$TSLA,$DDR,$SOHU,$ETM,$XRAY,$FLR,$AAT,$CVS,$CUTR,$D,$TEVA,$TUP,$UAL,$MHK,$AMP,$GOGO,$TEGP,$SMG,$LCII,$AYI,$HTZ,$AYI,$MTSI,$MO,$HFC,$DATA
In this report, we examine stocks that C-level officers and directors bought and sold ending the week of May 11, 2018. Insiders sell stock for many reasons, but they generally buy for just one – to make money. As a standard, we only look at material amounts of money, $100 thousand or more, as anything less could just be window dressing.
The bar is different with selling, because the natural state of management is to be sellers. This is because most companies provide significant amounts of management compensation packages as stock. Therefore, with selling, we analyze for unusual patterns, such as insiders selling 25 percent or more of their holdings or multiple insiders selling near 52 week lows.
Another red flag are large planned sale programs that start without warning. We generally ignore 10 percent 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 Website , Edgar, we subscribe to the Washington Service as they provide a way to manage and make sense of the vast realms of data.
To learn more about our strategy, visit our website here. 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.
Buying
Tesla Inc TSLA CEO Musk buys 33,000 at $298.50. Lots of short interest and doubters out there. Once you drive a Tesla, though, you won’t want to drive anything else. Tesla now has a larger market capitalization larger than General Motors. It’s a favorite short of noted short seller, Jim Chanos, that called out Enron leading to its collapse. On the other end of the spectrum noted investor Ron Baron thinks that Tesla will become the most valuable Company in the world.
My Tesla 100 X getting charged for free.
DDR Corp DDR Dir Otto buys $26.4 million at an average price of $7.32. DDR is an owner and manager of 258 value-oriented shopping centers representing 89 million square feet in 32 states and Puerto Rico. Director Otto has been a consistent purchaser of stock. His six month return is down 9%. The dividend yield now 10.15%. I think everyone knows that shopping centers are in secular decline as e-commerce has grown.
Second Sight Medical EYES Dir/10% owner Williams buys $10 million in a private placement at an average price of $1.48. EYES is one of those inspirational tech companies that make you want to be part of it making the world a better place. After debuting in its IPO in 2014 as high as $24, curing blindness has proved to be tougher than listing on Nasdaq. Is now the charm, the time to buy? We don’t think so. The money raised in this private placement doesn’t give the money losing beleaguered company much runway.
Sohu.com SOHU Chairman Zhang coughs up $7.5 million to buy 228,940 at ae average price of $32.83. Zhang has been a buyer of this stock at $40.06, $45.15, and now $32.83. Sohu.com Inc. provides online media, search, and game services on personal computers (PCs), mobile devices, and tablets in the People’s Republic of China. The Company’s revenue growth stalled in Q1 2018. It’s hard enough to know what’s going on with a company in this country much less another one, we will stay away from this name.
Entercom ETM Dir Field buys $3.9 million at an average price of $8.76. Have you heard that local radio is dead;replaced by streaming music options like Spotify, Apple, Pandora, etc.? Don’t tell that to director Joseph Field who has bought nearly $25 million at higher prices.
Market’s wrong about CBS-Entercom merger 6:49 PM ET Fri, 15 Sept 2017 | 00:58
Investors may have grown hesitant about a merger between CBS Radio and Entercom Communications, but CNBC’s Jim Cramer thinks they may have been wrong to worry.
The deal would combine the spun-off CBS Radio with Entercom, creating an entity that could reshape the U.S. radio industry.
Dentsply Sirona XRAY CFO Alexos buys $2.2 million at an average price of $44.71. New CEO Casey buys $1 million worth at $44.52. Perhaps Casey will fare better than the old interim CEO who purchased $5.1 millon stock at $66.04. We’ve lost a lot of money on this name. It appears we put too high a value on this name following both the CFO and interim CEO purchases back in November 2017. At the time we did a DCF valuation and knew we were overpaying but felt confident that there were unknown synergies between the merger of Dentsply and Sirona that we weren’t aware of. We were wrong. AT this level, investors may have a great opportunity so we are still in the name but at a reduced position.
Flour FLR Namesake Dir Flour buys 50,000 shares at $44.71.Fluor Corporation, through its subsidiaries, provides engineering, procurement, construction, fabrication and modularization, commissioning and maintenance, and project management services worldwide. It operates through four segments: Energy, Chemicals & Mining; Industrial, Infrastructure & Power; Diversified Services; and Government. Our DCF model shows Flour as very undervalued, worth $79.72 or higher in some other screens. It’s very unpredictable, though, as the service industry business is lumpy and prone to cost overruns such as in the most recent quarter.
