This week, we saw the return of many familiar names to our list of notable insider purchases, and given that we’ve written about these companies numerous times in the past, we decided to focus on a newcomer to our list, Victory Capital Holdings (VCTR). Victory Capital Holdings became an independent global asset management firm through a management-led buyout from KeyCorp (KEY), a bank-based financial services company. As of November 2022, Victory Capital has $157.1 billion in assets under management – an increase when compared to the previous month’s number of $150.5 billion.
Asset management companies, especially those focused on mutual funds, have had a difficult time growing assets in a competitive environment that favors ETFs and alternative asset classes. Growth is often driven by consolidation and Victory Capital has been growing through acquisitions for several years. The company’s funds have also been outperforming their benchmarks as you can see from the following slide from their Q3 2022 earnings presentation.
While Victory Capital has seen an understandable drop in the stock price over the past year due to the ongoing bear market, it has still managed to grow its revenue year-over-year by 2.42%, a significant number when competitors such as Franklin Resources (BEN) and Janus Henderson Group (JHG) have seen negative revenue growth. Furthermore, Victory Capital managed to grow its revenue by over 20% in the last three years, whereas Franklin Resources and Janus Henderson Group grew by around 13% and 4% respectively in the comparable time period. Victory Capital is also an incredibly efficient company, with a gross profit margin of 54.52% and a net income margin of 33.20%. As revenue grew, gross profit, operating income, and net income all also grew and despite revenue slightly declining in the last twelve months, gross profit and net income both managed to grow.
A comparable metric to look at is the acquisition of Legg Mason by Franklin Resources (BEN) in 2020, in which Franklin Resources paid $6.5 billion to purchase the company including around $2 billion in debt. According to the last 10-K filed by Legg Mason before its acquisition, they had operating revenue of $2.92 billion in fiscal 2020, ended March 31, 2020. This means that Franklin Resources acquired Legg Mason for around 2.2 times operating revenue. Revenue in 2020 was up just a little from $2.9 billion in 2019 and down from $3.14 billion in 2018.
Victory Capital currently has an operating revenue of $882.4 million (TTM) and an enterprise value of $2.77 billion, meaning it trades at around 3 times operating revenue – a small premium when compared to what Legg Mason was acquired for. Victory is trading at a premium because of its rapid growth over the last several years.
This week’s insider purchase was made by the CEO and Chairman of Victory Capital, David Craig Brown, and was his first insider purchase in roughly a year. Mr. Brown acquired 60,000 shares of the company for a total of $1.62 million at an average price of $26.97. This is well below where he purchased stock the last time, which was back in November 2021 when the company was trading at $34.62.
While the insider purchase is encouraging, given current market conditions, it doesn’t seem to be the right time to invest in an asset management company. We’ll definitely keep an eye on the stock to see how it performs and look for a continued increase in the value of assets that Victory Capital manages, but until the market shows signs of bottoming, it would be wise to temporarily steer clear of asset management stocks like Victory Capital.
Welcome to edition 652 of Insider Weekends. Insider buying decreased last week with insiders purchasing $65.81 million of stock compared to $75.6 million in the week prior. Selling also decreased significantly to $719.56 million compared to $5.04 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 10.93. In other words, insiders sold almost 11 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 66.68.
Notable Insider Buys:
1. B. Riley Financial, Inc. (RILY): $31.88
Shares of B. Riley Financial were acquired by 3 insiders:
You can view the list of recent insider transactions for B. Riley Financial, Inc. here.
|P/E: 5.45||Forward P/E: N/A||Industry P/E: 10.85|
|P/S: 1.09||Price/Book: 1.76||EV/EBITDA: N/A|
|Market Cap: $906.9M||Avg. Daily Volume: 334,001||52 Week Range: $31.6 – $91.24|
2. SoFi Technologies, Inc. (SOFI): $4.61
Chief Executive Officer Anthony Noto acquired 525,000 shares of this digital financial services provider, paying $4.59 per share for a total amount of $2.41 million. Mr. Noto increased his stake by 10.23% to 5,658,612 shares with this purchase.
You can view the list of recent insider transactions for SoFi Technologies, Inc. here.
|P/E: N/A||Forward P/E: -17.73||Industry P/E: 10.85|
|P/S: 2.71||Price/Book: 0.83||EV/EBITDA: N/A|
|Market Cap: $3.69B||Avg. Daily Volume: 42,917,276||52 Week Range: $4.24 – $16.49|
3. Victory Capital Holdings, Inc. (VCTR): $27.2
Chairman and CEO David Craig Brown acquired 60,000 shares of this investment company, paying $26.97 per share for a total amount of $1.62 million. Mr. Brown increased his stake by 2.77% to 2,228,137 shares with this purchase.
