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A Tale of Two Insider Purchases – Insider Weekends

  • May 21, 2023

This week I wanted to briefly discuss insider purchases at two companies that are at polar opposites in every way imaginable. The first one is a melting ice cube with declining revenue and a low single digit P/E, while the other one is a company with rapidly increasing revenue that trades at a triple digit P/E. While one of them has $18.75 billion of net debt on the balance sheet, the second one has excess cash on the balance sheet. The first has lost two-thirds of its value in the last year while the second has more than doubled in price over the last year.

The first one is the satellite company DISH Network (DISH) where Co-founder and Director James DeFranco acquired 3 million share for $18.59 million. This follows a $24.56 million investment in March. I wrote the following about the company after his March purchase:

I have come to be wary of insider buying in companies that have seen a recent sharp decline in its price. The insiders in this scenario are either trying to signal the market or are anchored to old prices and probably see the stock as a bargain. I’ve been following the insider purchases by James DeFranco, the co-founder of satellite TV company DISH Network, for several years and every time I analyze the company, I come away with the conclusion that it is a melting ice cube that is best avoided.

Mr. DeFranco has been remarkably consistent in being wrong about the company’s stock price. He was buying in 2018 and 2019 when the stock was trading in the $30s, he was once again buying last year in the high teens and he just purchased nearly $25 million worth of stock last week.

DISH Networks 5 Year Stock Chart
DISH Networks 5 Year Stock Chart

The stock is down nearly 75% over the last five years and a large number of the “P” symbols you see on the chart above are his purchases. The one thing that stood out with these purchases from last week was the size and speed of the purchases. I have never seen him buy almost $25 million worth of stock in a single week.

DISH Network saw its revenue drop from $15.22 billion in 2015 to $12.81 billion in 2019. The pandemic and a couple of small acquisitions helped revenue rebound to $17.88 billion by 2021 but growth once again stalled in the last five quarters. EchoStar spun out its satellite broadcasting services in 2019 and merged that division with DISH in 2019. DISH  entered the wireless retail segment and specifically postpaid mobile services through the $1.4 billion acquisition of Boost Mobile in 2020.

The company has a highly leveraged balance sheet with over $17.5 billion in net debt. The good news is that they still earn money, beat earnings estimates by a wide margin the last three quarters and free cash flow is positive. The stock trades at a trailing P/E of 2.92, a forward EV/EBITDA of 11.75 and at 0.31 times book value.

There seems to be more to the story here and it could be the value of the spectrum DISH owns, which is encouraging James DeFranco to buy more.

There was an interesting story in the NY Post last week about how Dish’s other Co-founder and Chairman of the Board Charlie Ergen flew to Dubai to raise much needed capital to allow the company to build out its 5G network. If the company manages to raise additional capital at a reasonable rate, gets the FCC to agree to let them build out their network over a longer period of time or sells some of its spectrum assets at close to market value, the stock could see a big jump. Longer-term, the company needs to offset the decline in its core business through other offerings that leverage its spectrum but that is a tall order and will require significant capital expenditure.

On the other end of the spectrum is Axon Enterprise (AXON), a company that used to be previously known as TASER after its non-lethal weapon that was rapidly adopted by local law enforcement agencies. The founder-led company expanded both in terms of the products it offers by getting into wearable cameras and the market it serves by offering its products to federal agencies and corporations.

Axon Customers
Axon Customers (source: company investor presentation)

The company has nearly doubled its revenue over the last three years and expects to grow revenue by 22% to $1.45 billion this year. Subscription revenue has been growing at a 44% CAGR over the last four years. Unlike a lot of high growth software companies, Axon is both profitable on a GAAP basis and is free cash flow positive.

I like the fact that the company is founder led, was recently added to the S&P 500 index, has a recession resistant business and is growing both rapidly and profitably. The stock unfortunately trades at a nose bleed valuation of 104 times TTM earnings and does not fit my investment style. I look forward to doing more work on the company to see if the rapidly expanding revenue and profits can justify the valuation but for now I am going it to add it our watchlist as a potential candidate for future investment.

Welcome to edition 683 of Insider Weekends. Insider buying decreased last week with insiders purchasing $154.55 million of stock compared to $212.98 million in the week prior. Selling also decreased to $1.16 billion compared to $1.38 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 the total insider purchases that week. The adjusted ratio for last week went up to 7.52. In other words, insiders sold almost 8 times as much stock as they purchased. This week, the Sell/Buy ratio was unfavorable, compared to the prior week when the ratio stood at 6.46.

