An airline, biotechs and others see huge insider buying

24/7 Wall St. Perspectives

• IPOs and the activities of activist investors have driven huge insider buying.
• An entertainment company and an airline joined biotech and energy companies as targets last week.
• Also: 2 dividend legends to keep forever.

IPOs and activist investor activity have revealed some huge insider buying over the past week or so. And again, the biotech and energy industries were well represented among notable acquisitions, along with an entertainment company and an airline. Buyers included beneficial owners, top executives and others. Let’s take a quick look at these trades.

Is insider buy-in important?

What does insider buying tell us?

A well-known adage reminds us that corporate insiders and 10% owners really only buy a company’s stock because they believe the stock price will rise and want to profit from it. Thus, insider buying can be an encouraging signal for potential investors. This is even more so during times of uncertainty in the markets and even when markets are near all-time highs.

Remember that when earnings season rolls around again, insiders will be prohibited from buying or selling stocks. Below are some of the most notable insider acquisitions that have been reported in the past week, starting with the biggest and most prominent.

TKO

Shares are near multi-year highs.

• Buyer(s): 10% owner Silver Lake West HoldCo
• Total shares: over 1.6 million
• Price per share: $89.1
• Total cost: over $146.2 million

TKO Group Holdings Inc. (NYSE: TKO) is the parent of the Ultimate Fighting Championship and World Wrestling Entertainment. It raised its guidance for the full year when it published its latest quarterly results. Since that report, the stock is up more than 6% and is trading near a multi-year high. The consensus price target is $132.25, and all but three of 16 analysts recommend buying the stock, five of them with a Strong Buy rating. Note that although it was reported last week, the transaction actually took place in April.

Southwest Airlines

Pushing back on an activist investor.

• Buyer(s): Executive Chairman Gary Kelly and another director
• Total shares: over 3.6 million
• Price per share: $29.05 to $30.00
• Total cost: around $107.7 million

Kelly took less than 34,000 of those shares. The rest were purchased by an executive in response to pressure from activist investor Elliott Management for management changes at Southwest Airlines Co. (NYSE: LUV). The stock was last seen trading above the buyers’ buy price range and is about 8% higher than six months ago. Analysts have an average price target of just $26.94, meaning they currently see no upside over the next 52 weeks. Things may change once things shake out with Elliott.

The new city energy

This buyer is an executive director and beneficial owner.

• Buyer(s): CEO Wesley Edens
• Total actions: Almost 5.8 million
• Price per share: $8.63
• Total cost: approximately $50.0 million

Edens took advantage of a public offering of shares of New Fortress Energy Inc. (NASDAQ: NFE). The energy infrastructure company posted disappointing quarterly results in August. After the report, shares fell to a multi-year low of $8.20, but the stock was last seen trading well above the buyer’s buy price. The consensus price target is rising to $19.07, which would be a gain of about 107%. On average, analysts recommend buying the stock, although Morgan Stanley just downgraded the stock to Equal Weight. Note that Edens is a beneficial owner with a stake of over 35 million shares.

BioAge Laboratories

Acquisition of shares in an initial public offering.

• Buyer(s): former 10% owner Cormorant Asset Management and a director
• Total actions: around 669,200
• Price per share: $18.00 to $20.00
• Total cost: over $12.4 million

This beneficial owner purchased BioAge Labs Inc.’s stock in its initial public offering. (NASDAQ: BIOA). The California-based clinical-stage biopharmaceutical company focuses on obesity and other metabolic diseases. Shares have traded as high as $24 so far. Cormorant took 450,000 shares and owns a stake of more than 1.6 million shares. The healthcare-focused investment firm also acquired shares of Corbus Pharmaceuticals Holdings Inc. (NASDAQ: CRBP ) in the previous week. Moreover, other biotech IPOs have recently tempted insiders.

Wave Life Sciences

A pharmaceutical giant with a big stake.

• Buyer(s): 10% owned by GSK
• Total shares: almost 2.8 million
• Price per share: $8.00
• Total cost: over $22.3 million

This pharmaceutical giant took shares of Wave Life Sciences Lt. (NASDAQ: WVE ) in a public offering. The Singapore-based clinical biotech company recently reported encouraging interim data on a muscle disorder treatment and received an FDA pediatric designation for its Duchenne muscular dystrophy treatment. The stock price is about 60% higher than 90 days ago, as well as about 7% higher than the buyer’s purchase price. The average price target is $15.78, and all six analysts who follow the stock recommend buying the stock. GSK’s stake is up to more than 16 million shares.

Talos Energy

Carlos Slim is still shopping.

• Buyer(s): 10% owner Control Empresarial de Capitales
• Total shares: 686,700
• Price per share: $10.03 to $10.55
• Total cost: nearly $7.1 million

This investment firm controlled by Carlos Slim collected his shares of Talos Energy Inc. (NYSE: TALO) since March. The stake is now around 43.5 million shares. The Houston-based oil and gas company recently reported a major discovery in the Gulf of Mexico, but it also saw the departure of its chief executive. The stock price is above the last buy price range, but less than 6% lower than six months ago. However, analysts expect the stock to rise to $17.83 per share in the next 12 months, which would represent a gain of more than 60%. Their consensus recommendation is to buy the stock.

And other internal purchases

Some smaller insider acquisitions at the Atlanta Braves, Lions Gate Entertainment, Simon Property and more.

In the past week, insider buys have been reported at AIG, Atlanta Braves, Autodesk, Biohaven, Green Dot, Hecla Mining, Lions Gate Entertainment, PBF Energy, SAIC, Saul Centers, Simon Property Group and Voya Financial.

Prediction: This will be the world’s first $5 trillion company

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