Happy Holidays! If a Santa Claus rally was supposed to materialize this year, it has yet to happen and the S&P 500 once again declined for the third week in a row. The pace of selling accelerated with a 7% drop last week. There could be various reasons for this market correction ranging from the Fed raising interest rates, fears of default from leveraged companies, trade wars, the partial government shutdown, a big drop in oil hurting energy companies, tax loss harvesting and forced liquidation of some hedge funds. An investor I know mentioned that the current market situation has presented opportunities that makes it feel like "shooting fish in a barrel". The aftermath of the 2008-2009 bear market certainly felt that way but I don't think we are there yet right now. I do see some interesting opportunities and started nibbling on two new positions last week.
Insiders often step up their buying during market corrections and they could provide signals about companies worth exploring during this downturn. Since we are in the quiet period before the end of the quarter and earnings season, the overall buying has not been as aggressive as I would have expected but insider buying was significantly higher last week compared to the same period last year. Insider buying increased last week with insiders purchasing $209.15 million of stock compared to $205.39 million in the week prior. Selling on the other hand declined sharply with insiders selling $513.22 million of stock last week compared to $809.7 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 dropped to 2.45. In other words, insiders sold more than 2 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 3.94. This is the lowest Sell/Buy ratio we have seen in nearly 20 months.
Note: As mentioned in the first post in this series, certain industries have their preferred metrics such as same store sales for retailers, funds from operations (FFO) for REITs and revenue per available room (RevPAR) for hotels that provide a better basis for comparison than simple valuation metrics. However, metrics like Price/Earnings, Price/Sales and Enterprise Value/EBITDA included below should provide a good starting point for analyzing the majority of stocks.
Notable Insider Buys:
1. The Medicines Company (NASDAQ:MDCO): $17.26
Shares of this pharmaceutical company were acquired by 3 insiders:
- Director Alexander J. Denner acquired 859,000 shares, paying $20.15 per share for a total amount of $17.31 million. These shares were purchased indirectly by funds managed by Sarissa Capital Management LP.
- EVP & Chief Corp. Development Officer Christopher T. Cox acquired 113,500 shares, paying $17.70 per share for a total amount of $2 million. These shares were purchased indirectly through a trust.
- Chief Executive Officer Mark Timney acquired 26,863 shares, paying $18.60 per share for a total amount of $499,652.
|P/E: N/A||Forward P/E: -7.71||Industry P/E: 29.45|
|P/S: 86.21||Price/Book: N/A||EV/EBITDA: -7.55|
|Market Cap: $1.27B||Avg. Daily Volume: 1,262,677||52 Week Range: $16.69 - $41.57|
2. Lions Gate Entertainment Corporation (NYSE:LGF.A): $14.00
Shares of this movies and TV shows production and distribution company were acquired by 3 insiders:
- Director Mark H. Rachesky acquired 779,900 class A shares, paying $14.23 per share for a total amount of $11.1 million. These shares were purchased indirectly by MHR Capital Partners Master Account LP.
- Director Gordon Crawfoot acquired 75,000 class A shares paying $14.21 per share for a total amount of $1.07 million.
- CFO James W. Barge acquired 10,000 class A shares paying $16.32 per share for a total amount of $163,200.
This purchase by Mr. Rachesky after Lionsgate stock declined more than 58% over the last year caught my eye. Dr. Rachesky, has held a stake in Lionsgate since 2005 and has served on the board since 2012. Business Insider wrote an interesting article about his Lionsgate stake in 2009 and called him Carl Icahn's ex-protege.
We wrote the following about an insider purchase by Mr. Crawfoot in April 2015,
This was an interesting purchase for multiple reasons. I have written about Lions Gate and have invested in the company in the past when it was trading in the high single digits. Unfortunately I did not hold it long enough to realize a nearly 5 fold increase in the stock that Carl Icahn’s ex-protege Mark Rachesky realized from his purchases back in 2011. Mr. Rachesky has started taking some profits off the table with a 10 million share sale this week generating $316 million from the sale.
Even as Mr. Rachesky is selling stock, veteran media investor Gordon Crawford is increasing his stake in Lions Gate. Mr. Crawford joined the board of Lions Gate in February 2013. He retired after nearly four decades with the asset management firm Capital Group that manages approximately $1 trillion in assets. The LA Times wrote an interesting article about him around the time of his retirement in December 2012 that is well worth a read.
|P/E: 22.8||Forward P/E: 21.88||Industry P/E: N/A|
|P/S: 0.72||Price/Book: 0.98||EV/EBITDA: 11.46|
|Market Cap: $2.08B||Avg. Daily Volume: 1,100,306||52 Week Range: $13.63 - $36.48|
3. Scientific Games Corporation (NASDAQ:SGMS): $15.13
Director Ronald O. Perelman acquired 600,000 shares of this gaming company, paying $15.27 per share for a total amount of $9.16 million. These shares were purchased indirectly by MacAndrews & Forbes Incorporated.
|P/E: N/A||Forward P/E: 29.1||Industry P/E: 44.95|
|P/S: 0.42||Price/Book: N/A||EV/EBITDA: 9.75|
|Market Cap: $1.39B||Avg. Daily Volume: 1,929,775||52 Week Range: $14.79 - $62.8|
4. Chesapeake Energy Corporation (NYSE:CHK): $1.9
Shares of this oil and natural gas producer were acquired by 5 insiders:
- Director Archie W. Dunham acquired 2,400,000 shares, paying $2.12 per share for a total amount of $5.08 million. Mr. Dunham increased his stake by 49.51% to 7,247,375 shares with this purchase.
