Insider Weekends: Cluster Of Insiders Purchase Carvana

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A nearly 6% drop in the S&P 500 index last week spurred insider buying with insiders purchasing more than 4 times as much stock as they did the prior week, reversing three weeks of declining purchases. While we did not reach the levels of insider buying we saw in March 2020, where insider buying exceeded insider selling for two weeks in a row, insider selling was only 2 times the level of insider buying last week. The norm is often between 15 to 25 times. To be specific, the average Sell/Ratio over the last year was 22.53 and over the last 10 years was 27.43.

With companies like Amazon (AMZN) down 39% over the last year, some of the bubble stocks have suffered even worse fates. One of these companies, Carvana (CVNA), was down nearly 95% peak-to-trough earlier last week from a peak of $376.83 on August 10, 2021 to a trough of $19.83 on June 13, 2022. This precipitous drop triggered a cluster of insider buying by four different insiders at the company as outlined below.

Carvana 1 Year Price Chart With Insider Purchases

Carvana 1 Year Price Chart With Insider Purchases (source: InsideArbitrage.com)

Among the survivors of this rubble will be generational buying opportunities. I wrote in early May that the market action at that time did not seem to indicate capitulation and my opinion has not changed. There were several things wrong at Carvana and we wrote the following about insider purchases at the company at the end of April,

In a month where we experienced the worst monthly drop in the Nasdaq since 2008 and where the big tech companies that were holding up the indexes also dropped, insiders stepped up as we expected to buy a significant amount of stock last week. Insiders purchased 11 times more stock last week than they purchased in the week prior. The $463 million of purchases were also significantly above the $6 million of purchases we saw during the same week in April 2021 and $15 million of purchases during the last week of April 2020.

The number is unusually high last week because the father-son duo Ernest Garcia II and Ernest Garcia III purchased shares of online car dealer Carvana (CVNA) in a secondary offering. They collectively purchased $364 million in a secondary offering but their purchases pale in comparison to the elder Garcia’s $1.15 billion of sales of Carvana in 2020 and $2.25 billion of sales in 2021 as you can see here. The stock has been under pressure lately as it launched a $1.25 billion secondary offering to sell class A shares and Apollo Global stepped in to pick up half of the $3.275 billion in debt it was trying to sell at a high yield of 10.25%. Carvana needed the capital to fund its $2.2 billion acquisition of KAR Global’s auction business. The stock is down more than 80% from a peak of over $370 last August.

This cluster of purchases last week was a little more encouraging and the company has taken some steps that might help it survive. Beyond layoffs and executives agreeing to forego salaries for the rest of this year, Carvana also appears to have stopped overpaying for used cars. I priced one of my cars to see what kind of money Carvana would pony up with and got an offer that was nearly half the Kelly Blue Book trade-in value for the vehicle. Carvana continues posting GAAP net losses and remains cash flow negative. However there are several other companies with positive free cash flows and strong balance sheets that are now trading at interesting valuations, if not at downright attractive levels.

Welcome to edition 624 of Insider Weekends. Insider buying increased significantly last week with insiders purchasing $256.48 million of stock compared to $59.53 million in the week prior. Selling declined to $456.86 million compared to $1.18 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 1.78. In other words, insiders sold almost 2 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 19.74.

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Notable Insider Buys:

1. Carvana Co. (CVNA): $24.27

Shares of this e-commerce platform for buying and selling used cars were acquired by 4 insiders:

  • 10% Owner Ernest C. Garcia acquired 1,985,258 shares, paying $21.18 per share for a total amount of $42.05 million. These shares were purchased indirectly by Verde Investments, Inc.
  • Chief Product Officer Daniel J. Gill acquired 94,000 shares, paying $21.77 per share for a total amount of $2.05 million. Mr. Gill increased his stake by 253.90% to 131,023 shares with this purchase.
  • Chief Brand Officer Ryan S. Keeton acquired 32,000 shares, paying $23.06 per share for a total amount of $737,840. Mr. Keeton increased his stake by 43.09% to 106,269 shares with this purchase.
  • Vice President, General Counsel, & Secretary Paul W. Breaux acquired 10,000 shares, paying $21.85 per share for a total amount of $218,500. Mr. Breaux increased his stake by 10.74% to 103,149 shares with this purchase.

You can view the list of recent insider transactions for Carvana Co. here.

P/E: N/A Forward P/E: -7.75 Industry P/E: 13.72
P/S: 0.31 Price/Book: 27.33 EV/EBITDA: -26.52
Market Cap: $4.31B Avg. Daily Volume: 10,495,701 52 Week Range: $19.8 – $376.83

2. Procore Technologies, Inc. (PCOR): $45.76

Director William J. G. Griffith acquired 752,607 shares of this cloud-based construction management platform, paying $42.31 per share for a total amount of $31.84 million. These shares were purchased indirectly by ICONIQ Strategic Partners VI, L.P.

