The headlines don’t stop. Most of them scary and getting worse by the day. That didn’t stop insiders from buying falling knives but not in the quantity I’m looking for to mark the all clear. The pace of buying is clearly picking up, though IT SEEMS that Friday the 28th was the climax and insiders paused as the news headlines worsened about the virus. In times of increasing investor panic, insiders will restore confidence, especially when they buy across the board.
In this post, we examine insiders purchasing $200,000 of more of their company’s shares, looking for clues that may offer insight into the future direction of stock prices. Directors, officers, and 10% share holders have a longer time horizon than most traders as any gains they make by trading their stock within 6 months of purchase must be forfeited back to the company. This penalty box is known as the short swing rule. When insiders buy their stock in size, they do it for only one reason, to make money. Even most required company ownership programs give wide latitude on timing.
Insider buying can be as much as two days delayed as the SEC requires a Form 4 detailing any buying or selling by an insider within 48 hours. On a weekend, this delay can be even longer. Most of what got reported on Monday actually happened the week before, on Friday February 28th.
Friday, March 28th Dread before the weekend- Dow loses 3,500 points on week, closes off lows, Fed pledges support.
Few sectors got hit as hard as airlines. We are watching this very carefully as there is huge uncertainty how long and how hard it will hit the airlines.
Director Cahill added to his purchases of American Airlines with 25,000 shares at $18.97 on 2/28/20 . . South by Southwest, a big trendy geek and music conference in Austin was canceled. With the news so glum for airlines it will be interesting to see if there is any more buying in the upcoming week. It’s hard to imagine the news getting much worse for the group. JP Morgan institutional all star analyst team did a conference call on the group and said that UAL, AAL, DAL, and LUV all had ample liquidity. American Airlines has been trading with whispered unfounded bankruptcy rumors. He offered an optimistic ray of hope for investors. He said American will be profitable this quarter and most of the carriers could operate break-even E.P.S. on 20-30% load capacity. The sliver lining in all of this might be when the airlines prove they can survive an existential threat far greater than an ordinary recession, their low multiples might get rated higher. That does make sense although I have to admit it sounded a bit like wishful thinking by Jamie Baker, JP Morgan No 1# rated airline analyst.
Allegiant Travel Co ALGT John Redmond bought 4000 shares of the airline’s plunging stock at $129.50.
Agricultural play Corteva CTVA saw a director pick up $981,750 shares at $28.05 on 2/27/20. I don’t know why demand would go down because of the virus other than short term supply disruptions. This looks like a good buy but the stock settled at $25.30 on Friday.
Ducommun Inc Chairman Oswald bought 10,000 $44.11 of this defense contractor. Gabelli announced they had taken a 5% activist stake and the stock shot up 20% on Feb. 21. It’s not hard to see the coronavirus direct impact on DCO. 48% of their revenue come from commercial aerospace. Although Boeing and Aerospace have multi year backlogs, it’s not likely they will shove unwanted orders down the throats of major customers.
Bank stocks and financial services companies suffered steep declines before the Fed reduced rates sending them all even lower. There were many small and regional bank stocks that had insider buying but we don’t report on those based on low volumes.
Principal Financial Group Director Gelatt bought $1,000,000 worth of this insurance company at $47.23. Low rates are tough for insurance companies, bank stocks, brokerage companies and Principal is paying the price, collapsing to $42.81 by the end of the week. PFG has a healthy 5.3% dividend yield if they can maintain it. My bet is they can.
Two other insurance company executives at Hartford Financial Services Group bought about $750,000 worth of stock at $49.80-$49.90. HIG is yielding 2.5%.
Wells Fargo WFC officer Daley bought 11,100 at $40.99
PNC Financial Services Group Director Feldstein bought $2.98 million at $123.49.
Morgan Stanley MS was unusually hard hit, first by a Bronx cheer from investors after they offered billions more for Etrade than its shareholders thought it was worth. Then the virus hit and the Fed lowered rates. Director and former CEO of Seagate bought more stock, upping his holdings by 50,000 shares at $44.97. MS closed at $41.69 on Friday. Free trades combined with low margin rates is not a recipe for profitability. Investors thought don’t realize Morgan Stanley is largely fee based. Lower account values will reduce fees but not eliminate them. MS yields 3.35% and will be able to maintain this dividend.
