Aggregate Insider Buying Remains Elevated For A Third Week $AMH

In another challenging week for the markets where the Nasdaq dropped nearly 4%, insiders once again significantly stepped up their insider purchases for a third week in a row. We saw an increase across all three dimensions, number of unique insiders buying shares, the number of companies with insider buying and the absolute dollar amount of purchases.

We saw 897 insiders across 381 companies purchase $324 million worth of stock last week. This compares with 584 insiders across 281 companies purchasing $188 million worth of stock in the week prior. The year-over-year comparison is even starker. During the same week in May 2021, 190 insiders from 107 companies purchased $43 million worth of stock. This brings up the question, how much of a macro signal does aggregate insider buying provide?

I use insider buying as an idea discovery tool to discover new companies or rediscover companies that may have fallen off my radar. I also use the aggregate data when I see extreme moves like we saw in March 2020 where insider buying surpassed insider selling for the first time in over a decade. While that has not occurred in recent weeks, the pace of insider buying is certainly elevated. The March 2020 situation was unique because of the rapid drop in markets in a matter of days and the unprecedented stimulus measures that were undertaken by governments and central banks across the globe. This bear market fells like a slow burn variety reminiscent of the 2001-2003 bear market.

Insiders are often early and if that is the case, we still have a ways to go before this bear is done. Investors that subscribe to a momentum strategy and pushed stocks up well beyond their intrinsic value are likely to do the same in the other direction. Mean reversion rarely stops at the mean. Insiders did step up their insider buying significantly in Q4 2008 and the first months of 2009 before the March 2009 bottom during the Great Recession following the bursting of the real estate bubble. This implies the optimal approach would be to add to existing positions or start new positions very gradually and spread trades out over weeks or months at risk of missing the first leg of the eventual rebound.

Getting to the specifics of the insider purchases this week, the top 5 list below barely scratches the surface. In a continuation of the trend we have been seeing, insiders of high growth companies have started buying stock and some of these companies like Doximity (DOCS) are also buying back shares. We wrote about Doximity in an article for our Broken Growth series on Seeking Alpha on Friday. It was interesting to see the co-founder of Coinbase (COIN) purchase shares of the company through the venture capital firm he co-founded. COIN is down more than 73% this year and was one of the few high growth companies that until recently, was profitable on a GAAP basis. That changed in Q1 2022 when the company reported its first quarterly loss in more than 8 quarters. The loss was driven by a decline in transaction volume in Q1 2022 on account of a drop in the value of cryptocurrencies in January 2022. The market was also spooked by a new risk disclosure by the company that appeared to indicate that in the event of a corporate bankruptcy, customer assets could be at risk. The CEO went on to say that while this was possible, it was unlikely that a court would “consider customer assets as part of the company in bankruptcy proceedings”.

It was also encouraging to see additional insider purchases at American Homes 4 Rent (AMH). I wrote an article titled American Home 4 Rent (AMH) on Sale in September 2018 and did a mini-tweet thread about the insider purchase last week here.

AMH Tweet Thread (source: Twitter)

Welcome to edition 620 of Insider Weekends. Insider buying increased significantly last week with insiders purchasing $324.11 million of stock compared to $187.78 million in the week prior. Selling almost doubled to $1.08 billion compared to $547.68 million 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 went up to 3.33. In other words, insiders sold more than 3 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 2.92.

Notable Insider Buys:

1. Coinbase Global, Inc. COIN: $66.15

Director Frederick Ernest Ehrsam acquired 1,091,814 shares of this cryptocurrency exchange, paying $68.71 per share for a total amount of $75.01 million. These shares were purchased indirectly by the venture capital firm Paradigm One that was founded by Mr. Ehrsam.

P/E: 6.77 Forward P/E: -16.54 Industry P/E: 12.42 P/S: 2.41 Price/Book: 2.25 EV/EBITDA: 4.15 Market Cap: $17.32B Avg. Daily Volume: 8,669,703 52 Week Range: $40.83 – $368.9

2. American Homes 4 Rent AMH: $36.57

Shares of this residential REIT were acquired by 2 insiders:

• Director Tamara Hughes Gustavson acquired 755,000 shares, paying $36.63 per share for a total amount of $27.66 million. Mr. Gustavson increased his stake by 8.77% to 9,367,123 shares with this purchase.
• Director Douglas N. Benham acquired 6,949 shares, paying $25.01 per share for a total amount of $173,813. The shares purchased were Series H Perpetual Preferred Shares.

You can view the list of recent insider transactions for American Homes 4 Rent here.

