Insider Weekends: First Insider Purchase At Starbucks In Nearly 4 Years

Summary

  • Insiders once again stepped up their purchases to take advantage of prices.
  • Uber’s CEO Dara Khosrowshahi bought 200,000 shares for $5.35 million.
  • Mr. Schultz picked up $10 million worth of Starbucks.
  • There were repeat purchases by the insiders of B. Riley as well.
  • Looking for more investing ideas like this one? Get them exclusively at Inside Arbitrage. Learn More »

Starbucks shop window

Westbury/iStock Unreleased via Getty Images

Less than a month after Howard Shultz returned as the CEO of Starbucks (NASDAQ:SBUX), he made the first insider purchase at the company in nearly four years by acquiring $10 million worth of stock at an average price of $72.67. While Mr. Shultz is willing to buy Starbucks stock with his own money, he suspended the company's buyback to reinvest capital into the company's stores and its employees. As outlined in the press release announcing his return to Starbucks,

"During Schultz’s previous four decades as ceo and chairman, the company grew from 11 stores to more than 28,000 stores in 77 markets around the world. During his tenure, Starbucks delivered a 21,000% gain in the value of its stock price between its initial public offering in 1992 and Schultz’s departure as ceo in 2017."

For a period of time after his departure, Starbucks appeared to be doing well and the stock hit a peak of over $126 per share last summer before giving back a large portion of those gains. The stock is down more than 37% year-to-date and over the last five years is only up a little over 20%. During the same period, revenue grew from over $22 billion to over $31 billion and net income increased from $2.9 billion to $4.4 billion. And these are GAAP earnings and not concocted "adjusted EBITDA" numbers.

Net margin actually improved after the last five years but gross margins have shrunk. With higher input and transportation costs, I would not be surprised to see margins compress further unless the company can successfully pass on some of those costs to its customers. Clearly consumers don't seem to be balking at paying $5 for a caffeinated drink but at some point, price increases will start impacting sales.

Despite a pullback in the stock, it isn't exactly cheap, trading at a forward P/E of 28 and a forward EV/EBITDA of 17.57. Revenue growth is expected to moderate to 15% this year and could decline further if the lockdowns in China continue or we enter into a recession next year. The company has net debt of nearly $21 billion on its balance sheet.

In an unusually volatile week, we saw significant market weakness earlier in the week probably driven by forced selling and a relief rally in the end. Insiders once again stepped up their purchases to take advantage of prices, which in some cases are down anywhere from 50% to 90% from their peaks. While overall insider buying went up by a little over $11 million last week, both the number of insiders and the number of companies with insider buying went up significantly. The last week of April saw 207 insiders across 98 companies purchase shares. This went up to 407 insiders across 169 companies in the first week of May and 584 insiders purchasing stock across 281 companies last week.

We wrote about Uber in our Broken Growth series of articles on Friday, May 6th and incidentally the same day, Uber’s CEO Dara Khosrowshahi happened to buy 200,000 shares for $5.35 million as detailed in a form 4 filing filed on Monday, May 9th. We wrote the following about Uber in that article,

The appeal with Uber has always been that the network and software they built could be expanded to other verticals and we saw this play out in delivery with restaurants first and then with groceries. The company recently expanded its partnership with Albertsons (ACI) and its various brands including Safeway, Randalls, etc. to over 2,000 stores. This shift to delivery helped the company in a material way during the early phases of the pandemic when their mobility division took a big hit.

The new vertical with a lot of potential for Uber is freight, where they connect shippers like Costco, CVS, Walgreens, Home Depot, H.E.B, Colgate-Palmolive, P&G and Abbott with carriers. While freight represented less than 7% of Uber’s gross bookings of $26.45 billion in Q1 2022, the division is growing rapidly.

In case you missed it, Mr. Khosrowshahi’s letter to employees highlighting the renewed focus on generating free cash flow is worth reading. If the company can demonstrate that it can generate free cash flow instead of chasing growth at all costs, investors might warm up to the stock, which continued dropping last week.

It was also interesting to see repeat purchases by the insiders of B. Riley.

Welcome to edition 619 of Insider Weekends. Insider buying increased last week with insiders purchasing $187.78 million of stock compared to $176.54 million in the week prior. Selling also increased to $547.68 million compared to $488.72 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 2.92. In other words, insiders sold almost 3 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 2.77.

