Insider selling is usually not a strong signal because insiders sell for a variety of reasons including the need to diversify their investments, to fund a large purchase, paying for a child’s education, etc. This has been confirmed by academic research over several decades and aligns with what I have seen during the last 12 years of tracking insider transactions every week. The only times I pay attention to insider selling is when insiders as a group are selling significantly more than usual as we outlined in the article Insider Weekends: The Pied Piper Is Heading Out Of Town last November and when insiders are selling despite a big recent decline in the stock.
The selling by Airbnb (NASDAQ:ABNB) insiders despite the recent pullback in the stock caught my eye. Co-founder Joe Gebbia has been selling shares consistently over the last several months but he significantly increased his selling last week as outlined below. Airbnb has been near the top of my watchlist of 40 “broken growth” stocks and while I have started nibbling slowly, valuations still remain stretched especially in light of recent geopolitical events. We wrote the following in late January in our Insider Weekends post discussing the RV manufacturer Thor Industries,
What we saw in the markets this week was particularly worrisome because the sell off was broad-based and even asset classes with low correlations between them appeared to be down. We are currently seeing mean reversion in full swing. As market participants who have invested through multiple cycles know, mean reversion often overshoots the mean. In other words, stocks can go from “strong buy” to “screaming buy” to “how can it get any cheaper” before they bottom. We haven’t yet approached the screaming buy phase yet as folks are already lining up to buy the dip, which has worked very well during the last decade.
I don’t think we see the quick rebound this time like we did after the COVID-19 related drop in early 2020. With monetary stimulus and quantitative easing out of the picture, all we have left now is fiscal stimulus in the form of the Build Back Better infrastructure plan, which still needs to win approval in the Senate.
The only reason I am nibbling and scaling into positions slowly is because almost no one can call a top or bottom with any consistency. I made the mistake of staying bearish for too long after the Great Recession in 2008-2009 and missed some generational buying opportunities. Thankfully I did not repeat that mistake coming out of March 2020, but this certainly feels like a market more like the one we saw after the dot-com bubble burst and not like the quick pullback and rebound during the pandemic.
I discussed Airbnb in an article titled Airbnb: Worth More Than Marriott, Hilton And Hyatt Combined last November and wrote the following,
Revenue growth year-over-year at Airbnb was a stunning 46.70% as remote work allowed folks to live out their travel dreams in far flung locales where they could rent out Airbnb’sfor several weeks or months.
Airbnb has benefited from organic growth from macroeconomic tailwinds as well as through several tuck-in acquisitions. All good things must come to an end and the forward growth rate for Airbnb is expected to moderate to about 15%. This is still well above all its competitors, which, with the exception of Booking Holdings, are expected to see revenue decline by low single digits.
Considering Airbnb’s growth rate, margins and a strong balance sheet, one would expect it to trade at a significant premium to the group. Interestingly the stock is marginally cheaper than both Marriott and Hilton with an EV/sales ratio of 22.55.
If the company grows revenue just 10% in 2022 to $6.5 billion and generates EBITDA of $3 billion, the company is trading at a 2022 EV/EBITA of 40.
With the recent pullback in the stock, Airbnb now trades at a trailing EV/sales of 14.11 and a forward EV/sales of 10.66. Paying 11 times 2022 sales for an asset-light company with very high gross margins and double digit revenue growth is not unusual, especially considering McDonald’s (NYSE:MCD) trades at a forward EV/sales of 9. However I would like to see insiders slow down their sales or exercise options without immediately selling them, as a signal that the insiders are starting to find the stock attractive.
Beyond Airbnb, the other noteworthy insider transactions last week were was the cluster buying of B. Riley (NASDAQ:RILY) by its founder Bryant Riley and a group of five other insiders as well as the cluster purchase of the specialty insurance and reinsurance company James River Group (NASDAQ:JRVR) by four insiders. James River Group trades for a little over 1.5 times tangible book value, the lowest it has traded on that metric in the last five years. The stock is also just below its December 2014 IPO price of $21 per share.
Welcome to edition 609 of Insider Weekends. Insider buying decreased last week with insiders purchasing $133.06 million of stock compared to $154.36 million in the week prior. Selling more than doubled to $1.97 billion compared to $815.51 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 14.82. In other words, insiders sold almost 15 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 5.28.
Notable Insider Buys: 1. Asana, Inc. (NYSE:ASAN): $45.44
President, CEO, & Chair Dustin A. Moskovitz acquired 750,000 shares of this work management platform, paying $50.51 per share for a total amount of $37.88 million. Mr. Moskovitz increased his stake by 3.93% to 19,839,676 shares with this purchase.