Verizon VP Dunne bought $1 million at $53.47. VZ closed out last week at $56.65. This one is on our buy list.
REITS were a casualty in-spite of dropping yields. Most of the carnage hit travel and leisure activity REITS but few were inoculated against the disease inspired carnage.
Hudson Pacific Properties Director Director Glasser bought $2.2 million at $32.94 of this office and sound studio property developer. HPP yield is 3% and seems well-covered but there is no way I’d settle for this paltry yield.
Brookfield Properties REIT BPYU CEO showed confidence in the future buying 75,000 shares at $16.66. is a diversified global real estate company that owns, operates and develops one of the largest portfolios of office, retail, multifamily, industrial, hospitality, triple net lease, self-storage, student housing and manufactured housing assets.
Douglas Emmett Inc, DEI REIT director and former Treasury Secretary, William Simon bought 15,000 at $38.95.
President and CEO of Hersha Hospitality Trust HT bought over $700k worth of this high end hotel property at prices of $11.83-$11.85. HT yields 10.28%.
Oil and gas stocks ended a miserable week with a failed OPEC meeting to halt the slide in world oil prices. The price of oil fell 10% on Friday alone, 20% Sunday nite.
Oil company executives at Chevron and Continental Resources bought $598 thousand and $1.654 million stock at $91.43 and $18.38 respectively. CVX looks like the better bet to me than CLR, one of the few stocks that closed higher at the end of the week. CLR closed at $14.85.
Warren Kelcy continued to add to his massive holdings at Energy Transfer LP ET buying $3.24 million at $10.80.
Dir Graf bought 50,000 shares of Genesis Energy LP GEL at $9.77. At its Friday close GEL yields 25.7%. Few think that this diversified energy infrastructure can continue this payout so expect a dividend cut here soon.
Dow Director bought 15,000 shares at $38.13. Dow was mentioned a dividend stock to buy in this week’s Barron’s amid the coronavirus selloff.
Humana Inc officer Susan Diamond bought $570,629 at $319.68 before Super Tuesday on Friday, the 28th. This turned out to be great timing as all the health insurers rallied sharply when Bernie Sanders lost to Biden in most state, giving medicare for all a temporary setback. HUM closed at $367.01, a major win. I wouldn’t chase anything in this group as increasing medicare use on the Democratic likely platform is a headwind.
Nielsen Holdings pc NLSN announced a poor quarter and the stock sold off sharply. Several analyst downgraded the stock. CEO Kenny bought 55,400 at $18.08.
Steel Dynamics STLD VP Pushis bought 18,600 at $26.12. Steel Dynamics raises quarterly dividend 4%, announces $500M share repurchase.
Union Pacific UNP COO bought$500k at $155.92. This looks like a good buy to me. UNP closed out the week at $156.09. Rail traffic will come back and there could be pent up demand after supply chains
Monday March 2nd -Stocks surged in the final minutes of trading on Monday, snapping back from one of the worst weeks for global markets since the 2008 financial crisis as investors seized on promises that the world’s governments would step in to help if the global economy was slammed by the outbreak of the coronavirus. The S&P 500 jumped 4.6 percent, the biggest single-day leap since late December 2018. The rally followed news that central bankers from the world’s biggest economies would join a conference call with Group of 7 finance ministers on Tuesday to discuss a response to the outbreak, fueling expectations among investors that governments might lower interest rates in tandem.
Fidelity National Financial FNF Director $610,698 worth of this title insurance company at $40.71. FNF yields 3.06 and its likely that low rates will kick off another round of mortgage refinancing. FNF closed Friday at $43.13, higher than the timely purchase.
A director bought $831,665 of Huntington Ingalls Industries at $207.92. HII suffered several downgrades after its recent earnings release. Shipbuilding and government spending are not likely to be impacted much by the coronavirus and we don’t expect an unusual rebound as the virus risk lessens.
Palo Alto Networks reported another less than stellar quarter and the stock plunged. Dir Donovan bought $3 million of PANW stock at $184.98 increasing his holdings by 57%. Donnovan was the former CEO of AT&T. An officer simultaneously sold 12,000 shares providing mixed signals on the ultimate success of this purchase.
