ENPH - Strong Large-Cap Insider Buys: Q2 2023

2023-07-26 14:48:30 ET

Summary

• After bringing you the second quarter installment covering mid-cap corporate insider activity, today's piece article will cover on the latest insider activity within the large-cap stock range.
• Insiders at Enphase Energy, Axon Enterprise, ONEOK, Inc., U.S. Bancorp, and Tyson Foods have shown unusual interest in their own companies' stocks, buying large amounts in the second quarter.
• Other notable insider purchases include the Saudi Sovereign Wealth Fund's $1.84 billion purchase of Lucid Group and Berkshire Hathaway's doubling down on Occidental Petroleum.
• This is the third consecutive quarter in which oil and gas company insiders are buying their own shares, signaling confidence in the industry despite uncertain market conditions.
• The following is a group of interesting large-cap stocks that we consider research-worthy and could possibly open a road to generating some alpha, at least if their own insiders are to be trusted.

Strong large-cap insider buys in Q2?

We have dissected thousands of S-4 fillings in an attempt to uncover firms that have enjoyed an unusual amount of interest from their corporate insiders, we strongly believe that each time a corporate insider decides to trade stock of their own company, a valuable signal to the market is being sent. In today's piece, we will focus our discussion and analysis exclusively on large-cap stocks, but the recurring series will be followed up with a second-quarter installment covering small-caps and mid-caps as well which has already been published on our profile. For the purposes of this article, we defined large-cap companies as publicly listed firms with market caps larger than $10 billion. Our original article containing the main thesis can be read here , while the first-quarter installment on large caps can be accessed through this link .

Below is our list of research-worthy large-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 in our view:

Enphase Energy ( ENPH )

• Active Corporate Insiders: 2

• Year-To-Date Performance: -32.3%

• Total Bought Back: $10,456,834
• Average Purchase Price: $162

Enphase Energy is a California-based country leading creator and manufacturer of software-driven home energy solutions. The energy technology company is in the business of developing and manufacturing solar battery energy storage units, micro-inverters, and EV charging stations, primarily oriented toward residential customers. It is one of the major success stories of the last bull market, achieving a monumental 2451% return over the past five years. To recall, ENPH traded in the mid-single digits in early 2018 and represents quite a success story. However, on the back of some lackluster financial results and a relatively disappointed investor base, fortunes have turned for the energy tech company. Currently, it is selling for only one-half of its all-time high prices, generating a -32.3% year-to-date return. Even after the recent sell-off, the solar energy firm does trade at a premium valuation, with the market assigning it an NTM EV/EBITDA of 24.58x, a P/E of 31.87x, and a P/FCF of 31.11x. Both Seeking Alpha and Wall Street Analysts remain quite bullish on ENPH's prospects, assigning the company a "Buy" rating with an average score of 3.55/5.00 and 4.17/5.00, respectively. In the second quarter, there were two active corporate insiders, the firm's CFO, Mandy Yang, and its director, Thurman Rogers. Together, they bought $10.4 million of ENPH shares during the period from late April to early May. The purchases came very shortly after the stock tumbled roughly 25% on recently announced problematic Q2 guidance from management. Rogers executed on the opportunity and increased his stake to some 60,000 shares, amounting to more than $10 million of the total amount bought in the quarter. It might be notable to point out that this purchase comes after years of insiders almost exclusively selling ENPH shares on the open market. Enphase Energy currently sells for roughly $179 per share.

Axon Enterprise ( AXON )

• Active Corporate Insiders: 2

• Year-To-Date Performance: 8.5%

• Total Bought Back: $8,735,057

• Average Price: $197

AXON is an Arizona-based weapons technology company that is in the business of developing and manufacturing energy weapons, body cameras, and software mostly oriented toward military, law enforcement, and sometimes civilian use. It is best known for its CED devices under the TASER brand in both the United States, as well as internationally. While the year-to-date performance of the stock is rather stagnant, falling somewhat behind the S&P 500 ( SPY ) a nd other major indices, the company does have a potent one-year track record of 72.6%. This has partially contributed to the firm currently sitting on a somewhat steep valuation, being priced by the market at an NTM EV/EBITDA of 43.32x, a P/E of 60.57x, and a P/FCF of 61.73x. Seeking Alpha Analysts have a rather solid opinion on its future prospects and rate the company as a "Buy" with an average score of 3.75/5.00. On the other end, Street Analysts are much more bullish, rating it as a "Strong Buy" with an average score of 4.50/5.00. AXON had two active corporate insiders in the second quarter, including CFO Brittney Bagley and Director Hadi Partovi. Brittney made a relatively small purchase on May 17th of 250 shares at around $197 per share, however, Director Partovi executed more significant purchases on three separate occasions; twice in the second half of May and once in late June. Axos had fallen 15% in a day about a week prior to the two insiders' initial purchases in May. Together, they bought about $8.7 million worth of AXON stock. On a side note, Axon has won $31 million in government contracts this year from a number of prominent government agencies. That's enough to place them amongst the top 20 earners over the last 90 days and top 25 YTD in this category. Axon Enterprise currently trades at $180.03 per share.

