Insider transaction activity can help investors cut through the noise. Insiders are some of the most informed participants in the market meaning their buying and selling activity can provide investors with valuable trading signals.
In this report, we are going to highlight some interesting insider buying at Sonic Automotive Inc (SAH:US). Sonic Automotive is one of the largest automotive retailers in the US. Operating in 14 states, it has franchised dealerships that represent over 25 different new vehicle brands, as well as a business that specializes in pre-owned vehicles. The company is listed on the New York Stock Exchange and currently has a market capitalization of $1.77 billion.
Sonic Automotive Inc: Insider Buying
Our insider transaction data shows that between April 6 and April 7, Sonic’s largest shareholder, Paul Rusnak, purchased 131,268 shares at an average price of $41.47 per share. This trading activity cost the insider approximately $5.5 million and increased his holding to five million shares.
Mr. Rusnak is an American automotive icon. Since opening his first dealership in May 1959, he has built up an automotive dealership empire across California, representing 32 different brands, including the likes of BMW, Mercedes-Benz, Rolls-Royce, Porsche, and Jaguar. So, he is likely to have a good understanding of Sonic’s prospects.
What’s interesting is that these are his first purchases here since 2016, when he bought stock near the $17 mark. The fact that he has spent over $5 million on Sonic shares now suggests that he sees value in the stock at present.
Record Q4 Results
Sonic recently posted very strong results for the fourth quarter of 2021.
For the period, the group generated record fourth quarter revenues of $3.2 billion, up 13.8% year over year. It also generated record fourth quarter net income from continuing operations of $96.3 million or $2.25 per diluted share – well above the consensus forecast of $1.85 per share.
On the back of this strong performance, Sonic’s board of directors approved a 108% increase to the company’s quarterly cash dividend, taking the payout to $0.25 per share. The group also repurchased approximately one million shares of its Class A Common Stock for an aggregate purchase price of approximately $50.4 million during the quarter.
It’s worth noting that in December 2021, Sonic completed the acquisition of RFJ Auto. This deal represented one of the largest transactions in automotive retail history and is expected to propel Sonic into the top-five largest dealer groups in the US. The transaction is expected to add $3.2 billion in annual revenues, which are incremental to the group’s previously stated target of $25 billion in total revenues by 2025.
“Our landmark acquisition of RFJ Auto and five other franchised dealership acquisitions in 2021 bolstered our geographic coverage and brand portfolio, which we expect will drive continued growth in 2022 and beyond,” commented President Jeff Dyke in the company's Q4 results.
Since the results, Sonic’s share price has taken a hit. Fears in relation to a recession and a drop in consumer spending have been the main driver of the fall. Mr. Rusnak clearly expects the stock to recover. We see his large purchase here as a bullish indicator.