Quiver Quantitative - Large-Cap Insider Activity in Q4:
In Q4 of 2023, we analyzed a total of 5,623 unique insider purchases spanning approximately 1,000 publicly traded U.S. firms. Our current discussion will exclusively target companies classified under the large-cap category. This piece is a part of a continuing series, with the upcoming segment focusing on small-cap and mid-cap firms. This next installment, encompassing the fourth quarter's analysis, will soon be published on our profile. For this article, we have defined large-cap companies as those publicly listed entities with market capitalizations exceeding $10 billion. You can explore our primary thesis in the original article available here, and our second-quarter analysis on large-cap companies is accessible via this link. Herein is our curated list of large-cap companies that have notably garnered heightened interest from corporate insiders during the fourth quarter. These firms are deemed particularly research-worthy due to their unusual and atypical insider activity patterns.
Below is our list of large-cap companies that have notably garnered heightened interest from corporate insiders during the fourth quarter. These firms are deemed particularly research-worthy due to their unusual and atypical insider activity patterns and in some cases due to additional alternative data we observe from the company.
Emerson Electric Co (EMR):
Active Corporate Insiders: 5 1 Year Performance: -1% Total Bought Back: $2,111,544 Average Purchase Price: $85
Emerson Electric Company (NYSE:EMR), a renowned player in the industrial sector, specializes in the manufacturing and distribution of a wide range of electrical, electromechanical, and electronic products and systems. As a major entity, Emerson has a significant presence in the global market. In the recent quarter, the spotlight was on several high-ranking insiders who demonstrated their confidence in the company's prospects. Unlike Emerson's previous quarters, where insider activity was relatively muted, this period saw a notable uptick in stock purchases by key insiders including the CEO. Five insiders bought back a total of around $2.1 million in company stock mostly in the first half of November; shares rose more than 10% shortly after. Insiders paid an average of about $85 per share during the purchasing spree. Its stock price, after facing a tumultuous period, has shown signs of growth in the last 6-7 months and is far outpacing most of its peers in the energy sector in that period. EMR is +22% vs XLE (NYSE:XLE) at + 7%. Emerson's financial results for the quarter, particularly the EPS and revenue figures, were closely watched. The company reported its EPS as $1.29 indicating no change from the previous quarter but a miss on estimates of $0.02 per share. Quarterly revenue fell on a YoY basis by nearly 30% however 2023 revenue still grew about 10%. As far as valuations go its P/E ratio is relatively on par with the rest of the sector, they’re currently trading at about 18x. Historically the company has maintained an attractive P/FCF ratio as well however this year FCF (Free Cash Flow) per share fell close to 90% to $0.48 basically sending their P/FCF through the roof. All that said they’ve maintained a net income margin of greater than 87% over the previous 12 months. EMR also currently offers a forward looking 2.2% dividend for shareholders. This could also play into the increased attention from insiders.
Northern Trust Corporation (NASDAQ:NTRS): Active Corporate Insiders: 3 1 Year Performance: -7.6% Total Bought Back: $1,736,268 Average Purchase Price: $64
Northern Trust Corporation, a prominent figure in the financial sector, specializes in investment management, asset and fund administration, fiduciary, and banking services. Its reputation as a stalwart in the industry is well-earned, given its expansive portfolio and global influence. In the recent quarter, the company caught the attention of market watchers due to interesting movements by its insiders, who actively engaged in stock transactions. That said the company doesn’t exactly have the most traditionally attractive fundamentals. With a P/E ratio of 14x, Northern Trust stands at a higher valuation compared to much of the rest of the financial sector, which may be perceived as quite expensive by investors seeking value opportunities. Q4 2023 earnings will be reported in a couple of weeks on January 18th but revenue looks to decline around 3% YoY and has now been relatively flat since 2018. The company’s debt to equity ratio remains quite high as well at around 11x. There are a few highlights however, like the fact that the asset management company has grown free cash flow per share from $8 last December to more than $15 at the end of 2023 and dividends have now grown for the third straight year. With that in mind NTRS paid shareholders a $0.75 dividend on January 1st, and similarly to Emerson Electric, could have contributed to the increased insider volume leading up to the payout. However there hasn’t been an insider purchase at the firm since 2019. This quarter, buys came from the CEO, CFO, and GC (General Counsel) all on October 24th paying an average of about $64 per share. Interestingly several other insider purchasing filings were recorded this quarter however they were both for dates far outside the reporting deadline and were not included for the figures used in this article. The company's recent lobbying spending could potentially be a catalyst for the stock as well. They spent an estimated $410,000 this year primarily on what seem to be quite specific pieces of financial legislation. What appeared most common was ‘88 FR 14672 - Safeguarding Advisory Client Assets: Issues related to the SEC's proposal requiring segregation of cash.’ While not even half a million in lobbying expenses is nothing compared to some other major players, it's the most NTRS has spent in a year since 2015.
