division that should help the company during this challenging environment.

I got interested in B. Riley after a series of insider purchases by founder Bryant Riley and other insiders in 2020. We featured the company as a spotlight idea in our September 2020 special situations newsletter and wrote the following about the company when it was trading for a bargain basement price of $26.78 (unadjusted for special or regular dividends),

The other interesting insider purchase was of the manufacturer of the Invisalign system, Align Technology (ALGN) by its CEO Joseph Hogan. There have been very few insider purchases of Align but Mr. Hogan’s timing both with buying and selling has been impeccable. He last purchased $1 million worth of shares in August 2019 at an average price just below $200. He also sold $46.64 million worth of shares at an average price of $699.54 in August 2021. This was an opportunistic sale unrelated to any option exercises as you can see here.

Welcome to edition 618 of Insider Weekends. Insider buying decreased last week with insiders purchasing $176.54 million of stock compared to $462.93 million in the week prior. Selling also decreased significantly to $488.72 million compared to $8.98 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 2.77. In other words, insiders sold almost 3 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 19.39.

Notable Insider Buys:

1. B. Riley Financial, Inc. (RILY): $51.02

Shares of B. Riley Financial were acquired by 6 insiders:

• Chairman and Co-CEO Bryant R. Riley acquired 241,343 shares, paying $47.23 per share for a total amount of $11.39 million. Mr. Riley increased his stake by 4.42% to 5,698,313 shares with this purchase.
• Director Randall E. Paulson acquired 30,000 shares, paying $46.84 per share for a total amount of $1.41 million. Mr. Paulson increased his stake by 19.43% to 184,417 shares with this purchase.
• Director Robert L. Antin acquired 10,000 shares, paying $45.53 per share for a total amount of $455,300. Mr. Antin increased his stake by 71.39% to 24,008 shares with this purchase.
• Director Michael Joseph Sheldon acquired 10,000 shares, paying $47.68 per share for a total amount of $476,792. Mr. Sheldon increased his stake by 30.15% to 43,164 shares with this purchase.
• CEO B. Riley Securities, Inc. Andrew Moore acquired 10,000 shares, paying $45.94 per share for a total amount of $459,377. Mr. Moore increased his stake by 4.26% to 244,758 shares with this purchase.
• President Kenneth M. Young acquired 2,500 shares, paying $46.69 per share for a total amount of $116,734. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for B. Riley Financial, Inc. here.

2. General Electric Company (GE): $78.23

Shares of General Electric were acquired by 3 insiders:

• Chairman and CEO Lawrence H. Culp Jr. acquired 65,000 shares, paying $74.53 per share for a total amount of $4.84 million. These shares were purchased indirectly by a holding company.
• Senior Vice President Scott Strazik acquired 3,737 shares, paying $74.23 per share for a total amount of $277,380. Mr. Strazik increased his stake by 31.41% to 15,634 shares with this purchase. 1,237 of these shares were purchased indirectly through a 401(k) plan.
• Senior Vice President John S. Slattery acquired 3,601 shares, paying $75.00 per share for a total amount of $270,075.

You can view the list of recent insider transactions for General Electric Company here.

3. Keurig Dr Pepper Inc. (KDP): $36.96

Shares of this beverage company were acquired by 2 insiders:

• Chief Strategy Officer Justin Whitmore acquired 65,611 shares, paying $37.51 per share for a total amount of $2.46 million. Mr. Whitmore increased his stake by 66.97% to 163,587 shares with this purchase.
• Chief Legal Officer Anthony Shoemaker acquired 10,000 shares, paying $36.42 per share for a total amount of $364,150. Mr. Shoemaker increased his stake by 26.32% to 48,000 shares with this purchase.

You can view the list of recent insider transactions for Keurig Dr Pepper Inc. here.

4. NexPoint Diversified Real Estate Trust (NXDT): $15.49

President and Principal Executive Officer James D. Dondero acquired 142,123 shares of this asset management company, paying $15.74 per share for a total amount of $2.24 million. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for NexPoint Diversified Real Estate Trust here.

5. Align Technology, Inc. (ALGN): $280.41

President and CEO Joseph M. Hogan acquired 6,700 shares of this medical devices company, paying $298.48 per share for a total amount of $1.99 million. Mr. Hogan increased his stake by 3.99% to 174,801 shares with this purchase.

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

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

Notable Insider Sales:

1. Cadence Design Systems, Inc. (CDNS): $146.37

Shares of this software application company were sold by 2 insiders:

• Director Lip-Bu Tan sold 70,000 shares for $152.30, generating $10.66 million from the sale. These shares were sold indirectly through a trust.
• Director James D. Plummer sold 33,000 shares for $155.95, generating $5.15 million from the sale. 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 Cadence Design Systems, Inc. here.

2. Equinix, Inc. (EQIX): $713.44

Shares of this digital infrastructure company were sold by 2 insiders:

• CEO and President Charles J. Meyers sold 12,244 shares for $711.91, generating $8.72 million from the sale.
• Chief Legal and HR Officer Brandi Galvin Morandi sold 1,000 shares for $752.58, generating $752,578 from the sale.

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

3. Shutterstock, Inc. (SSTK): $66.21

Executive Chairman & Interim CEO Jonathan Oringer sold 130,000 shares of Shutterstock for $69.62, generating $9.05 million from the sale.

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

4. Abbott Laboratories (ABT): $112.27

Shares of this health care products company were sold by 2 insiders:

• Director Daniel J. Starks sold 50,000 shares for $113.22, generating $5.66 million from the sale.
• Senior Vice President Randel William Woodgrift sold 24,000 shares for $113.00, generating $2.71 million from the sale. 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 Abbott Laboratories here.

5. Morningstar, Inc. (MORN): $246.08

Executive Chairman Joseph D. Mansueto sold 31,416 shares of this independent investment research services provider for $255.18, generating $8.02 million from the sale.

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

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 and Plus members.

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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.