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Insider of Uber Cannibal AutoZone Buys Shares

  • June 18, 2023

Founded in 1979, AutoZone (AZO) is one of the largest automotive replacement parts retailers, with over 7,000 stores in the United States, Mexico, and Brazil. The company specializes in providing new and remanufactured automotive hard parts, maintenance items, and accessories for cars, trucks, SUVs, and other vehicles. In the investing world though, AutoZone is most known for being what Monish Pabrai deemed an “uber cannibal” – a company that aggressively buys back its own stock.

In his Forbes article on the subject, AutoZone was the company that most frequently bought back its shares on the open market. While AutoZone, with its continuing series of buybacks, has not left the list of uber cannibals, it has found a home in another list instead, which we at InsideArbitrage call the Double Dipper. As mentioned in our Double Dipper screener, this list is a list of companies that are buying back their shares while their insiders are independently buying stock on the open market for their own portfolios.

The insider that was independently buying shares of AutoZone this week was Chief Information Officer Michelle Borninkhof, who joined the company in April 2021. Prior to joining AutoZone, Ms. Borninkhof was the Chief Information Officer at McDonald’s (MCD) since 2018 and also had spent 11 years at Walmart (WMT) in various leadership roles. In the last five years, insiders of AutoZone have had incredibly apt at timing their purchases, with a purchase made by Director Michael Calbert in March 2020 when AutoZone was trading at $886 a share – representing an increase of over 180%, given that a share of AutoZone now trades at $2,493.83. Ms. Borninkhof has also purchased AutoZone shares in the past, in March 2022, when AutoZone was trading at a price of $1,944.66.

Graph of Purchases of Two Insiders at AutoZone
Graph of purchases by Mr. Calbert and Ms. Borninkhof and AutoZone’s rise since the purchases

AutoZone has done extremely well considering the difficult market conditions both recently and throughout 2022, with the stock rising by around 22% over the last year. Part of this is due to continued buybacks, and the Board of Directors just authorized another $2 billion to be added to the ongoing share repurchase program as of June 14th, 2023. But moreover the company is very well run, with gross profit margin of over 50% and a net income margin of over 14%. As for fiscal 2022 results (year ended on August 27, 2022), net sales increased by 11.1% YoY to $16.3 billion, and while operating expenses increased to $5.2 billion, they represented only 32% of net sales – compared to 32.6% of net sales for fiscal 2021.

In more recent results for Q3 2023 (ended on May 6, 2023), net sales for the quarter increased by 5.8% to $4.09 billion and net income increased by 9.3% to $648 million. During the quarter, the company repurchased $908 million worth of shares, and in total for the first three quarters in fiscal year 2023, AutoZone repurchased $2.7 billion worth of stock. 22 new domestic stores were opened and the total number of stores reached 7,044 in Q3 2023, when compared to 6,846 stores in Q3 2022.

Due to how well AutoZone has been performing in recent years, and having beat earnings estimates the past four quarters, the company is valued just a little richly, with a P/E ratio of 19.59. AutoZone also has around $10.48 billion in total debt, and only $317.47 million in cash, and has a fair amount of leverage on the balance sheet. Nevertheless, consistent buybacks are a great way to unlock value for shareholders, and along with growth rates of around 8% seem to be truly supporting AutoZone.

While the fear of a recession has made us hold off from purchasing many companies discussed in our Insider Weekends articles, a recession may actually make car owners less likely to purchase new cars and instead invest more into maintaining their current vehicle – something AutoZone would profit from. In the last month or so AutoZone has seen some volatility, reaching a high of around $2,700 a share, and it seems like prices are stabilizing at the moment. AutoZone still has room for growth if they continue to increase the number of stores, keep their profit margins (or even improve them), and also continue their buybacks.

The key concern I have at this point with the company is the rapid growth in EV sales and the fact that it is very difficult for consumers or independent repair shops to fix or replace parts for EVs. The red hot growth in used car sales is also likely to start moderating, especially if student loan payments resume this fall.

Welcome to edition 687 of Insider Weekends. Insider buying decreased last week with insiders purchasing $68.98 million of stock compared to $72.87 million in the week prior. Selling increased to $1.66 billion compared to $1.51 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 24.02. In other words, insiders sold more than 24 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 20.75.

