Insider Weekends: Thomas Karam Purchases $5 Million Worth Of Equitrans Midstream

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Includes: BBY, CADE, ETRN, ORLY, RCMT, REV, SEM, ULTA, WDAY, WMT
by: Asif Suria
Summary

Insider buying declined again last week.

Notable Insider Buys: Revlon, Inc., Equitrans Midstream Corporation, Select Medical Holdings Corporation, RCM Technologies, Inc., Cadence Bancorporation.

Notable Insider Sales: Walmart Inc., Ulta Beauty, Inc., Workday, Inc., Best Buy Co., Inc., O'Reilly Automotive, Inc.

Insider buying declined again last week with insiders purchasing $53.36 million of stock compared to $80.53 million in the week prior. Selling also decreased with insiders selling $1.58 billion of stock last week compared to $2.37 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 total insider purchases that week. The adjusted ratio for last week edged up slightly to 29.56. In other words, insiders sold almost 30 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 29.38. Insider Sector Heat Map March 22, 2019 (Source: InsideArbitrage.com database)

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. Revlon, Inc. (REV): $21.68

Director Ronald O. Perelman acquired 355,000 shares of this beauty care products company, paying $19.90 per share for a total amount of $7.07 million. These shares were purchased indirectly by by MacAndrews & Forbes Incorporated.

Revlon's stock dropped sharply earlier this month after the company reported disappointing fourth quarter results where revenue declined 5.7%. What spooked investors even more was the company's decision to delay the filing of its annual report after disclosing that "it identified a material weakness in its internal control over financial reporting as of year-end 2018". The stock started the month at $26.52 and dropped to $18.02 by March 19th. Mr. Perelman's purchases took place on March 20th and 21st and the stock rebounded nearly 20% through the end of last week even in a weak market as you can see from the chart below.

Perelman's Revlon Purchases. Chart Source: Yahoo Finance.

With these latest purchases, Perelman increased his stake in Revlon to over 86% of the company. We have written about Revlon several times in the past including in September 2017 following a $10.85 million purchase by Mr. Perelman when we wrote:

Revlon’s second largest shareholder, Mittleman Brothers, was probably worried about Mr. Perelman taking the company private and wrote this letter to the CEO and the board urging them to obtain a standstill agreement from Mr. Perelman so that he does not increase his stake to 90% and then attempt to take the company private via a short-form merger.

Mr. Perelman responded on September 15th and according to this letter indicated,

MacAndrews & Forbes presently does not intend to increase its beneficial ownership above 89% of the issued and outstanding Revlon Class A Common Stock (“Common Stock”) or to undertake transactions to take Revlon private.

Should MacAndrews & Forbes determine to undertake transactions to increase its beneficial ownership above 89% of the issued and outstanding Common Stock or to take Revlon private, MacAndrews & Forbes agrees to:

(1) notify the Board at least 5 business days in advance of such transactions; and, prior to consummating such transactions,

(2) convene a Board meeting;

(3) support the creation of a special committee of independent directors empowered to select its own advisors; and

(4) negotiate with that special committee regarding the terms of such transactions by MacAndrews & Forbes, in order to promote the interests of all shareholders, including minority shareholders.

The agreement in this paragraph shall terminate on the first anniversary of the date hereof, unless extended in writing by MacAndrews & Forbes prior to such date.

For the avoidance of doubt, this letter should not be construed as an admission by MacAndrews & Forbes that any of the assertions made in the Mittleman Letter have any merit whatsoever.

P/E: N/A Forward P/E: -11.23 Industry P/E: 70.62
P/S: 0.44 Price/Book: N/A EV/EBITDA: 41.03
Market Cap: $1.15B Avg. Daily Volume: 140,647 52 Week Range: $14 - $29.62

2. Equitrans Midstream Corporation (ETRN): $20.28

Thomas Karam

President and CEO Thomas F. Karam acquired 250,000 shares of this natural gas pipeline company, paying $20.47 per share for a total amount of $5.12 million. These shares were purchased indirectly by E.T. Associates, L.P.

Equitrans Midstream was spun out of EQT Corporation (EQT) "to separate its separately managed gathering, transmission and storage, and water services operations (Midstream Business) from its natural gas, oil and natural gas liquids development, production and sales and commercial operations (Upstream Business)."

