Insider Weekends: Activist Investors Add To Their Avid Technology Stake

Summary

• Insider buying almost doubled last week.
• Notable Insider Buys: Avid Technology, Inc., Jazz Pharmaceuticals plc, New Mountain Finance Corporation, Mercury General Corporation, and Armada Hoffler Properties, Inc.
• Notable Insider Sells: Fortive Corporation, NVIDIA Corporation, Alteryx, Inc., Advanced Drainage Systems, Inc., and Uber Technologies, Inc.

Insider buying almost doubled last week with insiders purchasing $209.6 million of stock compared to $107.94 million in the week prior. Selling also increased with insiders selling $1.47 billion of stock last week compared to $1.33 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 dropped to 7.02. In other words, insiders sold more than 7 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week when the ratio stood at 12.31.

(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. Avid Technology, Inc. (AVID): $7.06

Director Christian Asmar acquired 1,049,073 shares of this technology hardware, software and peripherals company, paying $6.12 per share for a total amount of $6.42 million. These shares were purchased indirectly by Impactive Capital GP LLC.

Mr. Asmar is the cofounder of New York based activist hedge fund Impactive Capital, which has nearly $400 million in assets under management. Prior to starting Impactive Capital, he was at Blue Harbour Group, a $3 billion activist investment firm where he was a Managing Director and Investing Partner. He has served on Avid’s Board of Directors since October 2019. With this round of purchases, Avid Technology is most likely the top holding for Impactive Capital with nearly 15% of capital allocated to this position.

This is the first insider purchase we have seen at the company since a director purchased 80,000 shares in December 2017. For several years, a large number of insiders have also been exercising options without selling them.

P/E: 176.5	Forward P/E: 7.35	Industry P/E: 22.13
P/S: 0.78	Price/Book: N/A	EV/EBITDA: 13.35
Market Cap: $308.51M	Avg. Daily Volume: 681,925	52 Week Range: $4.67-$10.79

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2. Jazz Pharmaceuticals plc (JAZZ): $119.32

Director Seamus Mulligan acquired 50,000 shares of this biotech company, paying $111.08 per share for a total amount of $5.55 million. Mr. Mulligan increased his stake by 4.53% to 1,152,788 shares with this purchase.

Jazz Pharmaceuticals took a pretty large hit in early May after the company reported disappointing first-quarter results with earnings of $0.45 that missed analyst estimates by a large margin and revenue of $535 million that grew 5.22% year-over-year. The company also reduced its outlook for 2020 and now expects to earn between $150 million and $240 million or $2.70 and $4.30 per share.

The only other insider purchase we have seen at Jazz was a 50,000 purchase by Mr. Mulligan in November 2018.

P/E: 24.3	Forward P/E: 7.14	Industry P/E: 30.90
P/S: 3.02	Price/Book: 2.35	EV/EBITDA: 7.06
Market Cap: $6.6B	Avg. Daily Volume: 663,230	52 Week Range: $86.88-$154.24

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3. New Mountain Finance Corporation (NMFC): $9.5

Director Steven B. Klinsky acquired 272,861 shares of this business development company (BDC), paying $9.15 per share for a total amount of $2.49 million. Mr. Klinsky increased his stake by 3.92% to 7,240,751 shares with this purchase. 72,861 of these shares were purchased indirectly through a trust.

P/E: N/A	Forward P/E: 7.6	Industry P/E: 18.76
P/S: 3.21	Price/Book: 0.85	EV/EBITDA: N/A
Market Cap: $919.86M	Avg. Daily Volume: 1,504,134	52 Week Range: $4.62-$14.45

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4. Mercury General Corporation (MCY): $40.23

Chairman of the Board George Joseph acquired 63,500 shares of this insurance company, paying $39.27 per share for a total amount of $2.49 million. Mr. Joseph increased his stake by 0.32% to 19,612,934 shares with this purchase.

This is the third week in a row Mercury General made our list. We wrote the following after a purchase by Mr. Joseph two weeks ago:

Mercury General is mostly focused on automobile insurance and in this period when their customers are driving less, their risk of claims has also gone down. This is why other companies like All State and Geico have voluntarily reduced their insurance premiums. When I called Geico they told me that they will be reducing my premium by 15% and then reduced it an additional 10% after hearing I was not driving one of my cars very much.