Flour received multiple downgrades after missing its most recent quarter and lowering forecasted earnings. Baird analyst said it was too early in the commodity cycle recovery and too few catalysts remaining in a difficult environment for industrials. We are not sure if we agree with this thesis as we believe industry in this country will undergo a dramatic transformation from hydrocarbons to renewables.
American Assets Trust AAT CB Rady is at again scooping up $1.7 million of this REIT.American Assets Trust, Inc. AAT is a full service, vertically integrated and self-administered real estate investment trust, or REIT, headquartered in San Diego, California. The company has over 50 years of experience in acquiring, improving, developing and managing premier retail, office and residential properties throughout the United States in some of the nation’s most dynamic, high-barrier-to-entry markets primarily in Southern California, Northern California, Oregon, Washington, and Texas. Frankly we don’t see the appeal of a REIT yielding 3.2% when rates are projected to rise.
CVS Health Corp CVS CB Doman buys $1.5 million at an average price of $62.33 of this beat up drug store chain turned healthcare company. Dir Brown agrees with the opportunity and purchases 10,000 shares at an average price of $61.99.. CVS is transforming itself into a healthcare company with the purchase of Aetna. Larry Robbins at the recent Sohn Conference presented CVS investment thesis. We really like this play and are heavy into it but admittedly no one knows what the new company will ultimately look like but the large buy by the Chairman of the Board is at least a vote of confidence. The threat of Amazon going into the prescription business has been weighing on the share prices unjustifiably so in our opinion. At some point Amazon will likely be stopped or slowed by government antitrust concerns. In the short term we are more concerned about the rumour that Walmart is going to buy Humana. Charlie Munger of Berkshire Hathaway said that he believes that if the Democrats win Congress and the White House, you will see a single payer system, the US. Government. If that were the case, we would not own this stock but it seems unlikely in the near future to happen.
Cutera CUTR Director Barrett buys 5450 shares at $36.98 taking advantage of the earnings disappointment and 30% sell off this medical laser aesthetics systems. With 10,000 people turning 65 every day, the economics of medical aesthetics seem compelling. We are researching this one for purchase. Cutera was a high flyer rising 500% in five years before Wednesday’s fall. Cutera, Inc., a medical device company, designs, develops, manufactures, markets, and services laser and other energy based aesthetics systems worldwide.
Dominion Energy D Chairman of the Board Farrell takes advantage of nearly a 5 year low in price. Dominion is a high quality utility yielding over 5% with projected annual dividend growth. This seems like a bargain to me even in this rising interest rate environment. I would call this a lock for the income seeking investor with extremely low risk. We own it.
Teva Pharmaceutical TEVA Director Mignone buys $14.4 million of this beaten down leading generic pharmaceutical company at an average price of $19.24. Teva is debt laden, in the most recent quarter, $30.7 billion dollars. We are not fond of highly leveraged companies but it could work for a trade. We have a very small speculative position.
Tupperware TUP Dir Monteiro purchases 5000 shares at $43.20. Dir Szostak bought 2000 and VP Garcia bought 2000 of this beleaguered company. TUP is probing an 8 year low in price caused by stagnant or decreasing sales. Tupperware is a globally recognized brand that’s found in nearly every household in America but we would avoid this until they can return to consistent growth in sales and profits.
United Continental UAL Dir Shapiro once again buys large quantities of UAL, $3.3 million at $65.86. We have a large position in United, in part based on our belief with oil production strong in the US., jet fuel prices can be constrained. Tearing up the Iran deal, definitely puts a strong dent in the thesis. Our hope is that China will take up the Iranian oil but if the sanctions truly bite, we may take our chips off the table here. The continued insider buying buoys the thesis.
