Insider Weekends: A Second Group Of AbbVie Insiders Purchase Shares

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Includes: ABBV, AMZN, CSGP, ETRN, GRMN, LGND, SNAP, SYK, TRN, WTRE
by: Asif Suria
Summary

Insider buying increased significantly last week.

Notable Insider Buys: Trinity Industries, Inc., AbbVie Inc., Equitrans Midstream Corporation, Watford Holdings Ltd., Ligand Pharmaceuticals Incorporated.

Notable Insider Sales: Amazon.com, Inc., Garmin Ltd., Snap Inc., CoStar Group, Inc., Stryker Corporation.

Insider buying increased significantly last week with insiders purchasing $128.07 million of stock last week compared to $75.89 million in the week prior. Selling also increased significantly with insiders selling $3.09 billion of stock last week compared to $584.61 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 24.18. In other words, insiders sold more than 24 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week when the ratio stood at 7.7.

Insider Sector Heat Map August 2, 2019 (click to enlarge) (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. Trinity Industries, Inc. (TRN): $19.5

Director Brandon B. Boze acquired 658,796 shares of this rail transportation products company, paying $19.26 per share for a total amount of $12.69 million. These shares were purchased indirectly by ValueAct.

This appears to be a week of repeats as the top 3 notable insider purchases this week are all of companies where the insiders have purchased shares over the last few months. We don’t normally highlight purchases by funds but decided to make an exception in this case because San Francisco based activist value-oriented fund ValueAct Capital is buying shares. We last reported on ValueAct’s purchase of Trinity in November 2018 in a post titled Insider Weekends: Jay Hoag Purchases Shares of Zillow Again.

P/E: 22.21 Forward P/E: 12.75 Industry P/E: 19.15
P/S: 0.93 Price/Book: 1.14 EV/EBITDA: 13.13
Market Cap: $2.49B Avg. Daily Volume: 1,244,128 52 Week Range: $18.19 – $28.3297

2. AbbVie Inc. (ABBV): $65.35

Shares of this drug manufacturer were acquired by 2 insiders:

  • Director Roxanne S. Austin acquired 65,000 shares, paying $65.93 per share for a total amount of $4.29 million. Mr. Austin increased his stake by 124.73% to 117,114 shares with this purchase.
  • EVP, Chief Strategy Officer Henry O. Gosebruch acquired 30,000 shares, paying $67.28 per share for a total amount of $2.02 million. Mr. Gosebruch increased his stake by 65.56% to 75,763 shares with this purchase.

Five weeks ago we reported on a trio of AbbVie insider that purchased shares and we wrote the following about their purchases,

AbbVie announced its decision last week to acquire fellow pharma company Allergan (AGN), in a $63 billion cash plus stock deal that valued the maker of Botox at approximately $188 per share. Investors promptly bid down the stock of AbbVie to a fresh 52 week low on June 25th, when the stock closed at $65.70, more than 16% below its previous close. Part of the selling could have also been arbitrageurs selling AbbVie shares short to lock in the nearly 9% arbitrage spread on the deal.

This trio of AbbVie insiders acted quickly and picked up shares just a day after the deal was announced and before the stock rebounded to end the week at $72.72.

The spread on that merger has widened to nearly 10% and the market appears to be skeptical about the impact of this mega merger on the long-term prospects of AbbVie, especially considering the combined company could end up with combined net debt of nearly $60 billion (3x EBITDA of the combined company). The 27% decline in AbbVie shares since the start of this year compared to a gain of nearly 17% for the S&P 500 has left the stock sporting a dividend yield of 6.55% at a payout ratio of 51%. Beyond increased regulatory focus on high drug prices, the other key risk for AbbVie is its ability to replace the big drop in revenue it is going to experience after its best selling drug immunology drug Humira loses exclusivity in 2023 and generic competition enters the market.

Humira currently accounts for approximately 60% of current AbbVie revenue and will account for less than 40% of “new” AbbVie revenue after the merger. The following chart from the AbbVie’s investor presentation about the deal illustrates the impact of loss of Humira revenue on AbbVie. I wish they had also shown the expected impact of loss of Humira on the combined company’s operating cash flow on the chart on the right. One can reasonably conclude that a large part of AbbVie’s operating cash flow would be wiped out without Humira.

Impact of Humira Loss of Exclusivity on AbbVie (click to enlarge)

P/E: 23.86 Forward P/E: 6.9 Industry P/E: 29.88
P/S: 2.96 Price/Book: N/A EV/EBITDA: 8.73
Market Cap: $96.61B Avg. Daily Volume: 9,721,444 52 Week Range: $65.03 – $100.23

3. Equitrans Midstream Corporation (ETRN): $16.29

Shares of this natural gas pipeline company were acquired by 2 insiders:

  • Chairman and CEO Thomas F. Karam acquired 200,000 shares, paying $16.25 per share for a total amount of $3.25 million. These shares were purchased indirectly by E.T. Associates, L.P.
  • Director Margaret K. Dorman acquired 15,500 shares, paying $16.11 per share for a total amount of $249,705.

