- Executive Chair Bill Ford picked up $4.5 million worth of Ford stock on the open market last week.
- Automotive part manufacturer LCI Industries saw a cluster of three insiders purchase shares.
- Insiders are buying ahead of an earnings related blackout period.
- Looking for more investing ideas like this one? Get them exclusively at Inside Arbitrage. Learn More »
I was recently listening to Barry Ritholtz’s Masters in Business podcast interview with Darren Palmer, the VP of Ford’s Global EV Program, and he discusses the development of Ford’s first three all electric vehicles, including the Mustang Mach-E and the Ford F-150 Lightning truck. It was a fascinating interview and provided insights into how Ford plans to position the company for an electrified future by splitting the company into an electric division called the Model E and the legacy business continuing on as Ford Blue. While General Motors (GM) had a significant head start on Ford (NYSE:F) with electric vehicles like the Volt and Bolt and upcoming vehicles like the Hummer EV and the stunning Cadillac LYRIQ, it looks like Ford has a big hit on its hands with the Mustang Mach-E, which was selected by Consumer Reports as its top electric vehicle pick.
Executive Chair Bill Ford picked up $4.5 million worth of Ford stock on the open market last week and this follows his $8.5 million purchase in December. Both purchases were indirect purchases through a trust. We wrote the following on December 18, 2021 about Ford after his previous purchase:
When looking the investment landscape early last year when the COVID-19 pandemic started unfolding around us and even earlier this year, little did I anticipate that some of the biggest gainers this year would be auto stocks. I was more focused on companies like Berkshire Hathaway (BRK.A) that were positioned to do well if we saw sector or style rotation as discussed in this Twitter thread. Auto manufacturers have had a great year, benefiting from a combination of,
- increased demand from consumers flush with cash, as you can see from the following M2 money supply chart
- higher prices for both used and new cars
- historically low interest rates and lax lending standards
- a shift to electrification, which has seen even Ferrari announce a plug-in hybrid version of its supercar
The biggest beneficiary of these trends this year has been Ford (F), which has seen its stock shoot up nearly 125% this year as you can see from the chart below. The company’s all electric Ford Mach-E has been a big hit and is benefiting from the fact that Ford electric vehicles are still eligible for the $7,500 federal tax credit. When I was considering a second electric vehicle earlier this year to replace an old gas guzzler, the Mach-E was near the top of my list and the wait time then was more than 3 months. It looks like the wait time has now increased to 20+ weeks and the Premium and GT models now have a wait time of 28+ weeks. This increase in wait time is interesting considering the company indicated during its third quarter 2021 earnings call that it has seen a significant increase in semiconductor availability. The much anticipated electric F-150 truck is expected to launch in Spring 2022.
The company saw a big increase in its operating cash flow in Q3 to $7.7 billion, reinstated its quarterly dividend at 10 cents a share and raised its full year guidance to between $10.5 billion and $11.5 billion in operating earnings. The stock trades at a forward 2022 P/E of 10 and a forward EV/EBITDA of 15. Investors that may get turned off by the large net debt on Ford’s balance sheet should consider that a majority of it is from its financing arm. The company’s financing division has $122.52 billion of debt and liabilities partially offset by $106.37 billions of loans and leases. Ford has $25.62 billion in other debt that is more than offset by $31.42 billion of cash and short-term investments. The quality of the underwriting in its financing division is a key risk given the size of their liabilities.
Another interesting purchase last week was at an automotive part manufacturer LCI Industries (LCII), which saw a cluster of three insiders purchase shares. As an OEM manufacturer that supplies the RV industry among others, it is benefiting from strong RV and automotive sales. Margins are low as expected but growth in both the top line and the bottom line have been impressive with the company reporting record sales of $4.5 billion for 2021, up 60% year-over-year. Net income increased even more, up 82% from 2020. When the company reported results in February, they indicated they had strong January sales and estimates for Q1 and Q2 2022 are both every high. It makes sense that the insiders are buying ahead of an earnings related blackout period.
Insider buying decreased last week with insiders purchasing $54.4 million of stock compared to $71.35 million in the week prior. Selling, on the other hand, increased to $1.42 billion compared to $879.41 billion in the week prior.
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 26.03. In other words, insiders sold more than 26 times as much stock as they purchased. The Sell/Buy ratio this week was unfavorable compared to the prior week when the ratio stood at 12.33.
