Insiders sell company stock for a number of reasons such as to purchase a new house or settle a tax bill. However, they only buy stock for one reason – they believe the shares are set to rise in value.
Here, we are going to highlight an insider purchase at NVR Inc (NVR:US). NVR Inc is a house builder that operates under the NVHomes, Ryan Homes and Heartland Homes brands, and is primarily focused on the East Coast of the United States. It also operates a mortgage banking and title services business. It’s traded on the New York Stock Exchange and currently has a market capitalization of $16.9 billion.
NVR Inc: Insider Buying
Our data shows that on October 25, the Chief Accounting Officer at NVR Inc, Matthew Kelpy, bought 100 NVR shares at a price of $4,860 per share. This trade cost the insider a total of $486,000 and increased his holding to 212 shares.
Doubling of Holding
This insider trade caught our attention due to its size. Not only is it large in nominal terms but it is also large in relative terms as it has more than doubled the size of the insider’s holding. The fact that Kelpy has spent close to $500k on stock suggests that he is very confident in the future prospects of NVR. It’s also interesting that this is the first insider purchase at the company since Kelpy picked up stock at lower levels towards the end of October 2020.
It’s worth noting that Kelpy is very experienced in his field. He has spent nearly four years at NVR as Chief Accounting Officer which means he is likely to be extremely familiar with the business. Previously, he was Chief Accounting Officer at web hosting company Go Daddy Inc, which has a market cap close to $12 billion. Prior to this, he was Chief Accounting Officer at Oath Inc which is a subsidiary of the tech giant Verizon Communications.
NVR’s recent results showed that current demand for new homes is strong.
The company had a productive third quarter for the period ended September 30, 2021 with a net income of $332.1 million – this represented an increase of 29% on Q3 2020. Homebuilding revenue was up by 22% to $2.34 billion and the gross profit margin was up to 22.2% from 20% in the third quarter of last year. The finance segment of the business also saw growth – closed loan production of $1.62 billion in the quarter was up 17% on the same period last year.
In Q3, the business saw many key metrics improve. The average sales price of new orders rose 15% compared to the third quarter of 2020 and the cancellation rate fell to 9% from 12% in Q3 2020.
On the back of these strong Q3 results we see the recent insider trading as bullish. The large purchase of stock suggests that the Chief Accounting Officer believes that the market is undervaluing NVR shares right now.