ONEOK, Inc. ( OKE )

• Active Corporate Insiders: 2

• Year-To-Date Performance: 2.8%

• Total Bought Back: $1,792,007

• Average Price: $60

OKE is one of the largest US-based energy companies that is in the business of gathering, processing, storing, and transporting natural gas and natural gas liquids (NGLs). The firm owns and operates natural gas pipelines and processing plants in the U.S. Mid-Continent and Rocky Mountain regions. It is also in the business of providing midstream services to producers of NGLs. OKE has been on a rather slow and steady rise since the 2020 crash, when it was briefly selling under the $20 range. It's generated a one-year return of 14.2% and a year-to-date return of 2.8%. Despite this, ONEOK is not necessarily trading at very steep prices, with it currently being sold at an EV/EBITDA of 10.79x, a P/E of 14.81x, and a P/FCF of 16.01x. This price tag also includes a 5.75% dividend yield. They had two active corporate insiders during the second quarter, Director Brian Derksen and CEO Pierce Norton having together bought $1.7 million of OKE shares. This is the first material purchase since the 2020 crash. SA Analysts and Wall Street Analysts both hold the company in high regard. They have assigned it a "Buy" rating with an average score of 4.00/5.00 and 3.70/5.00, respectively. The energy firm is currently being traded for around $67 per share.

U.S. Bancorp ( USB )

• Active Corporate Insiders: 4

• Year-To-Date Performance: -13.2%

• Total Bought Back: $2,446,063

• Average Price: $32

USB is the bank holding company for one of the largest and oldest banks in the United States. Even though it is not as well-known as the major U.S. banks such as Wells Fargo ( WFC ), JPMorgan ( JPM ), or Citibank ( C ), U.S. Bancorp is everything but a small-scale bank considering we are dealing with the sixth largest bank in the United States, with an $860 billion balance sheet and active operations all over the country. It is also the second-oldest bank in the country, or at least holds the number two bank charter. Despite all of this, the market still tends to disassociate USB from some of the well-established banks, which we can see from the fact that U.S. Bancorp, similar to some smaller-scale regional banks, still hasn't recovered from the March selloff. Its year-to-date performance is still negative at 13.2%. USB is currently being sold at an NTM P/E of 9.04x, an NTM P/S of 2.10x, and a P/TBV of 1.89x. This price also includes a dividend yield of 5.00%. Seeking Alpha Analysts do not have a clear consensus on the stock, rating it a "Hold" with an average score of 3.44/5.00. On the other end, Wall Street Analysts hold the bank in somewhat higher regard, assigning it a "Buy" rating with an average score of 3.80/5.00. Four active corporate insiders bought a total of $2.44 million, each with six-figure purchases. We are discussing directors and Vice Chairman James Kelligrew. Buying was done in a relatively clustered manner, with trades made on April 21st and 28th as well as May 5th and 8th, during which shares traded in the range of $30–34 dollars. Shares of U.S. Bancorp are currently trading at $37.86.

Tyson Foods ( TSN )

• Active Corporate Insiders: 5

• Year-To-Date Performance: -12.9%

• Total Bought Back: $2,348,312

• Average Price: $48

Tyson Foods is an Arkansas-based food processing behemoth that is in the business of selling to major restaurant chains, grocery stores, and convenience stores. Throughout the decades, the company evolved into a household name and one of the largest food producers in the world, operating some major brands such as Tyson, Aidells, Jimmy Dean, Wright, Hillshire Farm, Ball Park, and others. The food processing giant has had a difficult year in the markets, generating a one-year return of -35.2% and a year-to-date return of -12.9%. After the recent pullback, it sells at a relatively discounted EV/EBITDA of 10.26x and a P/E of x24.08, which might be considered fair given the size and foothold of the company. Both Seeking Alpha and Wall Street Analysts agree with the fact and remain quite bullish on TSN, awarding the stock a "Buy" rating with an average score of 3.61/5.00 and 4.11/5.00, respectively. What seems to be a rather coordinated insider buying effort was executed while Tyson Foods was trading in the $48–49 range in the period between the 9th and the 12th of May. In the first quarter, shares of TSN were purchased by President and CEO Donnie King, EVP Johanna Soderstrom, and Director Kevin McNamara, as well as two other insiders. They bought back $2.34 million worth of TSN shares for an estimated average price of $48 per share. What seems to be particularly noteworthy is that the entire group of insiders has almost exclusively been involved in selling the stock for years on end prior to the purchases in the second quarter. Tyson Foods is currently trading at $54.23 per share.

Notable purchases include the Public Investment Funds (Saudi Sovereign Wealth Fund) $1.84 billion purchase of Lucid Group ( LCID ), as well as Warren Buffett's Berkshire Hathaway ( BRK.A ) ( BRK.B ) doubling down on their stake in Occidental Petroleum ( OXY ). Energy Transfer ( ET ) insiders, now almost ritually keep buying loads of stock as well. Other notable insider purchases include Keurig Dr Pepper Inc. ( KDP ), Dollar General Corp ( DG ), Caesars Entertainment (CZR), Albemarle Corp ( ALB ), NextEra Energy ( NEE ), Match Group ( MTCH ), Activision Blizzard ( ATVI ), FMC Corp ( FMC ), General Motors ( GM ), among others.

Final Takeaway

This is the third consecutive quarter in which oil and gas company insiders are buying their own shares hands over fist, in a huge vote of confidence in the industry. These purchasing sprees come at a time when the market is still attempting to process where oil and gas prices are headed over the short-to-mid-term, perhaps overconfidently believing that we should sooner rather than later encounter the other end of the cycle. However, judging by the actions of these corporate insiders, oil and gas stocks outperforming the major indices might, after all, be a recurring subject over the next couple of years.

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