Notable Insider Buys:
1. TMC the metals company Inc. (TMC): $2.45
Shares of this battery-grade metals explorer were acquired by 4 insiders:
- Director Andrei Karkar acquired 2,085,000 shares, paying $2.40 per share for a total amount of $5.01 million. These shares were purchased indirectly by ERAS Capital LLC.
- Director Andrew Hall acquired 28,000 shares, paying $2.13 per share for a total amount of $59,713.
- Chief Executive Officer Gerard Barron acquired 23,000 shares, paying $2.19 per share for a total amount of $50,370. Mr. Barron increased his stake by 0.15% to 15,291,809 shares with this purchase.
- Chief Financial Officer Craig Shesky acquired 15,000 shares, paying $1.80 per share for a total amount of $26,979. Mr. Shesky increased his stake by 2.26% to 678,316 shares with this purchase.
|P/E: N/A||Forward P/E: -7.66||Industry P/E: N/A|
|P/S: N/A||Price/Book: 5.96||EV/EBITDA: -3.5|
|Market Cap: $555.61M||Avg. Daily Volume: 5,456,012||52 Week Range: $1.15 – $15.39|
2. Ford Motor Company (F): $16.65
Executive Chairman William Clay Ford acquired 267,697 shares of Ford Motor Company, paying $16.81 per share for a total amount of $4.49 million.
"As pointed out by an astute reader, the shares purchased were Class B shares and could not have been an open market purchase. The indirect purchase for a trust is likely from a family member since class B shares are only available to Ford family members."
|P/E: 3.74||Forward P/E: 7.33||Industry P/E: 23.42|
|P/S: 0.49||Price/Book: 1.37||EV/EBITDA: 10.46|
|Market Cap: $66.67B||Avg. Daily Volume: 103,927,112||52 Week Range: $11.14 – $25.87|
3. LCI Industries (LCII): $107.84
Shares of this manufacturer of engineered products for transportation and recreational vehicles were acquired by 3 insiders:
- Director James Gero acquired 10,000 shares, paying $105.52 per share for a total amount of $1.06 million. Mr. Gero increased his stake by 3.29% to 314,192 shares with this purchase.
- President & CEO Jason Lippert acquired 9,265 shares, paying $108.00 per share for a total amount of $1 million. Mr. Lippert increased his stake by 3.20% to 298,992 shares with this purchase.
- Group President – Aftermarket Jamie Schnur acquired 3,250 shares, paying $107.79 per share for a total amount of $350,318. Mr. Schnur increased his stake by 19.19% to 20,182 shares with this purchase.
|P/E: 9.53||Forward P/E: 7.69||Industry P/E: 20.69|
|P/S: 0.61||Price/Book: 2.49||EV/EBITDA: 7.86|
|Market Cap: $2.73B||Avg. Daily Volume: 190,590||52 Week Range: $101.96 – $163.33|
4. Occidental Petroleum Corporation (OXY): $58.11
President and CEO Vicki A. Hollub acquired 14,191 shares of this oil and gas properties exploration and production company, paying $56.24 per share for a total amount of $798,102. Mr. Hollub increased his stake by 3.13% to 467,282 shares with this purchase.
|P/E: 36.97||Forward P/E: 12.13||Industry P/E: 12.18|
|P/S: 2.1||Price/Book: 5.14||EV/EBITDA: 6.95|
|Market Cap: $54.44B||Avg. Daily Volume: 32,952,322||52 Week Range: $21.62 – $63.24|
5. NexImmune, Inc. (NEXI): $4.46
Shares of this biotech company were acquired by 2 insiders:
- Director Grant Verstandig acquired 190,600 shares, paying $3.94 per share for a total amount of $750,274. Mr. Verstandig increased his stake by 26.66% to 905,495 shares with this purchase.
- President and CEO Kristi Jones acquired 10,000 shares, paying $3.74 per share for a total amount of $37,400. Mr. Jones increased his stake by 15.85% to 73,078 shares with this purchase.
|P/E: N/A||Forward P/E: -2.97||Industry P/E: 85.93|
|P/S: N/A||Price/Book: 1.22||EV/EBITDA: -0.38|
|Market Cap: $101.87M||Avg. Daily Volume: 177,534||52 Week Range: $1.72 – $26.5|
You can view the full list of purchases from this Insider Buying page.
Notable Insider Sales:
1. Airbnb, Inc. (ABNB): $173.07
Shares of Airbnb were sold by 3 insiders:
- Chairman – Samara & Airbnb.org Joseph Gebbia sold 504,166 shares for $165.85, generating $83.62 million from the sale.