Notable Insider Buys:

1. Luminar Technologies, Inc. (LAZR): $6.27

Shares of this autonomous driving company were acquired by 2 insiders:

  • Chairperson, President & CEO Austin Russell acquired 3,566,798 shares, paying $5.98 per share for a total amount of $21.32 million. Mr. Russell increased his stake by 346.29% to 4,596,798 shares with this purchase.
  • Director Jun Hong Heng acquired 33,750 shares, paying $5.91 per share for a total amount of $199,604. These shares were purchased indirectly through a trust.

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

P/E: N/AForward P/E: -13.06Industry P/E: 15.21
P/S: 49.43Price/Book: N/AEV/EBITDA: -5.25
Market Cap: $2.39BAvg. Daily Volume: 12,108,87952 Week Range: $3.91 – $11.345

2. Energy Transfer LP (ET): $12.76

Executive Chairman Kelcy L. Warren acquired 1,500,000 shares of this energy-related services provider, paying $12.42 per share for a total amount of $18.63 million. Mr. Warren increased his stake by 2.56% to 60,078,477 shares with this purchase.

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

P/E: 9.52Forward P/E: 8.08Industry P/E: 7.01
P/S: 0.45Price/Book: 1.46EV/EBITDA: 8.28
Market Cap: $40.08BAvg. Daily Volume: 11,210,19852 Week Range: $9.15 – $13.67

3. DISH Network Corporation (DISH): $6.7

Director James DeFranco acquired 3,000,000 shares of DISH Network, paying $6.20 per share for a total amount of $18.59 million. These shares were purchased indirectly by a limited partnership.

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

P/E: 2.09Forward P/E: -67Industry P/E: 19.83
P/S: 0.22Price/Book: 0.2EV/EBITDA: 10.01
Market Cap: $3.57BAvg. Daily Volume: 9,431,12852 Week Range: $5.94 – $23.49

4. Royalty Pharma plc (RPRX): $33.71

CEO, Chairman of the Board Pablo G. Legorreta acquired 230,000 shares of this biotech company, paying $33.38 per share for a total amount of $7.68 million. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for Royalty Pharma plc here.

P/E: 45.55Forward P/E: 8.58Industry P/E: 27.15
P/S: 6.43Price/Book: 2.54EV/EBITDA: 20.38
Market Cap: $15.16BAvg. Daily Volume: 1,903,24252 Week Range: $32.675 – $44.66

5. AFC Gamma, Inc. (AFCG): $11.35

Shares of this lender to cannabis companies were acquired by 2 insiders:

  • Chief Executive Officer Leonard M. Tannenbaum acquired 294,681 shares, paying $10.26 per share for a total amount of $3.02 million. Mr. Tannenbaum increased his stake by 8.83% to 3,633,527 shares with this purchase. 74,217 of these shares were purchased indirectly by the Leonard M. Tannenbaum Foundation.
  • President Robyn Tannenbaum acquired 243,372 shares, paying $10.22 per share for a total amount of $2.49 million. Mr. Tannenbaum increased his stake by 7.29% to 3,582,218 shares with this purchase.

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

P/E: 6.45Forward P/E: 4.87Industry P/E: 7.96
P/S: 3.65Price/Book: 0.69EV/EBITDA: N/A
Market Cap: $232.18MAvg. Daily Volume: 206,58452 Week Range: $9.91 – $19

6. Gen Digital Inc. (GEN): $16.2

President Ondrej Vlcek acquired 300,000 shares of this cyber safety solutions provider, paying $15.79 per share for a total amount of $4.74 million. Mr. Vlcek increased his stake by 7.77% to 4,160,061 shares with this purchase.

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

P/E: 19.06Forward P/E: 6.67Industry P/E: 23.07
P/S: N/APrice/Book: 7.9EV/EBITDA: N/A
Market Cap: $10.35BAvg. Daily Volume: 4,679,97452 Week Range: $15.45 – $26.83

7. Axon Enterprise, Inc. (AXON): $196.86

Shares of this defense weapons and body camera company were acquired by 2 insiders:

  • Director Hadi Partovi acquired 10,000 shares, paying $200.02 per share for a total amount of $2 million. Mr. Partovi increased his stake by 2.71% to 378,817 shares with this purchase.
  • CFO & CBO Brittany Bagley acquired 250 shares, paying $200.00 per share for a total amount of $50,000. Ms. Bagley increased her stake by 0.23% to 109,174 shares with this purchase.