Mohawk Industries MHK Director Balcaen buys $15.9 million at an average price of $209.18 increasing his ownership by 6.1%. Balcaen knows something about the flooring industry and been a director of the Company since February 2016. This is his first buy at Mohawk and it’s a big one. Mr. Balcaen has extensive experience growing and leading businesses in the flooring industry, serving as the CEO of the IVC Group (IVC), a global sheet vinyl and LVT manufacturing company, from 2004 – 2010 after which he served as chairman of the company until the Company acquired IVC in 2015. Mr. Balcaen began his career in flooring in 1984 working in various positions at the Balta Group, one of the largest producers of textile floor coverings in Europe, where he served as board member from 1990 to 2015 and CEO and Chairman from 1990 to 2004.Mohawk Industries, Inc. designs, manufactures, sources, distributes, and markets flooring products for remodeling and new constructions of residential and commercial spaces worldwide. Mohawk stock has been crushed, down from $280 at the start of the year. Mohawk was downgraded to Buy from Conviction Buy at Goldman Sachs on March 1. On May 1 RBC Capital analyst lowered his price target to $284 from $310. Most of the angst seems to be macro related, higher interest rates and commodity costs will dampen margins and decrease demand.
Discovery Inc DISCK Dir Wargo buys $1.1 million at $21.37. Insiders have been consistent buyers of out of favor media stock Discovery Inc. We are not able to get a handle on this company as the dynamics of over the top streaming, cable, 5G, Netflix, YouTube, etc are way to difficult for us to value.
Ameriprise Financial Inc AMP Chairman Cracchiolo scoops up $1 million of this financial advisory company. Ameriprise is down dramatically from $181 to Friday’s close at $137.07. Its very hard to see why this stock in the dog house. On April 23rd the Company reported strong first quarter and a good start to the year. According the the CEO, “We are generating strong earnings across the firm, and our momentum in Advice and Wealth Management continues with double-digit revenue growth, increased client activity and one of our strongest quarters of client net inflows. We’re serving more clients in personal advice relationships and continue to invest to deliver an exceptional client and adviser experience. As we grow, we continue to generate significant free cash flow that we invest in the firm and return to shareholders through dividends and share repurchases. During the quarter, we increased our repurchases opportunistically, while also increasing our excess capital. And today, we announced another increase in our regular quarterly dividend.” It may just be a case of a very strong winner coming down to more realistic expectations. In this case, I would bet on Chairman Cracchiolo’s timing.
After selling millions of dollars worth of stock for the last 8 years, this is his first purchase. Short term technicals are strong as well but we are lukewarm on the sector as robo advisors and changing disrupting technology may impact financial services firms in unforeseen ways. This is a trade and not a core position.
Gogo Inc GOGO New CEO Thomas shows commitment with his $1 million at $5.30 with this ubiquitous inflight internet provider. Gogo has a big convertible note due in 2020 and was downgraded by both Moodys and S&P with a negative outlook. On the most recent conference call, new CEO Thomas said “Lastly, we need to think through the financing implications of whatever we do. So we are running a concurrent financial planning process. Before anyone panics over the Words Gogo and financing, I want to remind everyone my family and I own 30% of the equity in this company. So we’re highly motivated to act in the best interest of shareholders.” More important though was the revelation that now banned Chinese Telecom ZTE is a major supplier to Gogo for the NextGen ATG system and helped them build and maintain their original ATG network.
We’ve made lots of money by trading Gogo. The promise of broadband internet on airplanes is a no brainer investment idea. The fact that it taking Gogo so long to accomplish this from almost an monopoly position looks like one of the great squandered opportunities. Promising new satellite technologies and competition from larger better capitalized competitors such as Elon Musk’s massive satellite deployments offering ubiquitous internet make this a race against the clock. We’ve seen nothing to convince us that GOGO will win the race. Their best hope is to sell out. We would only speculate here with small amounts of money and keep a tight stop loss
Tallgrass Energy TEGP Chairman Dehaemers buys 47,500 shares for $1 million of the oil and gas MLP. Director Ball also purchased 20,000 shares on 5-7-18 at $20.26. We love this name. It’s notable that Dehaemers had been a consistent buyer of TEP but is now buying TEGP. Tallgrass has announced they intend to simplify their capital structure by exchanging TEP for TEGP.
Tallgrass Energy GP, LP, through its interests in Tallgrass Equity, LLC, provides crude oil transportation services to customers in Wyoming, Colorado, and the surrounding regions of the United States. The company operates through three segments: Natural Gas Transportation; Crude Oil Transportation; and Gathering, Processing & Terminaling. It also provides natural gas transportation and storage services for customers in the Rocky Mountain, Midwest, and Appalachian regions; natural gas and crude oil.