Notable Insider Buys:

1. Starbucks Corporation: $75.6

Interim CEO Howard D. Schultz acquired 137,500 shares of Starbucks, paying $72.67 per share for a total amount of $9.99 million. Mr. Schultz increased his stake by 0.71% to 19,534,460 shares with this purchase.

P/E: 20.43 Forward P/E: 21.91 Industry P/E: 286.80
P/S: 2.86 Price/Book: N/A EV/EBITDA: 16.36
Market Cap: $86.71B Avg. Daily Volume: 10,911,101 52 Week Range: $68.39 – $126.32

2. B. Riley Financial, Inc. (RILY): $48.32

Shares of B. Riley Financial were acquired by 3 insiders:

  • Chairman and Co-CEO Bryant R. Riley acquired 141,296 shares, paying $47.30 per share for a total amount of $6.68 million. Mr. Riley increased his stake by 2.48% to 5,839,609 shares with this purchase.
  • Co-CEO Thomas J. Kelleher acquired 5,000 shares, paying $46.14 per share for a total amount of $230,684. These shares were purchased indirectly through an IRA.
  • Director Renee E. Labran acquired 408 shares, paying $48.98 per share for a total amount of $19,984. Ms. Labran increased her stake by 32.96% to 1,646 shares with this purchase.
P/E: 3.2 Forward P/E: N/A Industry P/E: 11.96
P/S: 0.85 Price/Book: 2.06 EV/EBITDA: N/A
Market Cap: $1.35B Avg. Daily Volume: 309,659 52 Week Range: $44.3 – $91.24

3. Uber Technologies, Inc. (UBER): $24.39

Chief Executive Officer Dara Khosrowshahi acquired 200,000 shares of Uber, paying $26.73 per share for a total amount of $5.35 million. Mr. Khosrowshahi increased his stake by 16.38% to 1,420,968 shares with this purchase.

P/E: N/A Forward P/E: 1219.5 Industry P/E: 56.92
P/S: 2.74 Price/Book: 3.29 EV/EBITDA: -23.23
Market Cap: $47.89B Avg. Daily Volume: 35,269,870 52 Week Range: $21.69 – $52.36

4. Luminar Technologies, Inc. (LAZR): $10.36

Chairperson, President & CEO Austin Russell acquired 600,000 shares of this automotive technology company, paying $8.77 per share for a total amount of $5.26 million. Mr. Russell increased his stake by 387.10% to 755,000 shares with this purchase.

P/E: N/A Forward P/E: -18.5 Industry P/E: N/A
P/S: 113.39 Price/Book: 18.21 EV/EBITDA: -19.86
Market Cap: $3.62B Avg. Daily Volume: 4,769,090 52 Week Range: $8 – $26.39

5. ViewRay, Inc. (VRAY): $3.3

Shares of this magnetic resonance imaging (MRI) manufacturer were acquired by 7 insiders:

  • Director Caley Castelein acquired 1,415,000 shares, paying $2.54 per share for a total amount of $3.6 million.
  • President & CEO Scott William Drake acquired 157,012 shares, paying $2.55 per share for a total amount of $399,994. Mr. Drake increased his stake by 3.97% to 4,111,742 shares with this purchase.
  • Chief Financial Officer Zachary William Stassen acquired 120,000 shares, paying $2.65 per share for a total amount of $318,250. Mr. Stassen increased his stake by 22.37% to 656,363 shares with this purchase.
  • Director Daniel Jeffrey Moore acquired 96,358 shares, paying $2.59 per share for a total amount of $250,001. Mr. Moore increased his stake by 54.55% to 272,998 shares with this purchase.
  • Director Kristine B. Johnson acquired 40,000 shares, paying $2.82 per share for a total amount of $112,704. Ms. Johnson increased her stake by 21.91% to 222,533 shares with this purchase.
  • Director Karen Prange acquired 37,600 shares, paying $2.66 per share for a total amount of $100,002. Ms. Prange increased her stake by 81.47% to 83,754 shares with this purchase.
  • Director Susan C. Schnabel acquired 20,000 shares, paying $2.53 per share for a total amount of $50,684. Ms. Schnabel increased her stake by 31.61% to 83,279 shares with this purchase.
P/E: N/A Forward P/E: -6.35 Industry P/E: 42.70
P/S: 8.49 Price/Book: 3.48 EV/EBITDA: -3.37
Market Cap: $595.51M Avg. Daily Volume: 1,785,308 52 Week Range: $2.39 – $8.25

