Founders at These 7 Companies Are Loading Up on Their Stock. Should You?
The Executive Vice President of the Dish Network (NASDAQ:DISH) is Jim DeFranco. He also happens to be a co-founder of the satellite TV provider. Between March 2 and March 8, DeFranco undertook massive insider buying, picking up nearly $16 mill…
The Executive Vice President of the Dish Network (NASDAQ:DISH) is Jim DeFranco. He also happens to be a co-founder of the satellite TV provider. Between March 2 and March 8, DeFranco undertook massive insider buying, picking up nearly $16 million in DISH stock, not too far off its recent 14-year low. While DeFranco isn’t Dish’s largest shareholder, he does own 3% of the stock, worth approximately $159 million despite the 75% decline over the past five years. The reality is that founders such as DeFranco, who still works at the company and serves on the board, know as much as any investor about what’s really happening at the company. If he’s loading up on DISH stock, it’s certainly worth considering why.
Founders buying stock can be a good thing. Investing in S&P 500 companies run by founders can also be good. In 2022, however, that wasn’t the case. In Dec., Investor’s Business Daily pointed out that 20 stocks in the Global X Founder-Run Companies ETF (BATS:BOSS) were down 60% or more in 2022 with 80% of the stocks in negative territory for the year. Chalk it up to the tech meltdown. Over the long haul, it’s a strategy that tends to work. Here are seven founders loading up on their company’s stock. Their insider buying is a very good sign.
Insider Buying: Charles Schwab (SCHW)
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Charles Schwab (NYSE:SCHW) is one of those bank-related stocks that’s been caught up in the Silicon Valley Bank collapse. Investors have painted a wide swath of companies including the discount broker as toxic bank stocks. No word yet if Schwab Chairman and founder Charles R. Schwab has bought any stock to revive his sagging fortune. It’s said to have taken a $3 billion hit due to the bank collapse.
The founder might not have bought stock in the past week, CEO Walt Bettinger said on March 14 that he bought 50,000 shares of SCHW stock for approximately $3 million of his own money to demonstrate how safe he thinks its stock is as an investment. While Bettinger didn’t found the company, he has been CEO since 2008. Serving for 15 years in the top job is above-average in today’s perform-or-else focus by company boards of directors. Bettinger’s purchase seemed to calm investors. Its shares gained nearly 10% on the news. That’s solid insider buying.
Insider Buying: Asana (ASAN)
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Asana (NYSE:ASAN), the project management software company, was founded by and is still run by CEO Dustin Moskovitz, a co-founder of Meta Platforms (NASDAQ:META). Moskovitz left the company in 2008 to create Asana. On March 8, Moskovitz announced that he would buy up to 30 million of its Class A shares for approximately $700 million, using a structured trading plan to accumulate the stock. He already owns more than 58% of its stock. These purchases will only strengthen his grip on the company.
For fiscal 2024, Asana expects its revenues to be $643 million at the midpoint of its guidance with a non-GAAP loss of 57 cents, 23 cents better than the analyst estimate for the year. Between the earnings report and Moskovitz’s plans to buy, ASAN stock gained more than 23% over the past month. It’s up more than 57% in the first 2.5 months of 2023. It’s on a roll.
Insider Buying: Twilio (TWLO)
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Twilio (NYSE:TWLO) co-founder and CEO Jeff Lawson bought nearly $10 million of the company’s Class A stock between March 2 and March 8 at prices between $62.46 a share and $64.06. With the purchase of 158,081 shares, Lawson now owns more than 400,000 of the Class A shares directly and indirectly. Overall, Lawson owned 3.6% of the company as of May 2022, while holding 21.8% of the votes.
The share purchase was the CEOs first since 2017. It comes at a tough time for the company. In mid-February, Twilio announced it would lay off 17% of its workforce. The 1,500 people cut from its headcount was the second round of layoffs in less than six months. “It is painful to part ways with so many talented people – but it’s necessary to get our two businesses into the right shape to succeed,” Lawson said in February.
Insider Buying: Shopify (SHOP)
The Shopify (NYSE:SHOP) stock bought by founder and CEO Tobias Lütke that I mention here is not new. These are purchases that happened in late October, approximately four months ago. However, I do believe they remain relevant as the billionaire works to remodel the e-commerce platform and company. Lütke bought 282,942 shares at $35.34 each. That’s an outlay of $10 million. He’s a billionaire, so it’s not a massive hit to his cash position, but important for anyone considering buying Shopify stock.