P/E: N/A Forward P/E: -46.37 Industry P/E: 52.59 P/S: 26 Price/Book: 34.19 EV/EBITDA: -40.25 Market Cap: $8.71B Avg. Daily Volume: 4,468,714 52 Week Range: $25.41 – $145.79 2. B. Riley Financial, Inc. (NASDAQ:RILY): $64.33
Shares of B. Riley Financial were acquired by 6 insiders:
- Chairman and Co-CEO Bryant R. Riley acquired 85,000 shares, paying $58.71 per share for a total amount of $4.99 million. Mr. Riley increased his stake by 1.59% to 5,426,970 shares with this purchase.
- Director Randall E. Paulson acquired 40,000 shares, paying $59.04 per share for a total amount of $2.36 million. Mr. Paulson increased his stake by 34.96% to 154,417 shares with this purchase.
- President Kenneth M. Young acquired 10,000 shares, paying $58.98 per share for a total amount of $589,752. These shares were purchased indirectly through a trust.
- Director Michael Joseph Sheldon acquired 8,430 shares, paying $59.51 per share for a total amount of $501,695. Mr. Sheldon increased his stake by 34.08% to 33,164 shares with this purchase.
- Co-CEO Thomas J. Kelleher acquired 4,300 shares, paying $58.64 per share for a total amount of $252,154.
- Director Renee E. Labran acquired 340 shares, paying $58.53 per share for a total amount of $19,899. Ms. Labran increased her stake by 37.86% to 1,238 shares with this purchase.
P/E: 4.26 Forward P/E: N/A Industry P/E: 13.53 P/S: 1.12 Price/Book: 2.68 EV/EBITDA: N/A Market Cap: $1.79B Avg. Daily Volume: 275,377 52 Week Range: $51.79 – $91.24 3. OPKO Health, Inc. (NASDAQ:OPK): $3.06
CEO & Chairman Phillip Frost M.D. acquired 850,000 shares of this medical devices and drug development company, paying $3.09 per share for a total amount of $2.63 million. These shares were purchased indirectly by Frost Gamma Investments Trust.
P/E: N/A Forward P/E: -306 Industry P/E: 87.64 P/S: 1.17 Price/Book: 1.18 EV/EBITDA: 31.57 Market Cap: $2.09B Avg. Daily Volume: 5,615,183 52 Week Range: $2.79 – $5.25 4. AbCellera Biologics Inc. (NASDAQ:ABCL): $8.53
Shares of this biotech company were acquired by 2 insiders:
- Chief Operating Officer Veronique Lecault acquired 230,789 shares, paying $8.66 per share for a total amount of $1.99 million. Ms. Lecault increased her stake by 17.23% to 1,570,122 shares with this purchase.
- Director John S. Montalbano acquired 30,000 shares, paying $8.88 per share for a total amount of $266,400. Mr. Montalbano increased his stake by 115.38% to 56,000 shares with this purchase.
P/E: 17.77 Forward P/E: 34.12 Industry P/E: 32.12 P/S: 6.44 Price/Book: 2.36 EV/EBITDA: 8.61 Market Cap: $2.42B Avg. Daily Volume: 2,211,255 52 Week Range: $7.42 – $39.19 5. James River Group Holdings, Ltd. (NASDAQ:JRVR): $20.74
Shares of this specialty insurance and reinsurance services provider were acquired by 4 insiders:
- Chief Executive Officer Frank D’Orazio acquired 50,000 shares, paying $20.64 per share for a total amount of $1.03 million. Mr. D’Orazio increased his stake by 42.26% to 168,315 shares with this purchase.
- Director Adam J. Abram acquired 24,000 shares, paying $20.39 per share for a total amount of $489,463. Mr. Abram increased his stake by 5.23% to 482,943 shares with this purchase.
- Director Sundar Srinivasan acquired 12,500 shares, paying $20.32 per share for a total amount of $254,059. Mr. Srinivasan increased his stake by 216.64% to 18,270 shares with this purchase.
- Director Gould Kirstin Romann acquired 4,150 shares, paying $20.40 per share for a total amount of $84,646. Mr. Romann increased his stake by 170.15% to 6,589 shares with this purchase.