We reported on a $5.12 million purchase of ETRN by Mr. Karam on March 24, 2019 and wrote the following back then,

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: 25.06 Forward P/E: 9.47 Industry P/E: 18.4
P/S: 2.68 Price/Book: 3.13 EV/EBITDA: 11.53
Market Cap: $4.15B Avg. Daily Volume: 2,053,517 52 Week Range: $15.63 – $23.47

4. Watford Holdings Ltd. (WTRE): $20.01

Shares of this insurance company were acquired by 6 insiders:

  • Director Nicolas Papadopoulo acquired 25,500 shares, paying $19.48 per share for a total amount of $496,740. Mr. Papadopoulo increased his stake by 30.91% to 108,000 shares with this purchase.
  • Chief Executive Officer John F. Rathgeber acquired 25,000 shares, paying $20.12 per share for a total amount of $502,915. Mr. Rathgeber increased his stake by 111.11% to 47,500 shares with this purchase.
  • Director Maamoun Rajeh acquired 20,000 shares, paying $19.02 per share for a total amount of $380,460. Mr. Rajeh increased his stake by 61.54% to 52,500 shares with this purchase.
  • Director Walter L. Harris acquired 15,000 shares, paying $19.51 per share for a total amount of $292,695. Mr. Harris increased his stake by 51.05% to 44,385 shares with this purchase.
  • CEO (WSIC; WIC) Alexandre Scherer acquired 2,500 shares, paying $20.19 per share for a total amount of $50,475. Mr. Scherer increased his stake by 62.50% to 6,500 shares with this purchase.
  • Chief Risk Officer Jon D. Levy acquired 1,500 shares, paying $20.99 per share for a total amount of $31,488. Mr. Levy increased his stake by 21.43% to 8,500 shares with this purchase.
P/E: N/A Forward P/E: 5.22 Industry P/E: 10.27
P/S: 0.7 Price/Book: 0.47 EV/EBITDA: 23.53
Market Cap: $453.88M Avg. Daily Volume: 158,147 52 Week Range: $18.75 – $28.985

5. Ligand Pharmaceuticals Incorporated (LGND): $95.06

Shares of this biotech company were acquired by 2 insiders:

  • Director Jason Aryeh acquired 4,004 shares, paying $99.22 per share for a total amount of $397,287. Mr. Aryeh increased his stake by 6.49% to 65,707 shares with this purchase.
  • Chief Executive Officer John L. Higgins acquired 1,850 shares, paying $95.45 per share for a total amount of $176,582. Mr. Higgins increased his stake by 1.28% to 146,749 shares with this purchase.
P/E: 3.11 Forward P/E: 25.21 Industry P/E: 98.31
P/S: 10.72 Price/Book: 1.79 EV/EBITDA: 13.22
Market Cap: $1.86B Avg. Daily Volume: 359,458 52 Week Range: $91.01 – $278.62

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

Notable Insider Sales:

1. Amazon.com, Inc. (AMZN): $1823.24

Chairman, CEO and President Jeff Bezos sold 968,148 shares of Amazon for $1897.83, generating $1.84 billion from the sale.

P/E: 75.64 Forward P/E: 54.07 Industry P/E: 24.52
P/S: 3.58 Price/Book: 16.97 EV/EBITDA: 28.15
Market Cap: $901.88B Avg. Daily Volume: 3,844,657 52 Week Range: $1307 – $2050.5

2. Garmin Ltd. (GRMN): $75.69

Executive Chairman Min H. Kao sold 1,573,657 shares of this GPS manufacturer for $78.16, generating $123 million from the sale. These shares were sold indirectly by Mr. Kao’s children.

P/E: 19.51 Forward P/E: 18.69 Industry P/E: 34.8
P/S: 4.16 Price/Book: 3.47 EV/EBITDA: 14.48
Market Cap: $14.39B Avg. Daily Volume: 1,114,957 52 Week Range: $59.98 – $89.72

3. Snap Inc. (SNAP): $17.03

Chief Executive Officer Evan Spiegel sold 2,780,306 shares of Snap for $18.01, generating $50.08 million from the sale.

P/E: N/A Forward P/E: -1703 Industry P/E: 283.27
P/S: 16.83 Price/Book: 11.04 EV/EBITDA: -22.35
Market Cap: $23.49B Avg. Daily Volume: 29,349,726 52 Week Range: $4.82 – $18.36

4. CoStar Group, Inc. (CSGP): $598.76

Shares of this provider of business services to the commercial real estate industry were sold by 3 insiders:

  • President and CEO Andrew C. Florance sold 24,210 shares for $628.64, generating $15.22 million from the sale.
  • Executive VP, Sales Matthew Linnington sold 14,651 shares for $617.39, generating $9.05 million from the sale. 13,033 of these shares were sold as a result of exercising options immediately prior to the sale.
  • Chief Financial Officer Scott T. Wheeler sold 6,933 shares for $629.50, generating $4.36 million from the sale. 4,700 of these shares were sold as a result of exercising options immediately prior to the sale.
P/E: 75.23 Forward P/E: 49.69 Industry P/E: 40.18
P/S: 16.92 Price/Book: 6.84 EV/EBITDA: 48.81
Market Cap: $21.88B Avg. Daily Volume: 260,230 52 Week Range: $315.85 – $638.17

5. Stryker Corporation (SYK): $211.62

Shares of this medical devices company were sold by 2 insiders:

  • Director Ronda E. Stryker sold 130,000 shares for $213.30, generating $27.73 million from the sale.
  • VP, Chief Financial Officer Glenn S. Boehnlein sold 2,700 shares for $214.16, generating $578,221 from the sale.
P/E: 22.64 Forward P/E: 23.51 Industry P/E: 31.72
P/S: 5.57 Price/Book: 6.63 EV/EBITDA: 21.5
Market Cap: $79.17B Avg. Daily Volume: 1,034,115 52 Week Range: $144.75 – $222.59

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

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.

Additional disclosure: 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.