Insider Buys
Good morning and happy Monday to everyone.
Last week was busy. Grit Alpha has been covering a near term catalyst in one of my favorite long-term stocks. The stock was up over 20% in the past week and I expect it to continue to do well. There was an update on a land bank (I own) that reported earnings and also an update on a small media outfit that I sold out of.
This morning we are reporting on notable insider purchases over the past week. One of my favorite ways to source stock ideas is to run a screener that finds the best insider buys for the past week. When insiders buy their own sock it means they are confident in the company’s future. I have found that buying stock alongside insiders when the stock is trading at a 52 week low is a good recipe for success.
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Insider Buys
We had a couple of big insider buys at Tyson Foods, Inc. (TSN) over the past week. the EVP, Chief People Office bought a nice size $246k block of stock in the open market. In addition, the CEO also purchased a $500k block of stock in the open market. There was also an insider buy of $99k worth of stock from the President of Fresh Meats and a $499k buy from the President of Poultry. Tyson has sold off and is trading at a 52-week low, with a 3.93% dividend yield and trades around 8.0x EBITDA. I don’t know the story here but it could be worth digging into.
We had an interesting insider buy from the EVP of Specialty Products at Calumet Specialty Products Partners L.P. (CLMT) with a $81.5k buy. Calumet has a 8.75x P/E ratio a market cap of $1.34 billion and almost $2.0 billion of debt. This is basically an LBO. The insider buy shows confidence in the de-leveraging strategy. Be aware if you purchase Calumet you will get a K-1 at the end of the year given the LP organization of the company.
The CEO of Health Catalyst (HCAT) purchased $500k of stock in the open market. I have never ran across this name but it has a $556 million market cap and trading off 26% this year. It doesn’t look like the name is profitable, but there is a decent amount of cash on the balance sheet.
A small insider buy from the CEO of Manhattan Bridge Capital, Inc. (LOAN) who bought $24.7k in the open market. Manhattan Bridge not only has a cool name, but it has a market cap of only $56 million and trading in the red. The P/E ratio is only 10x and you get a 9.41% dividend yield. The company originates loans so the financials will be messy. I don’t know the name well but it appears as if the management team has created long-term value for equity holders. It will be interesting to see how good returns will be in a high interest environment. You will really want to understand the underwriting process here if you get involved.
A small little insider buy at Adams Resources (AE) with the CFO purchasing $3.3k worth of shares. This is an interesting name to keep an eye on. Over the past 18 months the company bought back over 30% of their shares from the largest owner of the company and has done a few pipeline acquisitions. The accounting with the company is strange and the balance sheet is cash heavy. All of the cash is not available to give back to equity holders as the business model requires a significant amount of working capital to run the company. Nonetheless, it is an interesting company to watch as it tends to trade cheap.
The COO of Beasley Broadcast Group Inc. (BBGI) bought a small slug of $5k. Beasley is a pretty ugly legacy media company with a significant amount of related party transactions. The equity looks cheap but there is a ton of high cost debt and interest expenses eat much almost all of the free cash flow. The stock is a good trading vehicle, but eventually I think the company will have to restructure, unless advertising revenues come back in full force or the management team can ramp up digital revenues in a profitable fashion, which I am extremely skeptical of. There was also a small insider buy from the CEO of Beasley of $3.6k.
The CEO of Nerdwallet Inc. (NRDS) bought $258k of stock in the open market. This company went public during the bubble and has crashed. With only a $656 million market cap and $100 million of net cash, this name looks cheap. This is the company that has the Nerdwallet website that finds you great credit cards to apply to, so I don’t know how sustainable the business model is. All that aside, the company generates $580 million of revenue and $13 million of EBITDA. I don’t know why it is not more profitable, but there could be some stock-based comp in there. This name might be a good one to check out if there are real cost cuts. In my opinion, it could be a buyout target.
The SVP and CFP of Potbelly Corp. (PBPB) bought $26k worth of stock in the open market. Potbelly has been a value name for years that has never really worked out. There have been multiple activists, but for whatever reason, no one has been able to get the unit economics to work out. The insider buy is compelling and maybe this time is different. It could be a good mean reversion play, but by no means is Potbelly a compounder.
The COB of BurgerFi International (BFI) purchased $579k of stock in the open market. The stock is only at $0.50. This company has a $26 million market cap and is trading off 50% over the past year. There was a nice pop in the stock over the past week (I think from this insider buy). There is around $160 million of net debt (not counting operating leases which I assume most are negative cash flowing), putting the enterprise value around $184 million. It doesn’t look like the company is profitable but it is trading at a P/B of only 0.40x with insiders buying. This might be worth some time spending on given the absolute small size.
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Tyson is an interesting name.... thanks!