CenterPoint Energy, Inc (NYSE:CNP):
Active Corporate Insiders: 3 1 Year Performance: -1% Total Bought Back: $1,412,986 Average Purchase Price: $27
CenterPoint Energy primarily focuses on the transmission, distribution, and sale of electricity and natural gas. As an established company in this industry, CenterPoint has garnered significant attention, especially in terms of its financial performance and stock activity. The company's recent quarter has been particularly eventful, marked by several noteworthy financial indicators including a number of insider purchases. The CEO, CFO, and COO all made separate purchases throughout the month of November, shortly after Q3 earnings results, ultimately paying an average of around $27 per share. With earnings in mind, CenterPoint reported a year-over-year revenue growth of +3%. However, this quarter marked the company's first miss on revenue estimates since 2020, an event that might be worth more attention. This is also in collaboration with a backdrop of declining net income, which has now fallen by around 40% over the past two years. The company's financials also reveal negative free cash flow for what is now the fourth consecutive year. Nonetheless, annual EPS estimates for CenterPoint were set at $1.50, but actual figures are anticipated to be higher, potentially making it the highest annual EPS the company has seen since 2019. This projection of a higher-than-expected EPS is a crucial factor in evaluating the company's profitability and operational efficiency. Now at 20x, the P/E ratio is somewhat high, positioning the company as expensive compared to its peers in the utilities sector. CenterPoint Energy's debt-to-equity ratio stands at 3x, indicating a sizable level of debt compared to its equity but not an unmanageable one. Shares of the utilities of the giant have now risen notably since insiders purchased shares to around $29 each.
Charles River Laboratories International, Inc (CRL):
Active Corporate Insiders: 2 1 Year Performance: 3% Total Bought Back: $1,248,939 Average Purchase Price: $183
Charles River Laboratories is renowned for its extensive expertise in drug discovery and development. It’s also the first non-dividend stock we’ll discuss in this article. Both the CEO and COO made purchases about a week apart in mid-November paying what averages out to about $183 per share. The buying spree came a week or so after the firm posted strong Q3 earnings. Actual EPS beat estimates by $0.35 per share making way for what could potentially be a record for the company's annual EPS figure. Revenue growth has also been consistent, with YoY growth of close to 12% and a 3 year CAGR of 14%. 2023 revenue will set a record for the company at around $4.1 billion. The company’s balance sheet is also quite strong. Profitability is not a problem whatsoever as they’ve been free cash flow positive since at least 2013 and they currently operate with a net income margin of 12%. Net income has also been positive since at least 2013 and has grown every year since 2017. They also maintain a very low debt to equity ratio of 1.3x. CRL is somewhat expensive however when it comes to its P/E ratio which is currently 21x but with contrasting valuation metrics like price to free cash flow it's not the most concerning. Shares were relatively flat until the Q3 earnings report but have now risen nearly 30% since perhaps in part due to the large buys from executives. The stock currently trades around $225 per share.
Other large-cap stocks with significant insider volume include the following… Occidental Petroleum (NYSE:OXY) which saw Buffett add another 19 million or so shares to his already massive position which he grew in total by close to 9%. Energy Transfer (NYSE:ET) LP insiders bought another $27 million in stock making it somewhere in the range of 2-3 straight years in which insiders have purchased more than $100 million in company stock. A director at Square (SQ) bought nearly $30 million worth of shares in the $51 dollar range in what was the first insider purchase at the firm since 2015. Financial stocks including Bank of America (BAC), Fifth Third Bancorp (NASDAQ:FITB), Nasdaq, Inc (NDAQ), and M&T Bank Corp (MTB) all were purchased by one more insider in Q4; at just those five financial firms they combined for $3.4 million in volume.
Some articles in the past have included data on the performance of previously covered stocks and articles but going forward there will be a section like this at the end of each article discussing this. The previous large-cap article (covering Q3 trades) was first published on November 7th, 2023. The writing discussed 5 companies; Exxon Mobil (NYSE:XOM), Broadcom Inc (NASDAQ:AVGO), The AES Corporation (NYSE:AES), Zebra Technologies Corporation, and NextEra Energy Inc (NYSE:NEE). The respective returns for each company since we published are as follows… -2%,, +17%, +16%, +21%, +6% while the S&P 500 has returned around 8% in that same period.
This article was originally published on Quiver Quantitative