“I know there’s something going on’” is the refrain to a popular 1980’s hit. We had a similar, instant reaction when reviewing this week’s insider buying roster. When an 80’s hit pops in your head and there is a feeling of “there is something going on,” you absolutely dig deeper. That’s how it went down while examining last week’s insider buying roster. Five, top-level executives from RenaissanceRe Holdings Ltd. (RNR) bought the reinsurance and insurance products company’s stock. (1)
That’s what we call a cluster buy.
All the buys were what we define as commitment buys of $100,000 or more, ranging from Chief Accounting Officer (CAO) James Christopher Fraser’s investment of $217,776 to the Chief Executive Officer (CEO) Kevin O’Donnell’s $2.1 million spend.
That something is going on sensation gets more intense when looking at their history of insider buying and selling since 2003. It’s lopsided, really lopsided, sales topped more than $405 million with buys a tiny $5.1 million by comparison. OK, here’s why the something is going on sense is tingling, almost goosebumps inducing, nearly $4.4 million of the $5.1 million happened last week. Eighteen years, a touch more than $700,000 in buying and then all of a sudden, five C-suite insiders all decide at once to go shopping. Yeah, gotta feeling something is going on.
Unfortunately, we don’t have a seat at the boardroom table, just left to speculate that a handful of RNR insider buys that cut against nearly 20 years of history is probably not a coincidence.
Looking at their trading histories:
CEO O’Donnell pervious history going back to 2004 was sell, sell, and sell some more prior to last week. (2) EVP Group Chief Risk Officer Ian Branagan is another that only traded one way since 2010… sell, sell, sell too. (3) It’s the same story for EVP Chief Underwriting Officer Curtis Ross (4). Meanwhile, CAO Fraser (5) and Chief Financial Officer (CFO) Robert Qutub (6) had only options-related activity.
What is going on is a question we try to answer based on the information available. RenaissanceRe Holdings’ shares have gotten beaten up since the middle of August, going down the big slide, falling from $164 to roughly $138 at the start of October. The stock began to rebound and then got smacked down after reporting earnings on October 25th. A few days later, the insiders decided to buy.
Based on our experience, bargain hunting after earnings push stocks lower is common. However, this situation doesn’t have the feel of strictly buying while on sale. Surely, shares have taken a hit since 2004. RenaissanceRe’s monthly stock chart reveals at least a pair of aggressive selloffs in late 2008 and early 2020 (COVID), and yet insiders didn’t open their checkbooks.
It’s all speculation on our part, but it appears as something besides value shopping is going on with RNR. Although, we cannot dismiss bargain hunting out of hand because Wall Street analysts project consensus earnings per share (EPS) of $16.43 next year. That average price to earnings (P/E) ratio for the reinsurance peer is 15. Meanwhile, investors awarded RNR a much higher P/E, averaging 45.76 during the last half-decade with a low water mark of 11.98.
Now we can use the RNR’s low and average P/E, along with the peer group average number, to develop some potential price targets based on 2022’s consensus EPS forecast.
* RNR 5-year Low P/E: $196.83
* Industry Average P/E: $246.45
* RNR 5-year Average P/E: $751.84
As we type, RenaissanceRe Holdings trades at $156.31.
Outlook: RenaissanceRe Holdings Ltd. (RNR) appears to offer potential investors some value based on the reinsurance company’s 5-year low P/E. Plus, more upside should Wall Street be willing to pay up to the peer P/E. We’ll dismiss RNR’s half-decade average P/E as a consideration.
Earnings price checks aside, RenaissanceRe insider buying in the past week, compared to the selling galore for nearly 20 years, has us wonder if something else is going on.
RenaissanceRe Holdings Ltd. (RNR) is appropriate for investors with average to low risk tolerance based on it 5-year beta of 0.53. (7) A beta of 1 is said to have similar volatility to the S&P 500.
1 – https://www.secform4.com/insider-trading/913144.htm
2 – https://www.secform4.com/insider-trading/1289298.htm
3 – https://www.secform4.com/insider-trading/1457179-1.htm
4 – https://www.secform4.com/insider-trading/1492528.htm
5 – https://www.secform4.com/insider-trading/1693142.htm
6 – https://www.secform4.com/insider-trading/1553978.htm
7 – https://finance.yahoo.com/quote/RNR/key-statistics?p=RNR