The spinoff was affected late last year and EQT maintained a nearly 20% interest in ETRN after issuing 0.8 shares of ETRN for each share of EQT held. If you subscribe to Joel Greenblatt's philosophy of paying attention to spinoffs and following the actions of the insiders of the new spinoff, then this purchase appears to be bullish. Mr. Karam started his career in investment banking and later served as the CEO of three companies in the oil and natural gas industry that were eventually acquired.

P/E: 23.64 Forward P/E: 10.19 Industry P/E: 621.21
P/S: 3.45 Price/Book: 11.27 EV/EBITDA: 11.79
Market Cap: $5.16B Avg. Daily Volume: 1,988,334 52 Week Range: $17.63 - $23.47

3. Select Medical Holdings Corporation (SEM): $14.04

Vice Chairman and Co-Founder Rocco A. Ortenzio acquired 306,189 shares of this medical care company, paying $14.18 per share for a total amount of $4.34 million. These shares were purchased indirectly through a trust.

P/E: 13.76 Forward P/E: 11.7 Industry P/E: 28.59
P/S: 0.37 Price/Book: 2.36 EV/EBITDA: 9.65
Market Cap: $1.9B Avg. Daily Volume: 754,495 52 Week Range: $13.54 - $21.65

4. RCM Technologies, Inc. (RCMT): $4

Executive Chairman & President Bradley Vizi acquired 637,000 shares of this engineering & construction company, paying $3.92 per share for a total amount of $2.49 million. These shares were purchased indirectly by various trusts and entities.

P/E: 18.18 Forward P/E: 9.09 Industry P/E: 15.58
P/S: 0.26 Price/Book: 1.88 EV/EBITDA: 9.06
Market Cap: $51.49M Avg. Daily Volume: 23,634 52 Week Range: $2.54 - $5.9

5. Cadence Bancorporation (CADE): $17.77

Shares of this regional bank were acquired by 8 insiders:

  • Chairman & CEO Paul B. Murphy acquired 50,000 shares, paying $19.93 per share for a total amount of $996,438. Mr. Murphy increased his stake by 11.19% to 497,008 shares with this purchase.
  • President & COO Samuel M. Tortorici acquired 50,000 shares, paying $19.90 per share for a total amount of $995,000. Mr. Tortorici increased his stake by 63.06% to 129,286 shares with this purchase.
  • EVP & Chief Financial Officer Valerie Toalson acquired 4,984 shares, paying $20.06 per share for a total amount of $99,979. Ms. Toalson increased his stake by 8.55% to 63,258 shares with this purchase.
  • Director William B. Harrison acquired 3,188 shares, paying $20.00 per share for a total amount of $63,746. Mr. Harrison increased his stake by 3.51% to 94,107 shares with this purchase.
  • Director Richard J. Fredericks acquired 3,001 shares, paying $20.00 per share for a total amount of $60,007. Mr. Fredericks increased his stake by 20.01% to 18,001 shares with this purchase.
  • Director Scott M. Stuart acquired 1,563 shares, paying $20.00 per share for a total amount of $31,253. Mr. Stuart increased his stake by inf% to 1,563 shares with this purchase.
  • Director Virginia A. Hepner acquired 781 shares, paying $20.00 per share for a total amount of $15,617. Ms. Hepner increased his stake by 8.49% to 9,984 shares with this purchase.
  • Director Precious W. Owodunni acquired 60 shares, paying $19.97 per share for a total amount of $1,198.
P/E: 9.02 Forward P/E: 7.4 Industry P/E: 19.52
P/S: 4.99 Price/Book: 1.02 EV/EBITDA: N/A
Market Cap: $2.34B Avg. Daily Volume: 1,685,798 52 Week Range: $16.13 - $31.442

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

Notable Insider Sales:

1. Walmart Inc. (WMT): $98.28

Shares of Walmart were sold by 2 insiders:

  • Director Robson S. Walton sold 1,649,023 shares for $98.88, generating $163.06 million from the sale. These shares were sold indirectly by a trust.
  • Executive Vice President Gregory S. Foran sold 74,019 shares for $100.00, generating $7.4 million from the sale.
P/E: 43.49 Forward P/E: 19.66 Industry P/E: 37.02
P/S: 0.56 Price/Book: 3.93 EV/EBITDA: 10.48
Market Cap: $285.53B Avg. Daily Volume: 7,824,006 52 Week Range: $81.78 - $106.21

