Strong Mid-Cap Insider Buys: Q2 2023

Notable Insider Purchases for Q2?

We looked through thousands of S-4 filings in an attempt to identify firms whose corporate insiders were engaging in periods of unusually intense insider buying activity. The series continues with this second-quarter piece covering mid-cap companies but will be followed up shortly with articles covering both small-cap and large-cap insider activity. For the purposes of this article, we have defined mid-cap companies as publicly listed firms with a market cap between $2 and $10 billion. Our original article with the main thesis can be read here, while the last quarter’s article covering mid-cap companies can be accessed with this link.

Below is our list of research-worthy mid-caps that, in our view, enjoyed a period of unusual and atypical interest from corporate insiders during the first quarter of the year and are worthy of a further dive:

Zions Bancorporation (ZION)

• Active Corporate Insiders: 5

• Year-To-Date Performance: -25.4%

• Total Bought Back: $2,730,977

Zions Bancorporation is a Utah Salt Lake City-based bank holding company providing banking and other bank-related services through several of its bank operating subsidiaries, most notably including the likes of Zion Bank, Nevada State Bank, The Commerce Bank, and others. Its business operations are predominantly focused on the Western Coast of the United States, where the holding corporation operates a $90 billion balance sheet as one of the more influential regional banks. The bank operator is currently being valued by the market at a relatively compelling P/E of 8.81x as it trades slightly above its tangible book value at a P/TBV of 1.41x. ZION had some of the most focused and diversified insider buying activity we saw in this most recent quarter. Five different insiders, including the President, two Vice Presidents, the Chairman and CEO, and a Director bought a little over $2.7 million combined. This continues the well-established trend of insider buying in the regional banking sector that emerged last quarter and has so far proved rather profitable for the insiders. It is worth noting here that the President increased his position by 35%, one VP increased his stake by more than 500%, and the other by 96%. In ZION’s case, the same insiders executing the buying spree have been active sellers for the better part of four years, making the signal of confidence that much more important in our view. Both Seeking Alpha Analysts and Wall Street Analysts seem to have faith in the bank and trust that it will navigate toward better days. Both groups of analysts rate the company as a “Buy”, with an average score of 4.33/5.00 and 3.63/5.00, respectively. However, bears are still waiting for their day in the markets, with a roughly 15% of the float currently sold short. ZION currently trades at $36.10.

Luminar Technologies Inc. (LAZR)

• Active Corporate Insiders: 2

• Year-To-Date Performance: 47.3%

• Total Bought Back: $21,514,773

Luminar is a stock with a great track record for the year, having generated 47.3% returns year-to-date. The Florida-based light detection and ranging technology firm was founded in 2012 by co-founders Austin Russell and Jason Eichenholz, who both still actively serve in the company as the CEO and CTO. Even though it is just struggling to get out of the pre-revenue base, LAZR is broadly recognized as the leader in LIDAR technology solutions, already managing to secure lucrative deals with established names such as Volvo (OTCPK:VLVLY), Nissan (OTCPK:NSANY), and Mercedes-Benz (OTCPK:MBGAF). As of today, the company still burns through significant amounts of cash, but the bull thesis is that revenue is going to skyrocket until 2030. That particular sentiment can be viewed from the angle of the corporate insiders, who once again executed material insider purchases. This is especially true in the case of its CEO, Austin Russel, who in a period of only a couple of days increased his holdings in the company by a staggering 346%. He bought $21.3 million of Luminar stock between May 15th and 16th, in the range of $5.80 to $6.25 per share. One of the directors, Heng Jun Hong, joined in on the 15th, buying about $200K in stock for $5.91 per share. SA Analysts have failed to establish common ground on the prospects of the stock, rating LAZR as a “Hold” with an average score of 3.40/5.00, with coverage ranging from positive to outright pessimistic. Wall Street Analysts on the other end are slightly more optimistic on the matter, rating the company as a “Buy” with an average of 4.16/5.00. LAZR is currently selling for $6.90 per share.

GameStop Corporation (GME)