Notable Insider Buys:

1. Diversified Healthcare Trust (DHC): $2.57

Director Adam D. Portnoy acquired 6,003,515 shares of this diversified holding company, paying $2.99 per share for a total amount of $17.95 million. These shares were purchased indirectly by a trust.

You can view the list of recent insider transactions for Diversified Healthcare Trust here.

P/E: N/AForward P/E: N/AIndustry P/E: 27.12
P/S: 0.52Price/Book: 0.27EV/EBITDA: 22.45
Market Cap: $615.98MAvg. Daily Volume: 4,132,30152 Week Range: $0.61 – $3.3

2. GameStop Corp. (GME): $24.56

Shares of this multichannel video game operator were acquired by 2 insiders:

  • Executive Chairman Ryan Cohen acquired 443,842 shares, paying $22.53 per share for a total amount of $10 million. These shares were purchased indirectly by RC Ventures LLC.
  • Director Lawrence Cheng acquired 5,000 shares, paying $22.38 per share for a total amount of $111,899. These shares were purchased indirectly by Cheng Capital LLC.

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

P/E: N/AForward P/E: -98.24Industry P/E: 16.72
P/S: 1.29Price/Book: 5.88EV/EBITDA: -62.69
Market Cap: $7.48BAvg. Daily Volume: 5,509,97152 Week Range: $15.41 – $47.99

3. Asana, Inc. (ASAN): $25.01

President, CEO, & Chair Dustin A. Moskovitz acquired 160,000 shares of this work management platform, paying $22.65 per share for a total amount of $3.62 million. Mr. Moskovitz increased his stake by 0.41% to 39,272,803 shares with this purchase.

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

P/E: N/AForward P/E: -75.79Industry P/E: 25.69
P/S: 9.37Price/Book: 15.57EV/EBITDA: -14.6
Market Cap: $5.42BAvg. Daily Volume: 2,196,94452 Week Range: $11.32 – $29.51

4. Royalty Pharma plc (RPRX): $31.9

CEO, Chairman of the Board Pablo G. Legorreta acquired 90,000 shares of this biotechnology patents holder, paying $32.89 per share for a total amount of $2.96 million. These shares were purchased indirectly by a trust.

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

P/E: 43.7Forward P/E: 8.1Industry P/E: 27.92
P/S: 6.06Price/Book: 2.4EV/EBITDA: 19.69
Market Cap: $14.3BAvg. Daily Volume: 2,111,79852 Week Range: $31.68 – $44.66

5. Dollar General Corporation (DG): $164.32

Director Michael M. Calbert acquired 8,500 shares of this discount retailer, paying $155.38 per share for a total amount of $1,320,763. Mr. Calbert increased his stake by 7.86% to 116,682 shares with this purchase. 6,000 of these shares were purchased indirectly by a trust.

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

P/E: 15.5Forward P/E: 14.94Industry P/E: 22.83
P/S: 0.94Price/Book: 6.07EV/EBITDA: 13.05
Market Cap: $36.04BAvg. Daily Volume: 2,616,05252 Week Range: $151.27 – $261.59

6. AutoZone Inc. (AZO): $2493.83

Senior Vice President & CIO Michelle K. Borninkhof acquired 476 shares of this auto parts retailer, paying $2406.65 per share for a total amount of $1.15 million. Ms. Borninkhof increased her stake by 1904.00% to 501 shares with this purchase. 259 of these shares were purchased indirectly by Ms. Borninkhof’s spouse.

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

P/E: 19.7Forward P/E: 17.09Industry P/E: 16.72
P/S: 2.65Price/Book: N/AEV/EBITDA: 14.11
Market Cap: $45.28BAvg. Daily Volume: 175,75752 Week Range: $1980.74 – $2750

7. AutoNation, Inc. (AN): $149.16

CEO and Director Michael Mark Manley acquired 7,000 shares of this automotive replacement parts and accessories company, paying $144.89 per share for a total amount of $1.01 million. Mr. Manley increased his stake by 45.82% to 22,277 shares with this purchase.

