We absolutely love running into a new company that was not on our radar before, especially after an opportunistic insider purchase by a long-serving director. Mitchell Jacobson ponied up $14.45 million last week to pick up 200,000 shares of MSC Industrial Direct, a company that supplies nearly 2 million products to industrial customers ranging from fasteners to inventory management tools. He also purchased 4,654 shares in May and 67,796 shares last February for $5.29 million. The prior 10 years before that he only sold shares, mostly related to options exercises and often held zero shares after his sales. This makes his rather large opportunistic purchase of the stock unusual.
Mr. Jacobson is currently the company’s non-executive Chairman and has been the Chair of the Board for 24 years. He also served as the company’s CEO for 10 years from 1995 to 2005. For a nuts and bolts kind of company, I was surprised to see gross margins of 42.9% and operating margins of 14.3% (fiscal Q3 2022). Revenue is expected to grow about 13% in fiscal 2022 (ending August 2022) to $3.67 billion and then moderate to $3.80 billion in fiscal 2023. The company has a modest $760 million net debt on its balance sheet excluding capital leases.
This is a Steady Eddy kind of business trading at 10 times EBITDA. On the surface, the only thing that is exciting about the business at this time is this insider purchase and I plan to dig in further to see if I can better understand what is driving Mr. Jacobson’s sudden enthusiasm for the stock.
The other insider purchase that stood out was Bill Gurley’s 1 million share purchase of Stitch Fix (SFIX) at an average price of $5.43 per share. This is a significantly lower than what he paid for his October 2019 purchase at $20.83 per share. We wrote the following about the company in October 2019,
Stitch Fix is an online personal styling company where customers fill out a “style profile” and the company sends a customized shipment of clothes and accessories. Customers try out the assortment sent to them, keep what they like and send back the rest. In addition to the margins made on the clothes and accessories, the company also charges a $20 styling fee with each shipment.