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.
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.