Insider Weekends: Cluster Insider Buying at Enviva After Short Seller Report

Enviva (EVA) is a biomass company that manufacturers wood pellets from residual wood left over from harvesting of trees for telephone poles, furniture, etc. The company exports these wood pellets to the United Kingdom, Europe and Japan for use in power plants that can burn these wood pellets instead of using coal.

The company was the the subject of a short report by Blue Orca Capital that you can read here and the company responded by issuing a press release here. I am currently in the process of reading the book Dead Companies Walking by long/short fund manager Scott Fearon. Having seen this drama play out many times before, I agree with Fearon that companies that are doing well can for the most part ignore short sellers and continue executing on their business.

While I cannot comment on Blue Orca’s claim that Enviva is an ESG farce and that they are sourcing the wood for their pellets not just from residual wood but from clear cutting forests, many of the points they make about the company’s financials and dividend bear out. Reviewing the company’s financials, it is clear that the company is losing money, has negative free cash flow, continues to grow its long-term debt and yet chooses to pay a large dividend. Revenue growth was impressive for several years but growth appears to have tapered off in recent quarters.

It was interesting to note that the largest insider purchase of Enviva was by Jeffrey Ubben, the Co-Founder and Chairman of San Francisco based activist firm ValueAct Capital. He resigned from the CEO role at ValueAct in 2020 and now runs a firm called Inclusive Capital Partners that is “in pursuit of a healthy planet and the health of its inhabitants”. The fact that Inclusive Capital Partners was an early investor in electric car company Nikola (NKLA) should given us pause. This cluster of insider purchases after a 23% drop in Enviva does not give me enough confidence to consider it as a long investment, especially in a market that appears to have lost patience for money losing companies.

The insider purchase that stood out the most for me was the one by the CEO of small-cap multifamily REIT BRT Apartments (BRT). The REIT trades for 14 times trailing adjusted FFO, has a dividend yield of 4.94%, a payout ratio of 68% based on AFFO of $1.48 during the last four quarters and an occupancy rate in excess of 95%. While this is not the time to buy REITs, BRT Apartments along with American Assets Trust (AAT) will be top contenders when I am ready to start buying REITs again.

Welcome to edition 641 of Insider Weekends. Insider buying decreased significantly last week with insiders purchasing $38.24 million of stock compared to $110.88 million in the week prior. Selling also decreased to $371.61 million compared to $499.74 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 9.72. In other words, insiders sold almost 10 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 4.51.

Notable Insider Buys:

1. Enviva Inc. (EVA): $48.03

Shares of this producer and seller of utility-grade wood pellets were acquired by 8 insiders:

  • Director Jeffrey W. Ubben acquired 276,446 shares, paying $50.67 per share for a total amount of $14.01 million. These shares were purchased indirectly by In-Cap Funds.
  • Director John C. Bumgarner acquired 15,000 shares, paying $51.34 per share for a total amount of $770,100. Mr. Bumgarner increased his stake by 20.58% to 87,876 shares with this purchase.
  • EVP, Corp Dev and GC William H. Schmidt acquired 5,023 shares, paying $50.18 per share for a total amount of $252,054. Mr. Schmidt increased his stake by 1.27% to 400,091 shares with this purchase.
  • President Thomas Meth acquired 5,000 shares, paying $50.84 per share for a total amount of $254,200. Mr. Meth increased his stake by 1.17% to 432,671 shares with this purchase.
  • Chairman and CEO John K. Keppler acquired 4,943 shares, paying $50.65 per share for a total amount of $250,363. Mr. Keppler increased his stake by 0.69% to 724,541 shares with this purchase.
  • Exec VP & CFO Shai Even acquired 4,900 shares, paying $51.53 per share for a total amount of $252,497. Mr. Even increased his stake by 1.36% to 365,316 shares with this purchase.
  • Director Ralph Alexander acquired 3,850 shares, paying $51.68 per share for a total amount of $198,968. These shares were purchased indirectly through a trust.
  • Exec VP Operations Edward Royal Smith acquired 3,000 shares, paying $51.92 per share for a total amount of $155,760. Mr. Smith increased his stake by 1.14% to 265,437 shares with this purchase.

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

P/E: N/A Forward P/E: 50.56 Industry P/E: 9.77
P/S: 3.15 Price/Book: 6.65 EV/EBITDA: 142.8
Market Cap: $3.29B Avg. Daily Volume: 512,723 52 Week Range: $45.88 – $91.06

2. Rocket Companies, Inc. (RKT): $6.67

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

  • Chief Executive Officer Jay Farner acquired 149,100 shares, paying $6.72 per share for a total amount of $1 million. Mr. Farner increased his stake by 3.25% to 4,743,607 shares with this purchase.
  • Director Matthew Rizik acquired 15,700 shares, paying $6.71 per share for a total amount of $105,323. Mr. Rizik increased his stake by 3.83% to 425,602 shares with this purchase.