- Director Belinda J. Johnson sold 20,000 shares for $165.00, generating $3.3 million from the sale.
- Chief Technology Officer Aristotle N. Balogh sold 1,000 shares for $174.00, generating $174,000 from the sale.
|P/E: N/A||Forward P/E: 84.84||Industry P/E: 1,235.96|
|P/S: 18.57||Price/Book: 22.96||EV/EBITDA: 193.31|
|Market Cap: $111.26B||Avg. Daily Volume: 6,197,423||52 Week Range: $129.71 – $212.584|
2. Inspire Medical Systems, Inc. (INSP): $266.6
Shares of this medical technology company were sold by 2 insiders:
- CEO and President Timothy P. Herbert sold 130,000 shares for $250.52, generating $32.57 million from the sale. 130,000 of these shares were sold indirectly through a trust.
- Director Marilyn C. Nelson sold 15,000 shares for $255.01, generating $3.83 million from the sale. These shares were sold indirectly by GDN Holdings, LLC.
|P/E: N/A||Forward P/E: -213.28||Industry P/E: N/A|
|P/S: 31.47||Price/Book: 31.91||EV/EBITDA: -185.31|
|Market Cap: $7.34B||Avg. Daily Volume: 271,328||52 Week Range: $159.18 – $286.285|
3. Nvidia Corporation (NVDA): $267.12
Director Tench Coxe sold 100,000 shares of this semiconductor company for $274.06, generating $27.41 million from the sale. These shares were sold indirectly by a trust.
|P/E: 69.38||Forward P/E: 39.4||Industry P/E: 27.62|
|P/S: 24.73||Price/Book: 25.15||EV/EBITDA: 60.14|
|Market Cap: $665.66B||Avg. Daily Volume: 53,150,917||52 Week Range: $134.59 – $346.47|
4. Ameriprise Financial, Inc. (AMP): $297.41
Shares of this asset management company were sold by 3 insiders:
- Chairman and CEO James M. Cracchiolo sold 56,622 shares for $314.16, generating $17.79 million from the sale.
- Executive VP AND CFO Walter Stanley Berman sold 8,711 shares for $312.01, generating $2.72 million from the sale.
- President – Insurance & Annuities Gumer Alvero sold 2,044 shares for $314.30, generating $642,425 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
|P/E: 12.93||Forward P/E: 9.93||Industry P/E: 14.07|
|P/S: 2.45||Price/Book: 5.8||EV/EBITDA: 6.71|
|Market Cap: $32.89B||Avg. Daily Volume: 690,415||52 Week Range: $234.72 – $332.37|
5. Alight, Inc. (ALIT): $9.39
Director William P. Foley II sold 1,535,429 shares of this cloud-based provider of integrated digital human capital and business solutions worldwide for $10.30, generating $15.82 million from the sale. 515,449 of these shares were sold indirectly by Bilcar FT, LLC.
|P/E: 142.27||Forward P/E: 13.04||Industry P/E: 26.79|
|P/S: 3.27||Price/Book: 1.05||EV/EBITDA: 18.06|
|Market Cap: $5.08B||Avg. Daily Volume: 2,826,315||52 Week Range: $8.39 – $13.34|
You can view the full list of sales from this Insider Sales page.
Insiders Sell For Various Reasons But Only Buy For One Reason, They Expect The Stock To Go Up.
This is especially true for insiders of recent spinoffs. We do the hard work for you by combing through hundreds of insider purchases each year to find the best opportunities. Insiders sometimes buy to "signal" the market and make mistakes because of their myopic focus on their company/industry. We cut through the noise and use insider buying as an idea discovery tool.
Beyond insider buying, Inside Arbitrage also provides ideas and tools related to buybacks, spinoffs, SPACs and merger arbitrage. Click here to learn more.
This article was written by
Asif Suria is an entrepreneur and investor with a professional background in technology and a focus on event driven strategies including: merger arbitrage, spinoffs, (legal) insider trading, buybacks and SPACs. Asif has been actively investing for over 20 years and sharing his ideas for the past 10.He is the leader of the investing group Inside Arbitrage where he shares investment ideas rarely found in mainstream financial press. Inside Arbitrage provides access to six different event-driven strategies to expand your investing toolbox, special situations focused tools, qualitative writeups of ideas through weekly articles, and a comprehensive monthly newsletter. Learn more.
Analyst’s Disclosure: I/we have a beneficial long position in the shares of BRK.B either through stock ownership, options, or other derivatives. 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: I hold a long position in Berkshire Hathaway (BRK.B). 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.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.