• Active Corporate Insiders: 3

• Year-To-Date Performance: 28.9%

• Total Bought Back: $10,226,059

The brick-and-mortar game retailer rose to prominence during the 2021 short squeeze and subsequent meme stock mania. With the loss of traffic and subsequent sales originating from the 2020 lockdowns, in an already difficult financial position, Gamestop became one of the most popular short targets on the Street. As the shorts got greedy, reportedly extending their shorts to more shares than the firm even had outstanding, a retail investor movement rose to break the shorts. GME’s stock price skyrocketed from less than $5 a share to more than $325 as a result of the short sellers getting squeezed out. Management used this unprecedented interest to raise capital by diluting the new shareholder base, getting their hands on some much-needed cash. The turnaround story for the in-distress stock has been nowhere near the one projected by even the most optimistic bulls. While GME trades at only x1.19 NTM P/S, other than a one-off freakishly strong March earnings report, it is still burning through cash, posting quarter over a quarter of negative EBITDA and FCF with seemingly no end in sight. SA Analysts joined the ranks of Street Analysts in unanimously rating the meme stock as a straightforward “Sell”, with an average score of 2.12/5.00 and 2.00/5.00, respectively. The stock also fell out of prominence among the meme stock crowd, having been ranked as only the 19th hottest meme stock according to our data. This has not stopped corporate insiders from once again signaling confidence to the investor base by executing another round of insider purchases. This quarter saw three active corporate insiders, Executive Chairman Ryan Cohen and Directors Alain Attal and Lawrence Cheng. They all bought shares on June 9th for a combined total of about $10.3 million, with the majority being bought by Mr. Cohen, who is already well known for executing material purchases in the first quarter of 2022, during the GME’s impressive 150% surge. Insiders were buying the shares while GameStop traded between $21 and $23, and the stock can currently be purchased for roughly the same amount today, being traded for $22.10 per share.

East West Bancorp, Inc. (EWBC)

• Active Corporate Insiders: 9

• One-Year Performance: -10.9%

• Total Bought Back: $1,638,336

East West Bancorp is the company with the most active corporate insiders we had a chance to cover today. We tracked nine active corporate insiders for the retail and commercial bank in the quarter. While broadly falling under the category of a regional bank, EWBC is somewhat specific in the context of offering financial services in China as well. The unique story behind this bank is that it was in fact founded in order to predominantly serve the needs of Chinese American immigrants in Los Angeles. Since its beginnings in the 1970s, East West Bank has become one of the largest independent banks headquartered in Southern California, with a little more than 120 locations throughout the United States and Asia. Similar to the other banks we have covered today, it trades at a relatively fair valuation of x7.32 NTM P/E and a P/TBV of x1.39. It has followed a similar price trend as the other regional banks we discussed, bottoming out in early May, perhaps somewhat supported by considerable insider volume. It’s lost about 11% of its value year-to-date, joining the list of some of the less impacted regional banks. The bank holding company is well respected by SA Analysts as well as Wall Street analysts, with both groups of analysts assigning it a “Buy” rating on average. Purchases came between May 4th and May 11th in the range of $41 to $45 per share. In total, they bought around $1.6 million in company stock. Worth noting here, the COO opened a new position of 4780 shares, the EVP grew his stake by 23%, and two directors grew their stakes by 77% and 28% respectively. Shares of East West Bancorp can currently be purchased for $58.86.

Ameris Bancorp (ABCB)

• Active Corporate Insiders: 5

• Year-To-Date Performance: -14.1%

• Total Bought Back: $1,228,549

ABCB is a bank holding company that owns and operates Ameris Bank, a regional bank that is engaged in retail banking, commercial banking, credit card lending, and the mortgage loan business across more than 200 locations in the Southeast and Mid-Atlantic of the U.S. The company represents one of the “younger” regional banks founded in Georgia back in 1971. Unlike some of the other regional banks, it has only been moderately impacted by the crisis earlier in the year. Overall, shares of the bank operator are down only 14.1% year-to-date, still significantly underperforming the S&P 500 (SPY), but far from some of the other more distressed stocks. Even without a major sell-off, Ameris Bancorp is not sitting at some heavily stretched valuations; it is traded in the open market for an NTM P/E of 9.25x and a P/TBV of 1.29x, meaning it trades only at a small premium. This includes a token 1.6% dividend yield at current prices. The Chief Strategy and Risk Officers, as well as the CFO and CEO, all bought shares. Two directors also made notable purchases themselves. Similarly to ZION, the buying spree occurred from early to mid-May, a time that now appears to have been a bottom for many regional bank stocks. Both Street and SA Analysts remain fairly optimistic about the bank’s future potential, assigning it a “Buy” rating with a 4.00/5.00 and 3.85/5.00 score, respectively. Ameris Bancorp shares can currently be bought for $39.70.

Other notable mid-cap purchases includes Bill Ackman’s Pershing Square doubling down on their Howard Hughes Corp. (HHC) position, buying shares on 3 dozen or so different occasions throughout the second quarter, ultimately building up his stake to around 33% of the firm. More regional banks, Simmons First National (SFNC) and Texas Capital Bancshares (TCBI) enjoyed periods of notable insider purchases from April 28th to May 16th. Strong insider activity was noted for MoonLake Immunotherapeutics (MLTX), Dish Network Corp (DISH), RenaissanceRe Holdings (RNR), Agree Realty Corp (ADC), Callon Petroleum (CPE), CNX Resources (CNX), and Cleveland-Cliffs (CLF), among others.

Closing Thoughts

Somewhat similar to our insider activity coverage from last quarter, the well-established trend of insider buying in the regional banking sector continues and has so far proved rather profitable for the insiders. It appears that bank insiders are still willing to signal to the broader market that the banking crisis was, at least as far as they are concerned, to a larger extent overblown. It remains an open-ended question as to how long investors are willing to deal with depressed smaller-scale bank stocks and whether this opportunity will remain open at the time when we write the third-quarter update on the series.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.