As 2iq Research points out, Shopify insiders have rarely made non-automated purchases since the company’s IPO in 2015. Secondly, it’s Lütke’s first open market purchase since 2015. It was a vote of confidence by the CEO. How has Lütke done on his little bet in the four months since? They’re up 24%, a 72% annualized rate of return. I’d take that.
In mid-February, Shopify reported 26% revenue growth (28% excluding currency) to $1.7 billion with a 13% increase in gross merchandise volume of $61.0 billion. The only downer was its adjusted operating profit was $61.0 million (4% of revenue), down from $130.2 million (9% of revenue) a year earlier. Lütke’s stock purchase says he’s confident about the platform’s future.
SoFi Technologies (SOFI)
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Like Bettinger’s stock purchases, SoFi Technologies (NASDAQ:SOFI) CEO Anthony Neto’s purchases represent an opportunity for the head of one of America’s most innovative fintechs to make a value bet on a company he really believes in.
You’ll note that over the past year, all of the purchases by Neto happened in December or later. Neto bought 1.04 million shares in December at prices between $4.29 and $4.59. He’s up over a buck a share on those buys. On March 10, Neto bought 180,000 shares at $5.53 a share, setting a bit of a floor, if you will, on its share price. InvestorPlace contributor David Moadel highlighted Neto’s recent buy, reminding readers that SoFi wasn’t “overly exposed to bond-market risk like Silicon Valley Bank was.”
I’ve always liked SoFi’s position within America’s financial services industry. So, the fact that the company is suing the Biden administration over what it believes was an unlawful extension to the moratorium on federal student loan payments. The company’s sat by since March 2020, playing nice-in-the-sandbox over the ongoing pause.
It’s had enough. It wants the eighth extension to end now rather than in August, or when the Supreme Court rules on two related cases currently being heard by the highest court in the land. I like Neto’s moxie.
SLR Investment (SLRC)
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It’s been a while since I’ve had the opportunity to write about a BDC (Business Development Company) but SLR Investment’s (NASDAQ:SLRC) Chairman and Co-CEO Michael Gross just bought some of its stock, so I couldn’t resist. SLR invests directly and indirectly in senior secured loans of private middle market companies. That’s the modus operandi of a lot of BDCs. SLR’s been a BDC since 2010. In that time, it’s deployed more than $16 billion in over 1,500 portfolio companies.
SLR is externally managed by SLR Capital Partners, which was co-founded by Gross and Bruce Spohler in 2006. Both Gross and Spohler have bought SLRC shares since December. Gross bought once in December and three times in March, accumulating 156,297 shares at prices between $14.99 and $15.96. So far, Gross is underwater, but time has a way of solving that.
Any way you slice it, a $2.4 million bet isn’t chump change, unless you’re Warren Buffett or Elon Musk. It’s a show of confidence by Gross. As for analysts, they’re all over the map on SLRC stock. Two analysts have a Buy, one rates it Overweight, and you’ve got Neutral, Perform, and one Underweight for good measure. So, that doesn’t tell you much. The BDC finished 2022 with a $2.99 billion investment portfolio spread across 800 different companies. It made $1.3 billion in investments in 2022, while selling $972 million. Its total net assets increased by 18.7% in 2022, to $999.7 billion.
This is one company I’ll take a closer look at based on what I’ve seen.
Precigen (NASDAQ:PGEN) is not a big biotech company. Its market capitalization is just $277 million. However, it’s got an interesting history. The clinical-stage biopharmaceutical company is developing next generation gene and cell therapies. Their words (10-K), not mine. Precigen used to be called Intrexon Corporation. The name was changed in early 2020, with then CEO Randall Kirk stepping aside to become Executive Chairman, with Helen Sabzevari, the president of its Precigen subsidiary (hence, the new name) becoming CEO. She remains CEO.
In 2015, Intrexon’s shares traded near $70. It’s been downhill ever since. However, Kirk had already become a billionaire through the sale of two previous pharmaceutical companies, so there will be no tag day for the man. Forbes estimates his current net worth at $1.6 billion.
Anyway, in the past three months, Kirk bought 11.43 million Precigen shares at $1.75 each. It’s down significantly from his price paid. However, his most recent buy was 85,470 shares on March 9 at $1.17 a share. These were option exercises, not open-market purchases. As of March 31, 2022, Kirk owned 40.3% of PGEN stock. That number’s risen over the past year. I wouldn’t invest in Precigen but if you’re a risk-taker, his commitment is substantial.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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