As mentioned Tallgrass has announced they intend to simplify their capital structure by exchanging TEP for TEGP stock. I think this will change sentiment about the MLP. It yields 9.2%. Although I am a believer in the secular decline of gasoline as a transportation fuel being displaced by battery-powered autos, I don’t think this is something that will happen overnight and the US is becoming a global exporter of oil. Back up the truck on any TEGP pull back.
Scotts Miracle Grow SMG Dir Finn buys 7,500 at $76.95. SMG has been a steady winner for a decade climbing from low 20’a in 2009/2009 as high as $110.17. It seems that Finn’s purchase is taking advantage of the 25% drop from the highs due to disappointing sales in Q2 2018.Merrill Lynch double downgraded to Underperform on May 2nd. The director doubled his holdings with this purchase buying 7,500 at $76.95 on 5-4-18. It’s also interesting that SMG diversified its offering mix buying the largest hydroponic company, Sunlight Supply. They also appointed their former CFO David Evans to the board. Chief Executive Officer Jim Hagedorn is making the company’s largest-ever transaction as he continues his three-year transformation of Scotts, the largest maker of lawn and garden products, into a force in the cannabis industry. Nine states and the District of Columbia now allow recreational pot use, and the industry is expected to reach $75 billion in sales by 2030 as more legalize marijuana, according to Cowen & Co.
Lots of changes here. This is one to watch. We are buying a small position so it will stay on our radar. I like the hydroponics move. Lots of marijuana is being grown this way in warehouses.
LCI Industries LCII Chairman Gero purchases $893.4 thousand worth of recreational vehicle company. LCI and its competitor Thor Industries have been on a steady decline since the beginning of the year. It could be a case of the last few years have been as good as it might get for the RV industry with declining interest rates and gas prices both seemingly coming to an end.Even after this big decline in price, the stock seems overvalued using DCF analysis.
Acuity Brands Inc AYI Dir Dillard purchased $563.k at $1112.76. Yet another case of a stock down dramatically from the start of the year. Acuity Brands, Inc. provides lighting and building management solutions and services for commercial, institutional, industrial, infrastructure, and residential applications in North America and internationally.
Hertz HTZ CFO Kenney buys 15,000 at $17.22. We would not buy this stock as the car rental business is in secular decline due to ride hailing apps such as Uber and Lyft. Anything more than a dead cat bounce would be surprising.We are more inclined to short this than buy it.
MACOM Technology Solutions MTS Chairman John L. Ocampo indirectly purchased a total of 60,000 shares at an average price of $21.99 marginally increasing his holdings. As shown on the graph below, the $1.3 million purchase is Ocampo’s first at the semiconductor solutions provider and the largest in company history.The most lucrative, near-term opportunity lies in power amplifiers for 4G/LTE Base Stations – a billion-dollar semiconductor market – where GaN plays a critical role in expanding network coverage, increasing data rates and decreasing the energy cost of Base Stations, which operate 24/7, 365 days a year. These benefits are deeply rooted in the physics of GaN as a semiconducting material, which yields superior power efficiency, signal bandwidth and operating frequencies for the most advanced 4G/LTE and future 5G networks.
MACOM is unique in manufacturing GaN on inexpensive silicon substrates, which meet stringent supply chain requirements in capacity and cost structure for mainstream applications like Base Stations. The company has built strong barriers to entry with fundamental patents and intellectual property around GaN-on-Si for use in RF applications. This may be a 5G play at a discount.
Selling
Phillip Morris MO Chairman of the Board sells 100,000 $8.2 million of stock at a 3 year low. NMr. Cammilleri has been with the Company for 34 years. According to Forbes CEO compensation he is #25th highest paid CEO earning $32.75 million in the last year, the majority of which is from stock based compensation.That could explain the sales but it is also certainly bad form selling at a 3 year low while other executive were buying last week. He is also reputed to be dating former supermodel, Naomi Campbell, and that could be expensive too.
Holly Frontier HFC 7 insiders sold a combined $9.2 million of stock. This is the most insider selling since 1998. Clearly they are taking advantage of the recent record run for HFC. Holly is one of the largest independent refiners. With Trump’s favorable policy toward oil and gas, it seems Holly can continue its run although insiders are selling significant amounts of shares. It’s possible to put a small short on with tight stops.
Tableau Software DATA 6 insiders sold $65 million of this overvalued cloud business intelligence software provider. Almost anything to do with the cloud seems way overvalued to us but we are not inclined to stand in front of a moving train. Co-founders Chabot sells 99.1% and Stolte 98.8% of their remaining holdings according to Form 4 filings.