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

P/E: 6.18Forward P/E: 7.13Industry P/E: 16.72
P/S: 0.26Price/Book: 3.37EV/EBITDA: 6.13
Market Cap: $6.8BAvg. Daily Volume: 615,95852 Week Range: $94.92 – $158.3

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

Notable Insider Sales:

1. Walmart Inc. (WMT): $155.53

Shares of Walmart were sold by 2 insiders:

  • Director Robson S. Walton sold 1,369,000 shares for $156.00, generating $213.56 million from the sale. These shares were sold indirectly by a trust.
  • Senior Vice President David Chojnowski sold 4,000 shares for $156.74, generating $626,941 from the sale.

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

P/E: 38.03Forward P/E: 22.64Industry P/E: 22.83
P/S: 0.67Price/Book: 5.79EV/EBITDA: 13.17
Market Cap: $418.82BAvg. Daily Volume: 6,204,94752 Week Range: $118.22 – $158.23

2. Salesforce, Inc. (CRM): $211.76

Shares of this software application company were sold by 2 insiders:

  • Chair and CEO Marc Benioff sold 500,000 shares for $209.14, generating $104.57 million from the sale.
  • Co-Founder and CTO Parker Harris sold 1,250 shares for $215.50, generating $269,375 from the sale. 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 Salesforce, Inc. here.

P/E: 557.26Forward P/E: 25.79Industry P/E: 25.69
P/S: 6.41Price/Book: 3.6EV/EBITDA: 31.06
Market Cap: $206.25BAvg. Daily Volume: 6,549,07652 Week Range: $126.34 – $225

3. Airbnb, Inc. (ABNB): $128.68

Director Joseph Gebbia sold 691,145 shares of Airbnb for $124.85, generating $86.29 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: 42.89Forward P/E: 35.16Industry P/E: 16.72
P/S: 9.31Price/Book: 15.32EV/EBITDA: 36.61
Market Cap: $81.1BAvg. Daily Volume: 6,407,34452 Week Range: $81.91 – $144.63

4. NVIDIA Corporation (NVDA): $426.92

Shares of this graphics, compute and networking solutions provider were sold by 3 insiders:

  • Director Harvey C. Jones sold 119,795 shares for $403.17, generating $48.29 million from the sale. These shares were sold indirectly by a trust.
  • Director Tench Coxe sold 50,000 shares for $422.15, generating $21.11 million from the sale. These shares were sold indirectly by a trust.
  • Director Brooke A. Seawell sold 860 shares for $424.69, generating $365,233 from the sale.

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

P/E: 222.35Forward P/E: 44.99Industry P/E: 25.69
P/S: 40.75Price/Book: 43.06EV/EBITDA: 172.62
Market Cap: $1.05TAvg. Daily Volume: 47,720,48452 Week Range: $108.13 – $437.21

5. Humacyte, Inc. (HUMA): $3.22

President, CEO and Director Laura E. Niklason sold 5,375,000 shares of this biotech company, for $2.65, generating $14.23 million from the sale. These shares were sold indirectly by Ayabudge LLC.

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

P/E: N/AForward P/E: -3.66Industry P/E: 27.92
P/S: 249.98Price/Book: 4.07EV/EBITDA: -3.57
Market Cap: $332.97MAvg. Daily Volume: 322,01952 Week Range: $1.96 – $5.6

6. T-Mobile US, Inc. (TMUS): $130.93

Director Raul Marcelo Claure sold 192,600 shares of this telecom services company for $130.01, generating $25.04 million from the sale.

You can view the list of recent insider transactions for T-Mobile US, Inc. here.

P/E: 41.7Forward P/E: 14.9Industry P/E: 20.10
P/S: 1.99Price/Book: 2.36EV/EBITDA: 9.96
Market Cap: $157.1BAvg. Daily Volume: 6,569,50752 Week Range: $124.92 – $154.38

7. Advanced Micro Devices, Inc. (AMD): $120.08

Shares of this semiconductor company were sold by 2 insiders:

  • President, AMD Victor Peng sold 105,000 shares for $124.57, generating $13.08 million from the sale. These shares were sold indirectly by a trust.
  • SVP, GC & Corporate Secretary Harry A. Wolin sold 74,473 shares for $125.98, generating $9.38 million from the sale. 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 Advanced Micro Devices, Inc. here.

P/E: 667.11Forward P/E: 28.73Industry P/E: 25.69
P/S: 8.38Price/Book: 3.53EV/EBITDA: 47.85
Market Cap: $193.37BAvg. Daily Volume: 68,773,17752 Week Range: $54.57 – $132.83

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.