You can view the list of recent insider transactions for Victory Capital Holdings, Inc. here.
|P/E: 6.78||Forward P/E: 6.22||Industry P/E: 10.85|
|P/S: 2.11||Price/Book: 1.75||EV/EBITDA: 6.45|
|Market Cap: $1.86B||Avg. Daily Volume: 266,290||52 Week Range: $22.22 – $37.35|
4. BRT Apartments Corp. (BRT): $19.54
Shares of this real estate investment trust were acquired by 2 insiders:
You can view the list of recent insider transactions for BRT Apartments Corp. here.
|P/E: 6.95||Forward P/E: -14.8||Industry P/E: 27.55|
|P/S: 3.88||Price/Book: 1.37||EV/EBITDA: 14.07|
|Market Cap: $370.09M||Avg. Daily Volume: 63,542||52 Week Range: $18.73 – $25.67|
5. National Storage Affiliates Trust (NSA): $36.52
Executive Chairman Arlen Dale Nordhagen acquired 33,500 shares of this self storage properties operator, paying $36.76 per share for a total amount of $1.23 million. Mr. Nordhagen increased his stake by 0.82% to 4,098,351 shares with this purchase. 12,000 of these shares were purchased indirectly by Mr. Nordhagen’s spouse.
You can view the list of recent insider transactions for National Storage Affiliates Trust here.
|P/E: 39.7||Forward P/E: 28.76||Industry P/E: 27.55|
|P/S: 6.67||Price/Book: 2.25||EV/EBITDA: 15.2|
|Market Cap: $5.16B||Avg. Daily Volume: 747,110||52 Week Range: $35.37 – $70.04|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. ZoomInfo Technologies Inc. (ZI): $28.8
Chief Executive Officer Henry Schuck sold 1,041,667 shares of ZoomInfo for $28.16, generating $29.34 million from the sale. 41,667 of these shares were sold indirectly by a trust.
You can view the list of recent insider transactions for ZoomInfo Technologies Inc. here.
|P/E: 43.64||Forward P/E: 29.39||Industry P/E: 16.28|
|P/S: 11.41||Price/Book: 5.29||EV/EBITDA: 61.85|
|Market Cap: $11.63B||Avg. Daily Volume: 4,712,765||52 Week Range: $23.29 – $67.88|
2. Toast, Inc. (TOST): $17.62
Shares of this cloud-based and digital technology platform were sold by 3 insiders:
You can view the list of recent insider transactions for Toast, Inc. here.
|P/E: N/A||Forward P/E: -220.25||Industry P/E: 22.29|
|P/S: 3.71||Price/Book: 8.17||EV/EBITDA: -21.57|
|Market Cap: $9.18B||Avg. Daily Volume: 5,900,053||52 Week Range: $11.91 – $40.13|
3. Atlassian Corporation (TEAM): $127.22
Shares of this software application company were sold by 2 insiders:
You can view the list of recent insider transactions for Atlassian Corporation here.
|P/E: N/A||Forward P/E: 65.24||Industry P/E: 22.29|
|P/S: 10.85||Price/Book: 67.63||EV/EBITDA: -193.41|
|Market Cap: $32.51B||Avg. Daily Volume: 3,294,921||52 Week Range: $113.855 – $399.103|
4. NVIDIA Corporation (NVDA): $152.06
Shares of this semiconductor company were sold by 2 insiders:
You can view the list of recent insider transactions for NVIDIA Corporation here.
|P/E: 40.78||Forward P/E: 35.28||Industry P/E: 22.29|
|P/S: 13.27||Price/Book: 17.58||EV/EBITDA: 42.77|
|Market Cap: $378.93B||Avg. Daily Volume: 52,117,003||52 Week Range: $108.13 – $313.3|
5. Morningstar, Inc. (MORN): $213.5
Executive Chairman Joseph D. Mansueto sold 38,163 shares of Morningstar for $214.33, generating $8.18 million from the sale.
You can view the list of recent insider transactions for Morningstar, Inc. here.
|P/E: 74.91||Forward P/E: 35.23||Industry P/E: 10.85|
|P/S: 4.88||Price/Book: 7.69||EV/EBITDA: 29.53|
|Market Cap: $9.06B||Avg. Daily Volume: 99,200||52 Week Range: $207.11 – $350.21|
You can view the full list of sales from this Insider Sales page.
Disclaimer: I hold long positions in B. Riley (RILY) and Atlassian (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.