Several VICI Properties insiders bought stock from prices $24.60-$25.23. The largest purchase was the CEO’s buy of 23,710 shares at $24.60. VICI has a dividend yield of 4.91%. VICI is a REIT specializing in casino stocks. I’d like to be paid more for this risk if the virus spreads widely and gamblers shun casinos.
Wisdom Tree Investments, Inc Dir Bossibe bought 100,000 shares of this ETF sponsor at$3.89. I’ve yet to see any insiders make money off their numerous buys in WETF. Maybe this is the time as they say everything has its price. WETF now yields over 3%.
CFO Booth plunked down a healthy $676,962 at $398.21 buying 1700 Credit Acceptance shares at $398.21. A few days later CIO Kotch sold 3,619 CACC shares clouding the insider buy signal.
Dir Lowe makes his largest buy yet, accumulating 5000 shares of Phillips 66 at $75.63. He last paid $82.91 for PSX in May last year.
Tuesday March 3rd Emergency 1/2 point % rate cut catches traders flat footed. Stock rise sharply and then roll over as interest-rate cut by the Federal Reserve failed to reassure markets wracked by worries that a fast-spreading virus will cause a recession.The Dow Jones Industrial average sank 785 points, or 2.9%. It had surged 5% a day earlier on hopes for aid from the Fed and other central banks
General Dynamics insider bought $502,340 at $164.81. GD is not likely to lose business over the coronavirus.
One Water Marine sank sharply as investors anticipated a virus induced recession and sold discretionary spending stocks like ONEW. Several insiders bought stock, notably the CEO’s purchase of 28,874 shares at $13.81. The company had an IPO at 12 in February and has run as high $18.
Western Midstream Partners Director James Crane bought 71,500 shares of WES at $13.70 upping his holdings 28%. Shell Midstream Partners director Jones bought 15,000 at $16.57. SHLX closed the week at $15.10. Hess Midstream Partners Chairman of the Board, John Hess spent $1,022,788 buying 52,000 shares at $19.67. HESM closed out the week at $18.30.
The midstream players were not the only ones buying shares in the oil patch. Callon Petroleum CPE director Webster bought $1,260,000 at $2.10. Continental Resources CLR CFO Hart bought 16,200 at $16.99. Two directors at Vistra Energy VST bought shares at $20.21
In an ominous sign, funeral casket manufacturer Hillenbrand HI Inc Director Loughrey bought 10,000 at $20.50.
BCO CEO Doug Pertz bought 15,000 of Brinks Co. at $79.88. He has a good track record when it comes to BCO.
Wednesday March 4th Stocks surged Wednesday after former Vice President Joe Biden staged a major comeback in voter support during Super Tuesday. The Dow Jones Industrial Average gained 1,173 points or 4.5%. The S&P 500 added 126 points or 4.2%. Markets recovered losses after a sell-off on Tuesday knocked each of the major stock market indices down by more than 2.8%. The Bernie Sanders fear factor was routed in the amazing come from behind Biden win. It briefly answered a question on whether the market feared Bernie or the virus more. While concerns over the spread of COVID-19 persist, politics was a focal point for investors with major wins for Biden during Super Tuesday helping appease investors seeking a moderate, and perceived market-friendly candidate, for the Democratic nomination.
UHAL director Schmidt picked up 1,000 at $325.75.
ANI Pharmaceuticals Dir Haughey bought 5000 at $45.10. The drop in ANIP was due to poorer earnings that analysts estimated.
BCO Brinks CFO added to his holdings with 2500 at $80.15. Earlier in the week, the CEO bought over $1 million.
CFR Cullen Frost Bankers Dir Avery bought 3000 at $78.59
In an interesting twist, CEO Rondeau from Planet Fitness bought 25,000 share at $67.24. Fitness centers, movie theatres, casinos, and almost any business that makes its money from people gathering in public has been especially hard hit by the Coronavirus pandemic fears. This was a $1.681 million dollar buy in PLNT and not insiders last as the CFO bought some the following day. I’d be all over this name but I think the company is way overvalued at 40 plus times earnings. No doubt that gym rats will continue to pony up their membership but a repricing of value is probably inevitable.