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

P/E: N/A Forward P/E: -77.56 Industry P/E: 44.75
P/S: 11.07 Price/Book: 5.32 EV/EBITDA: -18.08
Market Cap: $6.2B Avg. Daily Volume: 929,341 52 Week Range: $40 – $108.75

3. Chewy, Inc. (CHWY): $28.7

Director James A. Star acquired 181,478 shares of this pet focused e-commerce retailer, paying $27.44 per share for a total amount of $4.98 million. These shares were purchased indirectly by Downstream Partners.

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

P/E: N/A Forward P/E: -287 Industry P/E: 42.84
P/S: 1.31 Price/Book: 206.48 EV/EBITDA: -248.93
Market Cap: $12.07B Avg. Daily Volume: 6,438,233 52 Week Range: $22.22 – $97.74

4. Avis Budget Group, Inc. (CAR): $160.83

Executive Chairman Bernardo Hees acquired 29,400 shares of this car and truck rentals company, paying $168.69 per share for a total amount of $4.96 million. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for Avis Budget Group, Inc. here.

P/E: 5.05 Forward P/E: 7.54 Industry P/E: 38.37
P/S: 0.75 Price/Book: N/A EV/EBITDA: 7.87
Market Cap: $7.77B Avg. Daily Volume: 1,009,941 52 Week Range: $65.87 – $545.11

5. Lions Gate Entertainment Corp. (LGF.B): $8.92

Director Gordon Crawford acquired 344,454 shares of this movies and TV shows production and distribution company, paying $8.98 per share for a total amount of $3.09 million. Mr. Crawford increased his stake by 26.71% to 1,634,013 shares with this purchase.

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

P/E: N/A Forward P/E: 12.25 Industry P/E: 53.32
P/S: 0.56 Price/Book: 0.76 EV/EBITDA: 3.16
Market Cap: $2B.05 Avg. Daily Volume: 785,106 52 Week Range: $8.41 – $18.77

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

Notable Insider Sales:

1. NVIDIA Corporation (NVDA): $158.8

Director Mark A. Stevens sold 227,650 shares of this semiconductor company for $158.06, generating $35.98 million from the sale. These shares were sold indirectly by a trust.

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

P/E: 42.59 Forward P/E: 24.62 Industry P/E: 18.30
P/S: 13.4 Price/Book: 15.11 EV/EBITDA: 31
Market Cap: $395.73B Avg. Daily Volume: 58,072,514 52 Week Range: $153.28 – $346.47

2. Airbnb, Inc. (ABNB): $99.49

Chairman of Airbnb.org Joseph Gebbia sold 250,000 shares of this travel company for $100.28, generating $25.07 million from the sale. These shares were sold indirectly by a trust.

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

P/E: 77.54 Forward P/E: 39.96 Industry P/E: 200.55
P/S: 9.71 Price/Book: 13.37 EV/EBITDA: 61.43
Market Cap: $64.24B Avg. Daily Volume: 6,466,626 52 Week Range: $92.09 – $212.584

3. Quanta Services, Inc. (PWR): $113.85

President and CEO Earl C. Austin sold 135,000 shares of this specialty contracting services provider for $126.48, generating $17.07 million from the sale.

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

P/E: 34.67 Forward P/E: 16.29 Industry P/E: 30.02
P/S: 1.15 Price/Book: 3.19 EV/EBITDA: 17.49
Market Cap: $16.36B Avg. Daily Volume: 1,714,446 52 Week Range: $84.4 – $140.04

4. Morningstar, Inc. (MORN): $228.4

Executive Chairman Joseph D. Mansueto sold 29,000 shares of Morningstar for $230.13, generating $6.67 million from the sale.

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

P/E: 53.87 Forward P/E: 27.32 Industry P/E: 11.69
P/S: 5.53 Price/Book: 7.23 EV/EBITDA: 27.61
Market Cap: $9.76B Avg. Daily Volume: 149,823 52 Week Range: $218.25 – $350.21

5. Cadence Design Systems, Inc. (CDNS): $143.09

President and CEO Anirudh Devgan sold 35,217 shares of this software application company for $158.82, generating $5.59 million from the sale.

You can view the list of recent insider transactions for Cadence Design Systems, Inc. here.

P/E: 53.41 Forward P/E: 32.3 Industry P/E: 44.75
P/S: 12.51 Price/Book: 14.3 EV/EBITDA: 38.63
Market Cap: $39.46B Avg. Daily Volume: 1,587,865 52 Week Range: $128.92 – $192.7

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.

Disclaimer: I hold a long position in Lions Gate Entertainment (LGF.B). 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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