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

P/E: 108.17Forward P/E: 52.64Industry P/E: 18.69
P/S: 11.39Price/Book: 10.37EV/EBITDA: 115.42
Market Cap: $14.55BAvg. Daily Volume: 1,142,33352 Week Range: $83.01 – $229.95

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

Notable Insider Sales:

1. Airbnb, Inc. (ABNB): $107.38

Shares of Airbnb were sold by 2 insiders:

  • Director Joseph Gebbia sold 350,000 shares for $108.22, generating $37.88 million from the sale. These shares were sold indirectly by a trust.
  • Chief Financial Officer Dave Stephenson sold 4,919 shares for $111.36, generating $547,780 from the sale.

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

P/E: 35.21Forward P/E: 26.65Industry P/E: 15.21
P/S: 7.77Price/Book: 12.79EV/EBITDA: 30.8
Market Cap: $67.68BAvg. Daily Volume: 6,160,44652 Week Range: $81.91 – $144.63

2. PTC Inc. (PTC): $134.21

Director Blake D. Moret sold 265,225 shares of this software and services company for $131.38, generating $34.84 million from the sale. These shares were sold indirectly by Rockwell Automation.

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

P/E: 49.89Forward P/E: 25.71Industry P/E: 23.07
P/S: 8.03Price/Book: 6.31EV/EBITDA: 31.46
Market Cap: $15.88BAvg. Daily Volume: 686,23852 Week Range: $97.97 – $139.91

3. Quanta Services, Inc. (PWR): $171.71

President and CEO Earl C. Austin sold 160,000 shares of this specialty contracting services provider for $172.14, generating $27.54 million from the sale.

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

P/E: 50.8Forward P/E: 20.89Industry P/E: 18.69
P/S: 1.42Price/Book: 4.52EV/EBITDA: 19.99
Market Cap: $24.93BAvg. Daily Volume: 874,81552 Week Range: $112.86 – $176.29

4. Alphabet Inc. (GOOG): $123.25

Director Kavitark Ram Shriram sold 150,000 shares of Alphabet for $120.01, generating $18 million from the sale. 75,000 of these shares were sold indirectly by Mr. Shriram’s spouse.

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

P/E: 25.89Forward P/E: 19.75Industry P/E: N/A
P/S: 5.48Price/Book: 6.01EV/EBITDA: 16.95
Market Cap: $1.56TAvg. Daily Volume: 28,216,52552 Week Range: $83.45 – $126.479

5. Bruker Corporation (BRKR): $75.82

President and CEO Frank H. Laukien sold 200,000 shares of this scientific instruments manufacturer for $72.78, generating $14.56 million from the sale.

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

P/E: 36.1Forward P/E: 26.14Industry P/E: 27.15
P/S: 4.24Price/Book: 9.28EV/EBITDA: 20.08
Market Cap: $11.12BAvg. Daily Volume: 862,37752 Week Range: $48.42 – $84.84

6. Inari Medical, Inc. (NARI): $62.17

Shares of this medical devices company were sold by 4 insiders:

  • Director William Hoffman sold 106,897 shares for $70.13, generating $7.49 million from the sale.
  • President and CEO Andrew Hykes sold 36,676 shares for $70.01, generating $2.57 million from the sale.
  • Chief Medical Officer Thomas Tu sold 24,927 shares for $70.01, generating $1.75 million from the sale.
  • Chief Financial Officer Mitch C. Hill, sold 12,750 shares for $70.26, generating $895,805 from the sale. 6,500 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 Inari Medical, Inc. here.

P/E: N/AForward P/E: 207.23Industry P/E: 27.15
P/S: 8.61Price/Book: 8.32EV/EBITDA: -147.97
Market Cap: $3.55BAvg. Daily Volume: 840,39252 Week Range: $52.59 – $86.94

7. Taylor Morrison Home Corporation (TMHC): $44.25

Shares of this public homebuilder were sold by 2 insiders:

  • Director William H. Lyon sold 213,294 shares for $44.10, generating $9.41 million from the sale. These shares were sold indirectly by a trust.
  • EVP, CLO & Secretary Darrell Sherman sold 21,156 shares for $44.66, generating $944,723 from the sale.

You can view the list of recent insider transactions for Taylor Morrison Home Corporation here.

P/E: 4.75Forward P/E: 6.75Industry P/E: 15.21
P/S: 0.59Price/Book: 1EV/EBITDA: 4.2
Market Cap: $4.83BAvg. Daily Volume: 1,012,14652 Week Range: $20.05 – $45.51

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 a long position in American Assets Trust (AAT). 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.