P/E: N/A Forward P/E: 8.43 Industry P/E: 10.06 P/S: 1 Price/Book: 1.07 EV/EBITDA: -4.62 Market Cap: $776.68M Avg. Daily Volume: 345,506 52 Week Range: $19.76 – $51.02
Notable Insider Sales: 1. Walmart Inc. (NYSE:WMT): $142.82
Shares of Walmart (NYSE:WMT) were sold by 2 insiders:
- Director Robson S. Walton sold 1,167,433 shares for $136.20, generating $158.99 million from the sale. These shares were sold indirectly by a trust.
- Executive Vice President Brett M. Biggs sold 22,133 shares for $140.02, generating $3.09 million from the sale.
P/E: 29.33 Forward P/E: 19.59 Industry P/E: 25.69 P/S: 0.69 Price/Book: 4.75 EV/EBITDA: 12.2 Market Cap: $396.17B Avg. Daily Volume: 9,062,042 52 Week Range: $127.81 – $152.57 2. Airbnb, Inc. (NASDAQ:ABNB): $142.7
Shares of Airbnb were sold by 2 insiders:
- Chairman – Samara & Airbnb.org Joseph Gebbia sold 497,600 shares for $151.35, generating $75.31 million from the sale. 15,525 of these shares were sold as a result of exercising options immediately prior to the sale.
- Director Belinda J. Johnson sold 20,000 shares for $141.30, generating $2.83 million from the sale.
P/E: N/A Forward P/E: 69.95 Industry P/E: 1,288.80 P/S: 15.31 Price/Book: 18.93 EV/EBITDA: 158.73 Market Cap: $91.74B Avg. Daily Volume: 6,354,206 52 Week Range: $129.71 – $215.49 3. Bunge Limited (NYSE:BG): $108.32
Director Paul J. Fribourg sold 690,000 shares of this agribusiness and food company for $107.98, generating $74.5 million from the sale. These shares were sold indirectly by Continental Grain.
P/E: 7.94 Forward P/E: 12.35 Industry P/E: 21.12 P/S: 0.26 Price/Book: 2.19 EV/EBITDA: 7.92 Market Cap: $15.31B Avg. Daily Volume: 1,147,132 52 Week Range: $71.73 – $109.83 4. Arista Networks, Inc. (NYSE:ANET): $118.55
Shares of this networking company were sold by 7 insiders:
- Chief Development Officer Andreas Bechtolsheim sold 515,500 shares for $120.54, generating $62.14 million from the sale. These shares were sold indirectly by a trust. 15,500 of these shares were sold as a result of exercising options immediately prior to the sale.
- Senior Vice President, CFO Ita M. Brennan sold 14,800 shares for $119.40, generating $1.77 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
- Chief Platform Officer John F. McCool sold 11,119 shares for $118.82, generating $1.32 million from the sale. These shares were sold indirectly by a trust. 1,336 of these shares were sold as a result of exercising options immediately prior to the sale.
- SVP and General Counsel Marc Taxay sold 9,621 shares for $119.19, generating $1.15 million from the sale. 1,708 of these shares were sold as a result of exercising options immediately prior to the sale.
- Director Charles H. Giancarlo sold 6,660 shares for $119.37, generating $795,037 from the sale.
- SVP, Chief Operating Officer Anshul Sadana sold 5,871 shares for $122.42, generating $718,711 from the sale.
- Director Kelly Bodnar Battles sold 560 shares for $115.69, generating $64,788 from the sale.
P/E: 45.08 Forward P/E: 28.43 Industry P/E: 22.80 P/S: 12.36 Price/Book: 9.17 EV/EBITDA: 33.99 Market Cap: $36.43B Avg. Daily Volume: 2,221,652 52 Week Range: $66.935 – $148.57 5. American National Group, Inc. (NASDAQ:ANAT): $189
Shares of this diversified insurance company were sold by 3 insiders:
- Director Frances A. Moody-Dahlberg sold 78,090 shares for $189.15, generating $14.77 million from the sale. Theses shares were sold indirectly by Moody FAMD Interests.
- Advisory Director Russell S. Moody sold 78,090 shares for $189.16, generating $14.77 million from the sale. These shares were sold indirectly by Moody RRM Interests.
- Director Ross R. Moody sold 39,245 shares for $189.50, generating $7.44 million from the sale. These shares were sold indirectly by Moody RRM Interests.
P/E: 7.27 Forward P/E: N/A Industry P/E: 10.06 P/S: 1.16 Price/Book: 0.73 EV/EBITDA: 1.6 Market Cap: $5.08B Avg. Daily Volume: 101,313 52 Week Range: $96.07 – $195.89