More carnage in the oil and gas space as two insiders bought shares in ETRN, Equitran MidStream at $6.54 per share. On Feb 27th ETRN announced it was acquiring EQM Equitran Midstream Partners. They also announced a dividend cut from $1.767 to $.60 ETRN closed at $6.11 per share. NGL Energy Partners Collingsworth bought 101,000 shares at $7.51. Callon Petroleum Co Dir Webster continues to accumulate stock at $1.90 per share. LNG Cheniere Energy CEO bought just under $1 million at $47.34. I caution this is before the OPEC disaster Friday and the 20% drop in Sunday night futures.
Two insiders bought shares in Liquidity Services at $4.01-$4.08 per share. LQDT provides reverse supply chain solutions auctioning off surplus goods.
Thursday March 5th Shares of airlines plunged and industrial, financial and energy stocks also fell sharply. Worry about long-term growth also pushed the yield on 10-year United States Treasury notes to a new low. Because of their relative safety, government bonds are in high demand during bouts of panic over the economy.
Two insiders also bought shares in Ebix, a software insurance enabler. The largest was the Chairman’s buy of $437,400 of EBIX at $21.87.
Business intelligence consulting company, Gartner IT, saw a VP buy 2725 shares at $125.50
Trip Advisor CEO Kaufer bought 44,444 shares of TRIP at $21.73. Maybe 44,444 is his lucky number. I certainly hope so as travel expectations have taken a sharp descent. I find it hard to believe though that Americans will change their leisure habits or that travel won’t rebound much sooner than the sell-off warrants.
CWH Camping World Holdings CEO Lemonis bought 50,000 CWH ar $10.74. We are not buyers. I think Lemonis should quit reality TV and concentrate on beleaguered Camping World.
Nothing seems to phase Richard Kinder as he buys 300,000 shares of Kinder Morgan KMI for $5,853,00
Friday March 6th Dow was down almost 900 points at one point, but mounted a strong rally erasing much of the loss based on some nebulous comments by the Fed that they stand ready like some guardian lion-like Foo Dogs ready to ward off evil. The Dow closed down 256.5 points, about 900 points lower for the week.
CMD Cantel Medical CEO Fotiades continues to ride the down escalator buying more of his company’s stock after it sold off on weaker than expected earnings.
Fun Cedar Fair Several of this fun park’s insiders bought stock. VP Duffield bought 5390 share at $37.15
Planet Fitness PLNT President shows he can pump up too with this purchase of 10,000 shares at $32.45
US Concrete Inc Director buys 10,70000 shares at multiyear lows of USCR at $24.61
American Asset Trust Chairman bought $1.25 million of this large diversified realty holding company.
There were several buys over $200,000 that we didn’t highlight, particularly hedge fund buys in names like Six Flags and Tivity Health.
Insiders sell stock for many reasons, but they generally buy for just one – to make money. THE INSIDERS FUND invests in companies at or near prices that management has been willing to invest significant amounts of their own money in. After all, who knows a business better than the people running it? You’ve always heard the best information is inside information. This is as close to “insider information” that an ordinary investor is likely to see- and it’s entirely legal. Officers, directors, and 10% owners are required to inform the public through a Form 4 Filing any transaction, buy, sell, exercise, or any other with 48 hours of doing so. This info is available for free from the SEC’s Web site, Edgar, although we subscribe to the Washington Service as they provide a way to manage and make sense of the vast realms of data.
As a rule, we only look at material amounts of money, $200 thousand or more, as anything less could just be window dressing. The bar is different from 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 is large planned sale programs that start without warning. Unfortunately, the public information disclosure requirements about these programs referred to as Rule 10b5-1 is horrendously poor. I also generally ignore 10 percent shareholders as they tend to be OPM (other people’s money) and perhaps not the smart money we are trying to read the tea leaves on.
Of course insiders can also be wrong about their Company’s prospects. They can easily be wrong about how much others will value them, and in many cases, maybe most cases have no more idea what the future may hold than you or I. In short, you can lose money following them. We have and we curse aloud, what were they thinking! Needless to say, past good fortune is no guarantee of future success. We may own positions, long or short, in any of these names and are under no obligation to disclose that. We welcome your comments on our analysis.
This blog is solely for educational purposes and the author’s own amusement. Investing with The Insiders Fund is for qualified investors and by Prospectus only. Nothing herein should be construed otherwise. To learn more about our strategy, visit our website. If you would like to hear more about how you can get involved with the Insiders Fund, please schedule some time on my calendar.
Prosperous Trading,
Harvey Sax