- CEO Robert D. Lawler acquired 100,000 shares, paying $1.86 per share for a total amount of $186,000. Mr. Lawler increased his stake by 2.47% to 4,154,419 shares with this purchase.
- EVP-Exploration & Production Frank J. Patterson acquired 80,000 shares, paying $1.93 per share for a total amount of $154,080. Mr. Patterson increased his stake by 10.10% to 871,691 shares with this purchase.
- Exec. Vice President & CFO Domenic J. Dell'Osso Jr. acquired 50,000 shares, paying $1.88 per share for a total amount of $93,800. Mr. Dell'osso increased his stake by 3.69% to 1,403,283 shares with this purchase.
- Director Brad R. Martin acquired 25,000 shares, paying $2.35 per share for a total amount of $58,750. Mr. Martin increased his stake by 3.43% to 752,900 shares with this purchase.
|P/E: N/A||Forward P/E: 2.71||Industry P/E: 14.33|
|P/S: 0.24||Price/Book: N/A||EV/EBITDA: 6.45|
|Market Cap: $2.33B||Avg. Daily Volume: 35,073,535||52 Week Range: $1.81 - $5.6|
5. Platform Specialty Products Corporation (NYSE:PAH-OLD): $9.78
Shares of this diversified animal health and mineral nutrition company were acquired by 2 insiders:
- Director Martin E. Franklin acquired 200,000 shares, paying $10.96 per share for a total amount of $2.19 million. These shares were purchased indirectly through a trust.
- EVP, General Counsel & Sec. John Edward Capps acquired 100,000 shares, paying $10.33 per share for a total amount of $1.03 million. Mr. Capps increased his stake by 64.79% to 254,333 shares with this purchase.
|P/E: N/A||Forward P/E: 13.04||Industry P/E: 24.38|
|P/S: 0.73||Price/Book: 1.38||EV/EBITDA: 9.81|
|Market Cap: $2.82B||Avg. Daily Volume: 2,535,301||52 Week Range: $9.09 - $13.54|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. Walmart Inc. (NYSE:WMT): $87.13
Director Robson S. Walton sold 1,225,886 shares of Walmart for $92.53, generating $113.43 million from the sale. These shares were sold indirectly through a trust.
|P/E: 49.76||Forward P/E: 18.46||Industry P/E: 45.35|
|P/S: 0.49||Price/Book: 3.52||EV/EBITDA: 9.55|
|Market Cap: $253.14B||Avg. Daily Volume: 9,076,342||52 Week Range: $81.78 - $109.98|
2. Salesforce.com, inc. (NYSE:CRM): $122.91
Shares of this software-as-a-service (SAAS) provider were sold by 4 insiders:
- Chairman of the Board & co-CEO Marc Benioff sold 304,417 shares for $133.28, generating $40.57 million from the sale.
- Pres., Legal & General Counsel Amy E. Weaver sold 4,889 shares for $134.34, generating $656,788 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
- co-CEO Keith Block sold 4,296 shares for $130.70, generating $561,500 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
- Director Craig Conway sold 367 shares for $134.34, generating $49,303 from the sale.
|P/E: 130.76||Forward P/E: 44.69||Industry P/E: 22.12|
|P/S: 7.53||Price/Book: 6.4||EV/EBITDA: 83.91|
|Market Cap: $94.03B||Avg. Daily Volume: 7,042,053||52 Week Range: $101.32 - $161.19|
3. Live Nation Entertainment, Inc. (NYSE:LYV): $48.76
President & CEO Michael Rapino sold 255,000 shares of this entertainment company for $50.57, generating $12.89 million from the sale.
|P/E: N/A||Forward P/E: 118.93||Industry P/E: 100.23|
|P/S: 0.92||Price/Book: 7.69||EV/EBITDA: 17.01|
|Market Cap: $10.22B||Avg. Daily Volume: 1,403,757||52 Week Range: $35.94 - $58.26|
4. Alphabet Inc. (NASDAQ:GOOG): $979.54
CEO, Google LLC Sundar Pichai sold 10,000 shares of Alphabet for $1041.50, generating $10.41 million from the sale.
|P/E: 36.76||Forward P/E: 20.76||Industry P/E: 25.67|
|P/S: 5.28||Price/Book: 4.01||EV/EBITDA: 15.24|
|Market Cap: $685.35B||Avg. Daily Volume: 1,919,140||52 Week Range: $973.69 - $1273.89|
5. American Financial Group, Inc. (NYSE:AFG): $88.24
Co-CEO & Co-President Carl H. Lindner sold 109,768 shares of this insurance company for $91.09, generating $9.99 million from the sale. These shares were sold indirectly through a trust.
|P/E: 11.02||Forward P/E: 10.3||Industry P/E: 13.85|
|P/S: 1.11||Price/Book: 1.52||EV/EBITDA: 6.14|
|Market Cap: $7.88B||Avg. Daily Volume: 401,388||52 Week Range: $88.11 - $121.69|
You can view the full list of sales from this Insider Sales page.
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.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.