The current environment is favorable for Mercury General on the risk side of the equation but they will take a hit on their assets, which are likely to yield less in this market. The company earned $1.07 per share in Q1 2020, beating estimates by 23 cents and growing its revenue by 4.12% to $954.22 million. The stock is trading near its 52 week low and also a multi-year low. The dividend yield is 6.64% with a 32 year history of growing its dividends. A payout ratio of over 88% is too rich for my liking.

P/E: 49.48	Forward P/E: 11.66	Industry P/E: 10.57
P/S: 0.61	Price/Book: 1.37	EV/EBITDA: 16.94
Market Cap: $2.23B	Avg. Daily Volume: 411,715	52 Week Range: $33.45-$65.22

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5. Armada Hoffler Properties, Inc. (AHH): $8.62

Director John W. Snow acquired 125,000 shares of this diversified REIT, paying $7.99 per share for a total amount of $999,358. Mr. Snow increased his stake by 202.70% to 186,667 shares with this purchase.

P/E: 20.52	Forward P/E: 21.02	Industry P/E: 30.09
P/S: 2.24	Price/Book: 1.17	EV/EBITDA: 18.58
Market Cap: $670.33M	Avg. Daily Volume: 594,230	52 Week Range: $6.4 – $19.43

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

Notable Insider Sales

1. Fortive Corporation (FTV): $60.98

Shares of this scientific & technical instruments company were sold by two insiders:

• Director Mitchell P. Rales sold 428,040 shares for $62.44, generating $26.73 million from the sale.
• Senior Vice President William W. Pringle sold 5,000 shares for $62.86, generating $314,300 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.

P/E: 37.95	Forward P/E: 17.08	Industry P/E: 17.71
P/S: 2.76	Price/Book: 2.84	EV/EBITDA: 15.48
Market Cap: $20.54B	Avg. Daily Volume: 2,778,460	52 Week Range: $37.31 – $83.18

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2. NVIDIA Corporation (NVDA): $355.02

Shares of this semiconductor company were sold by four insiders:

• EVP, Worldwide Field Operations Ajay K. Puri sold 39,118 shares for $354.52, generating $13.87 million from the sale.
• Director Mark L. Perry sold 12,208 shares for $333.31, generating $4.07 million from the sale.
• Director Persis Drell sold 1,700 shares for $322.39, generating $548,063 from the sale.
• Director Brooke A. Seawell sold 629 shares for $366.27, generating $230,384 from the sale.

P/E: 78.54	Forward P/E: 38.89	Industry P/E: N/A
P/S: 20	Price/Book: 17.82	EV/EBITDA: 56.71
Market Cap: $218.34B	Avg. Daily Volume: 15,716,325	52 Week Range: $132.6-$367.27

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3. Alteryx, Inc. (AYX): $143.94

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

• Director Jeff Horing sold 105,819 shares for $146.01, generating $15.45 million from the sale. These shares were sold indirectly by various trusts and entities.
• Director Kimberly Alexy sold 2,000 shares for $151.24, generating $302,480 from the sale.
• President & Chief Revenue Officer Robert Scott Jones sold 222 shares for $151.24, generating $33,575 from the sale.

P/E: 1734.22	Forward P/E: 119.95	Industry P/E: 45.78
P/S: 21.07	Price/Book: 22.24	EV/EBITDA: 253.03
Market Cap: $9.49B	Avg. Daily Volume: 2,204,355	52 Week Range: $75.17-$160.11

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4. Advanced Drainage Systems, Inc. (WMS): $44.34

EVP Robert M. Klein sold 250,000 shares of this building products & equipment company for $44.79, generating $11,196,742 from the sale.

P/E: N/A	Forward P/E: 37.9	Industry P/E: 24.91
P/S: 1.94	Price/Book: 5.74	EV/EBITDA: 14.82
Market Cap: $3.05B	Avg. Daily Volume: 555,285	52 Week Range: $22.13-$51.6

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5. Uber Technologies, Inc. (UBER): $36.32

SVP, Marketing and Public Affairs Jill Hazelbaker sold 300,409 shares of Uber for $34.54, generating $10.38 million from the sale.

P/E: N/A	Forward P/E: -26.9	Industry P/E: 48.19
P/S: 4.32	Price/Book: 5.54	EV/EBITDA: -7.09
Market Cap: $62.98B	Avg. Daily Volume: 38,947,474	52 Week Range: $13.71-$47.08

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

Analyst’s 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.

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.

Comments

[Chris Valley]

Alright, I will at least look at Mercury again. Do I really have to look though??

[Asif Suria]

Would love to hear your thoughts if you have been following them. I am intrigued but have not been following them.