P/E: 75.87 Forward P/E: 63.05 Industry P/E: 28.51 P/S: 10.85 Price/Book: 1.98 EV/EBITDA: 26.08 Market Cap: $14.62B Avg. Daily Volume: 2,890,249 52 Week Range: $34.79 – $44.07

3. DISH Network Corporation DISH: $20.78

Shares of this pay-TV services provider were acquired by 2 insiders:

• Director James DeFranco acquired 1,250,000 shares, paying $19.43 per share for a total amount of $24.28 million. Mr. DeFranco increased his stake by 144.07% to 2,117,658 shares with this purchase.
• Director George R. Brokaw acquired 5,000 shares, paying $19.07 per share for a total amount of $95,350.

P/E: 5.97 Forward P/E: 12.91 Industry P/E: 12.68 P/S: 0.62 Price/Book: 0.69 EV/EBITDA: 8.76 Market Cap: $11.01B Avg. Daily Volume: 3,732,376 52 Week Range: $17.04 – $46.31

4. Gain Therapeutics, Inc. GANX: $2.76

Chief Financial Officer Salvatore Calabrese acquired 3,000 shares of this biotech company, paying $8100.00 per share for a total amount of $24.3 million. Mr. Calabrese increased his stake by 58.82% to 8,100 shares with this purchase.

P/E: N/A Forward P/E: -1.67 Industry P/E: 61.78 P/S: 191.28 Price/Book: 1.03 EV/EBITDA: 0 Market Cap: $32.8M Avg. Daily Volume: 155,953 52 Week Range: $2.53 – $10.999

5. Transocean Ltd. RIG: $3.9

Director Frederik Wilhelm Mohn acquired 2,000,000 shares of this offshore contract drilling services provider for oil and gas wells, paying $3.75 per share for a total amount of $7.5 million. These shares were purchased indirectly by Perestroika AS.

P/E: N/A Forward P/E: -10.83 Industry P/E: N/A P/S: 1.07 Price/Book: 0.24 EV/EBITDA: 10.35 Market Cap: $2.66B Avg. Daily Volume: 24,579,407 52 Week Range: $2.63 – $5.56

Notable Insider Sales:

1. Paylocity Holding Corporation PCTY: $161.71

Director Steven I. Sarowitz sold 225,000 shares of this cloud-based payroll and human capital management software solutions provider for $163.79, generating $36.85 million from the sale.

P/E: 104.33 Forward P/E: 50.07 Industry P/E: 47.33 P/S: 11.27 Price/Book: 15.76 EV/EBITDA: 89.3 Market Cap: $8.91B Avg. Daily Volume: 268,679 52 Week Range: $152.97 – $314.495

2. Airbnb, Inc. ABNB: $112.55

Chairman of Airbnb.org Joseph Gebbia sold 250,000 shares of Airbnb for $121.32, generating $30.33 million from the sale. These shares were sold indirectly by a trust.

P/E: 87.72 Forward P/E: 44.84 Industry P/E: 297.13 P/S: 10.99 Price/Book: 15.12 EV/EBITDA: 75.82 Market Cap: $72.67B Avg. Daily Volume: 6,654,234 52 Week Range: $107.45 – $212.584

3. Cactus, Inc. WHD: $48.29

Shares of this wellheads and pressure control equipment company were sold by 5 insiders:

• Senior VP & COO Joel Bender sold 203,935 shares for $48.04, generating $9.79 million from the sale.
• President and CEO Scott Bender sold 180,000 shares for $48.00, generating $8.64 million from the sale.
• Director Michael Y. McGovern sold 24,024 shares for $48.26, generating $1.16 million from the sale.
• VP of Operations Steven Bender sold 20,000 shares for $48.00, generating $960,000 from the sale.
• Director Alan Semple sold 20,000 shares for $48.84, generating $976,800 from the sale.

P/E: 49.43 Forward P/E: 22.78 Industry P/E: N/A P/S: 7.33 Price/Book: 5.9 EV/EBITDA: 21.28 Market Cap: $3.66B Avg. Daily Volume: 549,763 52 Week Range: $31.65 – $64.18

4. ZoomInfo Technologies Inc. ZI: $39.67

Shares of ZoomInfo were sold by 2 insiders:

• Chief Executive Officer Henry Schuck sold 300,000 shares for $42.71, generating $12.81 million from the sale.
• President and Chief Operating Officer Joseph Christopher Hays sold 57,213 shares for $43.33, generating $2.48 million from the sale.

P/E: 103.04 Forward P/E: 39.28 Industry P/E: 19.57 P/S: 19.15 Price/Book: 7.77 EV/EBITDA: 91.6 Market Cap: $16B Avg. Daily Volume: 3,407,011 52 Week Range: $35.03 – $79.17

5. The Kraft Heinz Company KHC: $38.37

Chief Executive Officer Miguel Patricio sold 259,958 shares of Kraft Heinz for $44.28, generating $11.51 million from the sale.

P/E: 38.76 Forward P/E: 13.75 Industry P/E: 18.61 P/S: 1.83 Price/Book: 0.95 EV/EBITDA: 10.78 Market Cap: $46.96B Avg. Daily Volume: 7,296,030 52 Week Range: $32.785 – $44.95