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

P/E: 3.7 Forward P/E: 12.13 Industry P/E: 10.23
P/S: 1.33 Price/Book: 1.45 EV/EBITDA: 5.68
Market Cap: $13.26B Avg. Daily Volume: 3,106,278 52 Week Range: $6.23 – $18.13

3. Douglas Elliman Inc. (DOUG): $4.61

Shares of this real estate services and property technology investment business were acquired by 3 insiders:

  • Chairman, President & CEO Howard M. Lorber acquired 100,000 shares, paying $3.99 per share for a total amount of $399,340. Mr. Lorber increased his stake by 3.60% to 2,876,341 shares with this purchase.
  • Director Michael Liebowitz acquired 100,000 shares, paying $3.92 per share for a total amount of $392,400. These shares were purchased indirectly by MSL18 Holdings LLC.
  • SVP, Treasurer & CFO Bryant J. Kirkland III acquired 10,000 shares, paying $3.87 per share for a total amount of $38,700. Mr. Kirkland increased his stake by 2.27% to 450,000 shares with this purchase.

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

P/E: 6.07 Forward P/E: 7.68 Industry P/E: N/A
P/S: 0.28 Price/Book: 1.27 EV/EBITDA: 4.36
Market Cap: $374.68M Avg. Daily Volume: 404,718 52 Week Range: $3.83 – $12.66

4. Dave & Buster’s Entertainment, Inc. (PLAY): $33.41

Shares of this entertainment and dining venues operator were acquired by 2 insiders:

  • SVP, Chief Procurement Officer Les Lehner acquired 12,154 shares, paying $32.81 per share for a total amount of $398,741. Mr. Lehner increased his stake by 73.35% to 28,725 shares with this purchase.
  • Chief Financial Officer Michael Quartieri acquired 5,000 shares, paying $31.73 per share for a total amount of $158,633. Mr. Quartieri increased his stake by 13.82% to 41,185 shares with this purchase.

You can view the list of recent insider transactions for Dave & Buster’s Entertainment, Inc. here.

P/E: 12.11 Forward P/E: 9.1 Industry P/E: N/A
P/S: 0.99 Price/Book: 4.52 EV/EBITDA: 11.68
Market Cap: $1.57B Avg. Daily Volume: 1,022,370 52 Week Range: $29.597 – $52.535

5. BRT Apartments Corp. (BRT): $20.25

President and CEO Jeffrey Gould acquired 28,043 shares of this real estate investment trust, paying $19.07 per share for a total amount of $534,718. These shares were purchased indirectly by Gould Investors L.P.

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

P/E: 5.04 Forward P/E: -59.56 Industry P/E: 26.66
P/S: 3.64 Price/Book: 1.44 EV/EBITDA: 9.91
Market Cap: $363.18M Avg. Daily Volume: 56,007 52 Week Range: $18.35 – $25.67

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

Notable Insider Sales:

1. Palo Alto Networks, Inc. (PANW): $154.83

Shares of this cybersecurity platform were sold by 2 insiders:

  • Director James J. Goetz sold 153,645 shares for $173.07, generating $26.59 million from the sale.
  • EVP, Chief Product Officer Lee Klarich sold 8,754 shares for $161.26, generating $1.41 million from the sale.

You can view the list of recent insider transactions for Palo Alto Networks, Inc. here.

P/E: N/A Forward P/E: 40.85 Industry P/E: 19.35
P/S: 8.42 Price/Book: 220.24 EV/EBITDA: 1516.67
Market Cap: $46.33B Avg. Daily Volume: 4,091,945 52 Week Range: $140.517 – $213.633

2. Airbnb, Inc. (ABNB): $109.16

Director Joseph Gebbia sold 250,000 shares of Airbnb for $110.13, generating $27.53 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: 52.48 Forward P/E: 42.81 Industry P/E: 11.44
P/S: 9.46 Price/Book: 13.31 EV/EBITDA: 47.57
Market Cap: $69.81B Avg. Daily Volume: 5,796,195 52 Week Range: $86.71 – $212.584

3. NVIDIA Corporation (NVDA): $112.27

Director Mark A. Stevens sold 85,000 shares of this semiconductor company for $116.49, generating $9.9 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: 30.11 Forward P/E: 25.63 Industry P/E: 19.35
P/S: 9.41 Price/Book: 11.72 EV/EBITDA: 27.4
Market Cap: $279.78B Avg. Daily Volume: 58,059,935 52 Week Range: $108.13 – $346.47

4. Atlassian Corporation (TEAM): $189

Co-CEO, Co-Founder Michael Cannon-Brookes sold 43,070 shares of this software application company for $212.09, generating $9,134,625 from the sale. These shares were sold indirectly by a trust.

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

P/E: N/A Forward P/E: 78.75 Industry P/E: 19.35
P/S: 17.19 Price/Book: 143.62 EV/EBITDA: -617.79
Market Cap: $48.18B Avg. Daily Volume: 1,715,112 52 Week Range: $159.54 – $483.13

5. RPM International Inc. (RPM): $89.64

Shares of this specialty chemicals company were sold by 2 insiders:

  • Chairman and CEO Frank C. Sullivan sold 65,000 shares for $92.60, generating $6.02 million from the sale.
  • Director Frederick R. Nance sold 477 shares for $89.98, generating $42,920 from the sale.

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

P/E: 22.08 Forward P/E: 17.37 Industry P/E: 10.6
P/S: 1.66 Price/Book: 5.8 EV/EBITDA: 17.04
Market Cap: $11.57B Avg. Daily Volume: 598,923 52 Week Range: $74.56 – $101.48

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 own long positions in Rocket Companies (RKT) and Atlassian Corporation (TEAM). 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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