2. Ulta Beauty, Inc. (ULTA): $330.52

Shares of this beauty products retailer were sold by 9 insiders:

  • Director Charles Heilbronn sold 242,432 shares for $334.99, generating $81.21 million from the sale.
  • Chief Executive Officer Mary N. Dillon sold 120,949 shares for $334.42, generating $40.45 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Chief Financial Officer Scott M. Settersten sold 29,529 shares for $338.64, generating $9.99 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Director Dennis K. Eck sold 15,000 shares for $336.06, generating $5.04 million from the sale.
  • Chief Human Resources Officer Jeffrey J. Childs sold 9,757 shares for $333.89, generating $3.26 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Director Lorna Nagler sold 4,500 shares for $337.62, generating $1.52 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Director Robert F. Diromualdo sold 3,098 shares for $337.12, generating $1.04 million from the sale.
  • GC and Corporate Secretary Jodi J. Caro sold 2,511 shares for $334.52, generating $839,985 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Director Catherine Ann Halligan sold 704 shares for $342.97, generating $241,451 from the sale.
P/E: 30.21 Forward P/E: 22.17 Industry P/E: 43.08
P/S: 2.92 Price/Book: 10.72 EV/EBITDA: 16.86
Market Cap: $19.6B Avg. Daily Volume: 812,468 52 Week Range: $199.15 - $345.24

3. Workday, Inc. (WDAY): $191.08

Shares of this software application company were sold by 4 insiders:

  • Director David A. Duffield sold 175,000 shares for $186.18, generating $32.58 million from the sale.
  • Co-President & CFO Robynne Sisco sold 40,000 shares for $195.29, generating $7.81 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • Co-President Gomez Luciano Fernandez sold 7,344 shares for $186.45, generating $1.27 million from the sale.
  • Chief Products Officer Petros Dermetzis sold 2,257 shares for $186.36, generating $420,606 from the sale.
P/E: N/A Forward P/E: 86.46 Industry P/E: 34.27
P/S: 14.76 Price/Book: 21.66 EV/EBITDA: -174.23
Market Cap: $41.66B Avg. Daily Volume: 2,007,640 52 Week Range: $117.24 - $200

4. Best Buy Co., Inc. (BBY): $70.11

Shares of Best Buy were sold by 6 insiders:

  • Chairman & CEO Hubert Joly sold 139,133 shares for $68.53, generating $9.53 million from the sale.
  • Chief Merch & Mktg Officer Rajendra M. Mohan sold 44,619 shares for $68.53, generating $3.06 million from the sale.
  • CFO Corie S. Barry sold 27,788 shares for $68.55, generating $1.9 million from the sale.
  • General Counsel & Secreta Keith J. Nelsen sold 24,374 shares for $68.55, generating $1.67 million from the sale.
  • CHRO & President, U.S. Retail Kathleen Scarlett sold 4,703 shares for $68.58, generating $322,539 from the sale.
  • SVP, Finance-Shared SVCS & CAO Mathew Watson sold 1,990 shares for $68.58, generating $136,484 from the sale.
P/E: 13.48 Forward P/E: 11.74 Industry P/E: 36.77
P/S: 0.44 Price/Book: 5.7 EV/EBITDA: 6.69
Market Cap: $18.87B Avg. Daily Volume: 3,589,844 52 Week Range: $47.72 - $84.37

5. O'Reilly Automotive, Inc. (ORLY): $376.3

Shares of this auto parts retailer were sold by 2 insiders:

  • Chairman of the Board David E. O'Reilly sold 34,000 shares for $375.48, generating $12.77 million from the sale. 25,500 of these shares were purchased indirectly through a trust.
  • Director Lawrence P. O'Reilly sold 5,600 shares for $375.48, generating $2.1 million from the sale.
P/E: 23.37 Forward P/E: 19 Industry P/E: 30.48
P/S: 3.09 Price/Book: 84.11 EV/EBITDA: 15.77
Market Cap: $29.49B Avg. Daily Volume: 689,480 52 Week Range: $217.64 - $394.42

You can view the full list of sales from this Insider Sales page.

Disclaimer: I hold a long position in Workday (WDAY). 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 am/we are long WDAY. 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.