Insider Trading Report Edition 360 – Ronald O. Perelman Adds To His Significant Revlon Stake

Welcome to edition 360 of Insider Weekends. Insider buying increased with insiders buying $143.26 million of stock compared to $106.38 million in the week prior. Selling declined sharply with insiders selling $2.11 billion of stock last week compared to $4.63 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 dropped to 14.7. In other words, insiders sold almost 15 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 43.28.

Insider Sell Buy Ratio May 12, 2017

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. Revlon, Inc. (REV): $19.9

Director Ronald O. Perelman acquired 950,000 shares of this beauty care products company, paying $20.40 per share for a total amount of $19.38 million. These shares were purchased indirectly through MacAndrews & Forbes Incorporated and related entities.

Following this purchase Mr. Perelman’s holding company MacAndrews & Forbes Incorporated owns nearly 80% of Revlon. The holding company acquired Revlon for $1.8 billion and incurred other acquisition related costs of $900 million in 1985. Revlon once again became a publicly traded company in 1996. The stock dropped sharply earlier this month after Revlon reported disappointing first quarter results with sales declining 5.8% and a net loss of $6.6 million (adjusting for Revlon’s acquisition of Elizabeth Arden).

You can view the list of recent insider transactions for Revlon, Inc. here.

2. American Homes 4 Rent (AMH): $22.3

Director Tamara Hughes Gustavson acquired 462,123 shares of this real estate investment trust, paying $22.21 per share for a total amount of $10.26 million. Ms. Gustavson increased her stake by 3.52% to 13,600,665 shares with this purchase.

We have reported on purchases of American Homes 4 Rent several times in the past as insiders have been actively buying stock since 2013. We wrote the following after Director Wayne Hughes’ insider purchase in mid-2015 at much lower prices,

This is the third purchase (of) a million shares by Mr. Hughes we have reported on over the last six months. Following his purchase in December we mentioned,

“Mr. Hughes is the billionaire founder of Public Storage (PSA) and retired as the CEO of PSA in 2012. He founded the former manager of American Homes 4 Rent in 2011.”

For a REIT, the company has an unusually low yield of just 1.2%, when compared to the average yield of 3.27% of all residential equity REITs (PDF). The value most likely lies in the single family homes that company holds on its balance sheet as their timing in buying single family homes after the great recession was impeccable. The company trades at 1.05 times tangible book value.