$XRAY,$DS,$TEP,$GE,$MXWL,$COTY,$MULE,$OSTK,$PSEC,$SQBG

In this report we examine stocks that C-level officers and directors  bought and sold ending the week of September 22nd, 2017.  Insiders sell stock for a variety of reasons but they generally buy for just one, to make money.  We only look at material amounts of money, $100k or more, as anything less could be window dressing.  The bar is different on selling as the natural state of management is to be sellers.  Most companies provide significant amounts of their compensation packages as stock. Therefore we analyze selling for unusual patterns; such as insider selling 25% or more of their holdings or multiple insiders selling near 52 wk. lows.  Another red flag is large planned sale programs that just start out of the blue.

We generally ignore 10% shareholders as they tend to be OPM (other people’s money) and not the SMART money we are trying to go to school on.  Although this info is available for free from the SEC’s Web site , Edgar, we subscribe to the Washington Service as they provide a way to manage and make sense from the realms of data. To learn more about our strategy visit our website at The Insiders Fund. We welcome your comments on our analysis. We may own positions long or short in any of these names and are under no obligation to disclose that-So do your own research.

Buying

Dentsplay XRAY The best insider buys are when management steps up and buys signficant dollar amounts near a 52 wk. high. Such was the case last week when newly appointed CFO Alexos bought 50,000 shares at $65.85 for $3.3million.He worked most recently with Madison Dearborn Partners LLC, a Chicago-based private equity firm which he co-founded. Interim CEO Thierer bought 77,000 shares for $5.1 million. Thierer was previously CEO of Opturm RX which United Healthcare bought in 2015.  XRAY senior management was forced out by the shareholder private equity giant Dearborn Partners.  This is my guess as I haven’t seen that analysis.  Valuation is challenging on this one because in February 29, 2016 DENTSPLY International Inc. merged with Sirona Dental Systems, Inc. (“Sirona”) in an all-stock transaction and the registrant was named DENTSPLY SIRONA Inc. Dentsplay was a slow but steady growing large distributor of dental products and supplies. Sirona was the leading 3D manufacturer of implants, crowns, etc that was revolutionizing the dental industry and was bought by Dearborn Partners in 2005.

During September 2016, the Company finalized the acquisitions of MIS Implants Technologies Ltd. (“MIS”), a dental implant systems manufacturer headquartered in northern Israel, and a small acquisition of a healthcare consumable business. MIS is a growing and profitable manufacturer of dental implant systems. MIS is a leader in the value segment of the market, selling its products under the MIS brand through a wide distribution network that includes a direct sales force, reaching over 65 countries. The combined companies may just starting to reach their stride. Dentsply Sirona is the world’s largest manufacturer of professional dental products and technologies. I’m reading a lot into the tea leaves here but that’s what it takes to understand why insiders might pony up large amounts of money.

 

Drive Shack DS Drive Shack, a new, well-financed competitor to Topgolf, is preparing to open its first location in Orlando and promises an aggressive nationwide expansion. New York-based Drive Shack is an offshoot of American Golf, the multi-course operator that Fortress Investment Group LLC acquired in 2013. American Golf was managed in recent years by Newcastle Investment Corp., a Fortress affiliate that used to operate as a real estate investment trust. Newcastle announced in late 2016 that it was changing its name to Drive Shack and would not retain its REIT status. I would be careful with this one as it has spiked 25%  on the news of Chairman Edens purchase of $5 million worth of stock at $4.14. This is the kind of insider buy that doesn’t register as high with us this is a complete transition to a new business model and a small amount of money in relative terms as Wes Edens is the founder of Fortress. Unlike XRAY which is a dominant player, DS is  trying to salvage a business model that doesn’t offer much promise.

Tall Grass Energy Partners TEP   CEO Dehaemers has been a consistent buyer of this MLP, Tallgrass Energy Partners, LP. TEP acquires, owns, develops, and operates midstream energy assets in North America. It operates in three segments: Crude Oil Transportation & Logistics, Natural Gas Transportation & Logistics, and Processing & Logistics. The Crude Oil Transportation & Logistics segment engages in the ownership and operation of the Pony Express System, a crude oil pipeline serving the Bakken Shale, Denver-Julesburg, and Powder River Basins, as well as other nearby oil-producing basins.

General Electric GE Insiders have been consistent buyers of GE and have been consistently wrong.  The latest purchase by new CEO Flannery of $1 million worth of stock at $18.27 doesn’t seem much different from the others.  This time though investor sentiment is so negative after the dividend cut and uninspiring interview Flannery did on CNBC and the disastrous 3rd quarter earnings call has created what I feel could be a cathartic selling climax.

Maxwell Technologies MXWL CEO Fink bought 230,000 at $4.98 for $1.1 million. Dir Bucheim purchased $1.3 million at average price of$4.98.  Maxwell Technologies, Inc. develops, manufactures, and markets energy storage and power delivery products worldwide. This is a high growth market so it will take some research to understand why revenues are shrinking at MXWL.

Coty COTY  Insiders don’t stop buying Coty.  This is the #1 most bought stock we follow. Officer Ramos purchased 55,576 shares for $936.1k at an average price of $16.84.  Coty had a huge spike after reporting earnings that were not disastrous.  I still believe something is up with this dog.

Postscript Two insiders, COO Hussain and CFO Chadwick purchased $1 million  at $51.86 and $1.6 million worth  at $54.20 of Cavium CAVM 8-16-16.  Looks like it worked out pretty well for them as Marvel is buying the company for $6 billion in cash and stock.

Selling

Overstock OSTK numerous insiders are taking advantage of the once in a lifetime opportunity to sell 2nd tier e-commerce vendor Overstock on coin/blockchain hype.  I’ll give CEO Patrick Byrne credit for being a visionary but the market has gotten crazed with OSTK valuation. The stock is up nearly 250% this year on declining revenues and growth rates and negative operating margins in its core business.  The stock should be closer to $5 than $50.  I wouldn’t short it because manias and bubbles are hard to predict their demise. That’s what it bitching and probably blockchain are.