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

Notable Insider Sales:

1. Murphy USA Inc. (MUSA): $248.8

Shares of this retail motor fuel products company were sold by 4 insiders:

  • Director Robert Madison Murphy sold 40,000 shares for $239.52, generating $9.58 million from the sale. These shares were sold indirectly by a trust.
  • President & CEO R Andrew Clyde sold 20,615 shares for $235.79, generating $4.86 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
  • SVP, Marketing Robert J. Chumley sold 5,409 shares for $240.38, generating $1.3 million from the sale. 1,565 of these shares were sold as a result of exercising options immediately prior to the sale.
  • SVP, Sales & Ops Renee M. Bacon sold 1,801 shares for $241.60, generating $435,122 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
P/E: 16.68 Forward P/E: 19.35 Industry P/E: 14.62
P/S: 0.39 Price/Book: 7.69 EV/EBITDA: 9.4
Market Cap: $6.02B Avg. Daily Volume: 312,998 52 Week Range: $126.56 – $251.51

2. BancFirst Corporation (BANF): $82.03

President and CEO and Director David E. Rainbolt sold 142,938 shares of this regional bank for $83.55, generating $11.94 million from the sale.

P/E: 16.95 Forward P/E: 16.61 Industry P/E: 8.69
P/S: 5.49 Price/Book: 2.28 EV/EBITDA: N/A
Market Cap: $2.68B Avg. Daily Volume: 150,356 52 Week Range: $53.77 – $86.82

3. Pfizer Inc. (PFE): $49.92

Shares of Pfizer were sold by 3 insiders:

  • President R&D Mikael Dolsten sold 63,902 shares for $49.32, generating $3.15 million from the sale.
  • Executive Vice President Douglas M. Lankler sold 38,273 shares for $49.41, generating $1.89 million from the sale.
  • Executive Vice President William R. Carapezzi Jr. sold 32,908 shares for $50.00, generating $1.65 million from the sale.
P/E: 12.95 Forward P/E: 0.98 Industry P/E: 22.97
P/S: 3.47 Price/Book: 3.63 EV/EBITDA: 8.97
Market Cap: $281.94B Avg. Daily Volume: 28,419,885 52 Week Range: $38.48 – $61.71

4. Lattice Semiconductor Corporation (LSCC): $49.38

Shares of this semiconductor company were sold by 3 insiders:

  • President & CEO James Robert Anderson sold 112,260 shares for $48.60, generating $5.46 million from the sale.
  • VP Corp, CFO Sherri R. Luther sold 19,000 shares for $45.57, generating $865,849 from the sale.
  • VP Corp, R&D Stephen Douglass sold 1,208 shares for $48.16, generating $58,177 from the sale.
P/E: 73.7 Forward P/E: 26.41 Industry P/E: 21.30
P/S: 13.19 Price/Book: 16.47 EV/EBITDA: 52.34
Market Cap: $6.8B Avg. Daily Volume: 1,486,246 52 Week Range: $43.59 – $85.45

5. T-Mobile US, Inc. (TMUS): $126.33

President and CEO Michael G. Sievert sold 40,000 shares of T-Mobile for $122.66, generating $4.91 million from the sale.

P/E: 56.4 Forward P/E: 20.41 Industry P/E: 26.05
P/S: 1.97 Price/Book: 2.26 EV/EBITDA: 10
Market Cap: $158.36B Avg. Daily Volume: 5,061,391 52 Week Range: $101.51 – $150.2

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

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I am an entrepreneur and investor with a focus on event driven strategies including merger arbitrage, spinoffs, (legal) insider trading, buybacks and SPACs. I was one of the earliest contributors on Seeking Alpha and started publishing here in 2005. For more than a decade I have been writing every week about M&A and interesting insider transactions. My work has been mentioned in Barron's, Dow Jones, BNN Bloomberg and other publications.  

I have been an active investor for more than two decades and my background in technology has helped me built tools that inform my investing process, especially as it relates to event-driven strategies that require updated data and processes. The focus on my Inside Arbitrage service is to provide investors with the right combination of tools and analysis to help them take advantage of strategies that can perform well across market cycles.  

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Disclosure: I/we have a beneficial long position in the shares of RILY 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.

Additional disclosure: Disclaimer: I hold a long position in B. Riley (RILY). 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.

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