Global Insider Buying Remains High for Third Week $AMH

In another tough week for the markets where the Nasdaq fell almost 4%, insiders again significantly increased their insider buying for a third consecutive week. We saw an increase in all three dimensions, the number of unique insiders buying shares, the number of companies with insider buying, and the absolute amount of buying.

We saw 897 insiders at 381 companies buy $324 million worth of stock last week. That compares to 584 insiders at 281 companies that bought $188 million worth of stock the previous week. The year-on-year comparison is even more striking. In the same week of May 2021, 190 insiders from 107 companies bought $43 million worth of stock. This begs the question: what level of macro signal is provided by aggregate insider buying?

I use insider buying as an idea discovery tool to uncover new businesses or rediscover businesses that may have fallen off my radar. I also use aggregate data when I see extreme moves like we saw in March 2020 where insider buying exceeded insider selling for the first time in over a decade. While that hasn’t happened in recent weeks, the pace of insider buying is certainly high. The situation in March 2020 was unique due to the rapid decline of markets within days and the unprecedented stimulus measures that were taken by governments and central banks around the world. This bear market falls as a slow-burn variety reminiscent of the bear market of 2001-2003.

Insiders are often ahead and if so, we still have a ways to go before this bear is over. Investors who subscribe to a momentum strategy and push stocks well above their intrinsic value are likely to do the same in the other direction. Mean reversion rarely stops at the mean. Insiders increased their insider buying significantly in the fourth quarter of 2008 and the early months of 2009 before the March 2009 trough during the Great Recession following the bursting of the housing bubble. This implies that the optimal approach would be to add existing positions or create new positions very gradually and spread trades over weeks or months at the risk of missing the first leg of the eventual rebound.

Coming to the details of insider buying this week, the top 5 list below barely scratches the surface. Continuing the trend we have seen, insiders of high growth companies have started buying shares and some of these companies like Doximity (DOCS) are also buying back shares. We talked about Doximity in an article for our Shattered Growth Series on Seeking Alpha Friday. It was interesting to see the co-founder of Coinbase (PIECE OF MONEY) buy shares in 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. This changed in the first quarter of 2022 when the company announced its first quarterly loss in over 8 quarters. The loss was driven by a drop in trading volume in the first quarter of 2022 due to a fall in the value of cryptocurrencies in January 2022. The market was also spooked by a new risk disclosure by the company which seemed indicate that in the event of bankruptcy of the company, the assets of the customers could be threatened. The CEO went on to say that even if it were possible, it was unlikely that a court “consider client assets as part of the business in bankruptcy proceedings”.

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

AMH tweet thread (source: Twitter)

Welcome to issue 620 of Insider Weekends. Insider buying increased significantly last week, with insiders buying $324.11 million worth of shares, up from $187.78 million the previous week. Sales nearly doubled to $1.08 billion from $547.68 million the previous week.

Sale/purchase ratio: The insider sell/buy ratio is calculated by dividing the total insider sells in a given week by the total insider buys that week. The adjusted ratio for the past week rose to 3.33. In other words, insiders sold more than 3 times as many shares as they bought. The sell/buy ratio this week was unfavorable compared to the previous week when the ratio stood at 2.92.

Notable Insider Buys:

1. Coinbase Global, Inc. PIECE OF MONEY: $66.15

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

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

2. American Homes 4 Rental AMH: $36.57

The 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 consideration 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 trades 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 PLATE: $20.78

The shares of this pay TV service provider were acquired by 2 insiders:

  • Director James DeFranco acquired 1,250,000 shares, paying $19.43 per share for a total consideration 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 consideration 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

CFO Salvatore Calabrese acquired 3,000 shares of this biotechnology company, paying $8,100.00 per share for a total consideration of $24.3 million. Mr. Calabrese increased his stake from 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 capitalization: 32.8 M $ Avg. Daily Volume: 155,953 52 Week Range: $2.53 – $10.999

5. Transocean Ltd. PLATFORM: $3.9

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

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

Notable insider sales:

1. Paylocity Holding Company PCTY: $161.71

Director Steven I. Sarowitz sold 225,000 shares of this provider of cloud-based payroll and human capital management software solutions 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

Airbnb.org President 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 wellhead and pressure control equipment company were sold by 5 insiders:

  • Senior Vice President and COO Joel Bender sold 203,935 shares for $48.04, generating $9.79 million from the sale.
  • Chairman 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.
  • Vice President 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/AP/S: 7.33 Price/Book: 5.9 EV/EBITDA: 21.28 Market capitalization: 3.66 B $ Avg. Daily volume: 549,763 52 week range: $31.65 – $64.18

4. Zoom Info Technologies Inc. ZI: $39.67

ZoomInfo shares were sold by 2 insiders:

  • CEO Henry Schuck sold 300,000 shares for $42.71, generating $12.81 million from the sale.
  • President and COO 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: $16 billion Avg. Daily Volume: 3,407,011 52 week range: $35.03 – $79.17

5. The Kraft Heinz Company KHC: $38.37

CEO 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: 46.96 B$ Avg. Daily volume: 7,296,030 52 week range: $32,785 – $44.95