Insider Weekends: Cannibals With Insider Buying

When reviewing the list of insider purchases this week, I was struck by the fact that three of the five companies that made our list had very recently announced large stock buybacks (Darden Restaurants, Nike and Chesapeake Energy) and a fourth one was a hungry cannibal having repurchased nearly 45% of its shares outstanding in the last four years. The buybacks for dialysis services company DaVita (DVA) were so large, I pulled up the 10-Qs for Q1 2018 and Q1 2022 from EDGAR to confirm that the data our automated systems had picked up was correct.

DaVita has been a long-term holding of Berkshire Hathaway (BRK.A) and it is speculated that portfolio manager Ted Weschler helped Berkshire build the position starting in Q4 2011 after Warren Buffett recruited both Ted Weschler and Todd Combs to join Berkshire. Ted was also responsible for Berkshire’s stake in Apple (AAPL) before Buffett decided to supersize that position.

Berkshire built their position in DaVita until November 2014, held the position unchanged through 2020 and then scaled back part of their position. They still hold 36.1 million shares, representing more than 38% of DaVita’s 94.6 million shares outstanding. DaVita’s last buyback announcement was in December 2021 when they announced their intention to acquire $2 billion worth of stock representing nearly 19% of DaVita’s market cap at announcement.

A combination of increasing revenue and increasing net income combined with these buybacks has helped the company grow its EPS from $0.93 in 2018 to $9.30 in 2021. Healthcare services is a difficult business and this is reflected in the company’s gross and net margins which came in at 30.68% and 7.77% during the trailing twelve months. It also does not help that the company is highly leveraged with nearly $11 billion in net debt. Capital leases represent $2.9 billion of that net debt.

The stock trades at a forward P/E of 10.64, a forward EV/EBITDA of 9.19 and is expected to grow revenue 5.4% to $11.81 billion this year. The company has been the subject of criticism from short sellers like Jim Chanos about how it uses a non-profit partially funded by DaVita to provide services to uninsured or underinsured patients. The company also recently lost a case in the Supreme Court again Marietta Memorial Hospital related to lower reimbursement rates.

Welcome to edition 626 of Insider Weekends. Insider buying decreased last week with insiders purchasing $35.49 million of stock compared to $67.87 million in the week prior. Selling also decreased to $403.42 million compared to $554.42 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 11.37. In other words, insiders sold more than 11 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 8.17.

Notable Insider Buys:

1. DaVita Inc. (DVA): $83.11

Chief Operating Officer, DKC, Michael David Staffieri acquired 20,000 shares of this kidney dialysis services, paying $77.70 per share for a total amount of $1.55 million. Mr. Staffieri increased his stake by 48.56% to 61,190 shares with this purchase.

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

2. Darden Restaurants, Inc. (DRI): $114.35

Director Timothy J. Wilmott acquired 10,000 shares of this restaurant chain, paying $120 per share for a total amount of $1,200,000. Mr. Wilmott increased his stake by 58.50% to 27,094 shares with this purchase.

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

3. Rocket Companies, Inc. (RKT): $7.61

Shares of this tech-driven real estate, mortgage, and e-Commerce company were acquired by 2 insiders:

• Chief Executive Officer Jay Farner acquired 133,100 shares, paying $7.50 per share for a total amount of $997,889. Mr. Farner increased his stake by 4.67% to 2,985,407 shares with this purchase.
• Director Matthew Rizik acquired 14,200 shares, paying $7.50 per share for a total amount of $106,513. Mr. Rizik increased his stake by 6.43% to 234,902 shares with this purchase.

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

4. NIKE, Inc. (NKE): $101.18

Director John W. Rogers acquired 10,000 shares of Nike, paying $102.96 per share for a total amount of $1.03 million. Mr. Rogers increased his stake by 63.77% to 25,681 shares with this purchase.

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

5. Chesapeake Energy Corporation (CHK): $82.9

Shares of this oil and natural gas producer were acquired by 3 insiders:

• Executive Chairman Michael Wichterich acquired 5,000 shares, paying $83.16 per share for a total amount of $415,800. Mr. Wichterich increased his stake by 24.61% to 25,318 shares with this purchase.
• President and CEO Domenic J. Dell’Osso Jr. acquired 3,000 shares, paying $82.04 per share for a total amount of $246,126. Mr. Dell’Osso increased his stake by 9.12% to 35,891 shares with this purchase.
• EVP & COO Joshua J. Viets acquired 1,700 shares, paying $75.19 per share for a total amount of $127,820. Mr. Viets increased his stake by 6.59% to 27,504 shares with this purchase.

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

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

Notable Insider Sales:

1. Airbnb, Inc. (ABNB): $91.41

Chairman of Airbnb.orgJoseph Gebbia sold 454,166 shares of Airbnb for $100.85, generating $45.8 million from the sale. 15,525 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 Airbnb, Inc. here.

2. Booz Allen Hamilton Holding Corporation (BAH): $92.84

Shares of this consulting services provider were sold by 2 insiders:

• Executive Vice President Karen M. Dahut sold 50,068 shares for $89.06, generating $4.46 million from the sale.
• President and CEO Horacio Rozanski sold 40,000 shares for $88.98, generating $3.56 million from the sale.

You can view the list of recent insider transactions for Booz Allen Hamilton Holding Corporation here.

3. Enphase Energy, Inc. (ENPH): $195.72

President & CEO Badrinarayanan Kothandaraman sold 38,650 shares of this home energy solutions provider for $200.00, generating $7.73 million from the sale.

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

4. Interactive Brokers Group, Inc. (IBKR): $55.81

Chairman Thomas Peterffy sold 120,000 shares of this investment brokerage for $57.13, generating $6.86 million from the sale.

You can view the list of recent insider transactions for Interactive Brokers Group, Inc. here.

5. Velodyne Lidar, Inc. (VLDR): $0.98

Affiliate David S. Hall sold 6,972,966 shares of this real-time 3D vision provider for $0.97, generating $6.77 million from the sale.

You can view the list of recent insider transactions for Velodyne Lidar, 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.

Disclaimer: I hold long positions in Berkshire Hathaway (BRK.B) and Airbnb (ABNB). 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.