Insider Weekends: Largest Insider Purchase At CME Group In Over Ten Years

A signal from insider transactions we pay special attention to is opportunistic purchases by long-serving Directors. These signals don’t show up often but when they do, we have seen impressive subsequent performance. Sometimes it takes several weeks or months for this performance to materialize as insiders often tend to be early with their purchases. We saw this with Jay Hoag’s purchases of Netflix (NFLX), Germán Larrea Mota-Velasco’s purchases of Southern Copper (SCCO), Harold Hamm’s purchases of Continental Resources (CLR) and Bruce Sachs’ purchases of Vertex Pharmaceuticals (VRTX), which we discussed in our December 2020 Special Situations Newsletter.

We saw this pattern once again last week when William R. Shepard, an independent Director of the derivatives exchange CME Group (CME) purchased $8.27 million worth of stock at an average price of $170 per share. This was the largest insider purchase at the CME Group in over ten years and Mr. Shepard’s largest purchase since his August 2010 $1.22 million purchase at a split-adjusted price of $49 per share.

Mr. Shepard has served on The CME Group’s Board of Directors since 1997 and has been a CME Group member for 45 years. The CME Group is the world’s largest derivatives marketplace that facilitates the trading of equity, currency, interest rate, energy, agriculture and metals futures. Given that it is a marketplace, the expectation is that it should be able to weather downturns better than most companies but that has not always been the case. During the 2007-2009 bear market, the stock was down nearly 80% peak to trough. The stock is down almost 35% peak-to-trough during this downturn.

The CME Group has always traded at a premium valuation in light of its excellent net margin, which was an astounding 54% during the trailing twelve months. Revenue in Q3 2022 was up nearly 11% on account of a 26% increase in trading volume. After the recent pullback, the stock trades at a forward EV/EBITDA of 19. Looking ahead, while both revenue and earnings are expected to grow, revenue in 2023 is expected to grow just a little over 3% to $5.21 billion. Mr. Shepard probably holds a more optimistic view of the business compared to consensus analyst estimates. However as alluded to above, insiders often tend to be early and I am going to add The CME Group to my watchlist to see if it presents an attractive opportunity to invest in the near future.

Welcome to edition 646 of Insider Weekends. Insider buying increased significantly last week with insiders purchasing $176.33 million of stock compared to $66.42 million in the week prior. Selling also increased significantly to $5.11 billion compared to $1.01 billion in the week prior. Most of this increase was driven by Elon Musk’s $3.95 billion sale of Telsa (TSLA).

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 28.99. In other words, insiders sold almost 29 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 15.19.

Notable Insider Buys:

1. Datadog, Inc. (DDOG): $82.35

Director Matthew Jacobson acquired 719,894 shares of this monitoring and analytics platform for developers, paying $69.45 per share for a total amount of $49.99 million. These shares were purchased indirectly by ICONIQ Strategic Partners VI, L.P.

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

2. Energy Transfer LP (ET): $12.2

Executive Chairman Kelcy L. Warren acquired 1,200,000 shares of oil & gas midstream company, paying $12.35 per share for a total amount of $14.82 million. Mr. Warren increased his stake by 2.28% to 53,778,477 shares with this purchase.

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

3. CME Group Inc. (CME): $174.25

Director William R. Shepard acquired 48,645 shares of this derivatives marketplace, paying $170.00 per share for a total amount of $8.27 million. These shares were purchased indirectly by a trust.

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

4. Cable One, Inc. (CABO): $724.23

Director Thomas Sinnickson Gayner acquired 10,000 shares of this data, video, and voice services provider, paying $656.86 per share for a total amount of $6.57 million. These shares were purchased indirectly by Markel Corporation.

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

5. Definitive Healthcare Corp. (DH): $11.92

Director Jason Ronald Krantz acquired 450,000 shares of this healthcare commercial intelligence provider, paying $11.54 per share for a total amount of $5.19 million. These shares were purchased indirectly by a trust.

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

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

Notable Insider Sales:

1. Tesla, Inc. (TSLA): $195.97

Shares of Tesla were sold by 2 insiders:

• CEO Elon Musk sold 19,500,000 shares for $202.52, generating $3.95 billion from the sale. These shares were sold indirectly by a trust.
• Chief Financial Officer Zachary Kirkhorn sold 3,751 shares for $222.50, generating $834,598 from the sale.

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

2. Ares Management Corporation (ARES): $84.1

Shares of this asset management company were sold by 3 insiders:

• Co-Founder & Exec. Chairman Antony P. Ressler sold 675,779 shares for $83.02, generating $56.1 million from the sale. These shares were sold indirectly by TJ Capital Investors, LLC.
• General Counsel Aghili Naseem Sagati sold 15,000 shares for $84.92, generating $1.27 million from the sale.
• Co-Founder, CEO and President Michael J. Arougheti sold 2,983 shares for $85.02, generating $253,615 from the sale. These shares were sold indirectly by Atticus Enterprises LLC.

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

3. MACOM Technology Solutions Holdings, Inc. (MTSI): $71.04

Shares of this semiconductor company were sold by 5 insiders:

• Director John L. Ocampo sold 229,630 shares for $64.56, generating $14.83 million from the sale. These shares were sold indirectly by a trust.
• President and CEO Stephen G. Daly sold 95,000 shares for $64.96, generating $6.17 million from the sale.
• SVP, GC, HR & Secretary Ambra R. Roth sold 12,102 shares for $64.50, generating $780,596 from the sale.
• SVP, Global Sales Donghyun Thomas Hwang sold 4,000 shares for $63.22, generating $252,880 from the sale.

You can view the list of recent insider transactions for MACOM Technology Solutions Holdings, Inc. here.

4. Paylocity Holding Corporation (PCTY): $216.11

Shares of this software application company were sold by 3 insiders:

• Director Steven I. Sarowitz sold 89,681 shares for $201.36, generating $18.06 million from the sale.
• CFO and Treasurer Ryan Glenn sold 500 shares for $203.99, generating $101,995 from the sale.
• VP & Chief Accounting Officer Nicholas Rost sold 283 shares for $200.59, generating $56,767 from the sale.

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

5. Interactive Brokers Group, Inc. (IBKR): $73.55

Shares of this investment brokerage were sold by 2 insiders:

• Chief Information Officer Thomas Frank sold 120,100 shares for $79.88, generating $9.59 million from the sale.
• Chairman Thomas Peterffy sold 80,000 shares for $79.81, generating $6.38 million from the sale.

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