These are the insider buys that matter for last week. For real time insider alerts subscribe to our Twitter at https://twitter.com/theinsidersfund. When insiders buy, stocks make knee jerk moves up. The best time period to make bank is the next three days, perhaps five and then the prior trend sets in. Follow us on Twitter for the names we take an interest in.
This week’s top movers are Camping World Holdings up 27.03% and Quidel, up 29.88%
The average 3 day gain was 5.25% and holding just three days longer pushed it to 8.04%. If there is no 5 day number, that means there hasn’t been time enough for 5 days.
Camping World CWH Marcus Lemonis rocked the charts with a stunning 3 day return of 27.03%. This was only exceeded by test manufacturer Quidel’s CEO Doug Bryant’s purchase of 5000 shares of QDEL at $160.33 up a mind popping 29.88%. Is it too late to jump on these rocket ships? In the case of Camping World, Marcus has been a believer and he has us back in his camp. Camping is big, big with budget conscious millennials, and now with the pandemic, outdoor life is hitting strides previously unimagined. Lemonis has steadily added to shares, even when all of Wall Street was panning his buying bankrupt sporting goods chain Gander Mountain. Marcus took a good relatively asset like model and started competing head to head with the online world of Amazon and he got a Bronx cheer for it. CWH stock sunk into single digits but that didn’t deter Lemonis. He bought heavily in the single digits and now he is buying at 52 week highs. Buying on the way down is what distinguishes the great investors from the cut and run day traders. I’m not quite ready to anoint Lemonis yet as a once in a lifetime pandemic is not something he was planning on. Can you say camping bubble? You can make a lot of money in a bubble. Can someone please tell me where the next one will be?
Shoot first and ask questions was certainly the case with QDEL. When the news broke that the CEO was buying more stock at a 52 week high day traders and momentum players piled in sending QDEL up $32 that day. When I tell people I don’t want to take phone calls during trading hours, this is why. You snooze you lose. QDEL has been blowing out numbers and estimates all year long. The Covid-19 diagnostic testing opportunity is just fuel on the fire. Raymond James, Barclays, and JP Morgan have all downgraded the stock making themselves look like idiots to their clients as the stock has tracked steadily higher. The picture is mixed though as the CFO sold 20,000 shares in May at $201.60 so jumping on this bandwagon now is late to the party IMHO. Lesson learned, when the momentum market is hot, like it is now, you need only be in the stock for 3 days and make 25% -if you’re nimble and have a keyboard and our twitter feed handy.
Following insiders works better in some markets than others. We are in one of those times now. Buying is scarce but the market is volatile and stocks are making out sized moves. Such was the case with home health care operator Amedisys Inc. A director bought just 2000 shares at $167.48 and combined with a favorable investor conference AMED made an 18.57% run over the 5 day period after his buy. Director Perkins is no shrinking violet. He also purchased AMED in the depths of the pandemic market meltdown back on March 12th with 2000 shares at $153.76. The fact that he was willing to pay up for more and that the stock hadn’t moved that much was a gimme.
Big buy in biotech FibroGen was like shooting ducks in a barrel. All you had to see was Covid-19 near the pipeline and you knew there was going to be pin action. I’m just surprised it stalled out up 14%. Fibrogen CEO Contempo purchased 27,800 shares at $35.57 and we were off to the races. We definitely will reload on FGEN on any pullback. This is a biotech to watch. FGEN has two products in sales and various stages in the pipeline. Roxadustat is currently approved in China for the treatment of anemia in CKD patients on dialysis and patients not on dialysis and approved in Japan for the treatment of anemia in CKD patients on dialysis. The NDA filing for roxadustat for the treatment of CKD anemia was accepted by the U.S. Food and Drug Administration in February 2020. Astellas is in the process of preparing an MAA for submission to the European Medicines Agency in the second quarter of 2020. Roxadustat is in Phase 3 clinical development in the U.S. and Europe and in Phase 2/3 development in China for anemia associated with myelodysplastic syndromes (MDS), and in a Phase 2 U.S. trial for treatment of chemotherapy-induced anemia. Pamrevlumab is in Phase 3 clinical development for the treatment of idiopathic pulmonary fibrosis (IPF) and for the treatment of locally advanced unresectable pancreatic cancer (LAPC), and in Phase 2 clinical development for the treatment of Duchenne muscular dystrophy (DMD). The U.S. Food and Drug Administration (FDA) has granted Orphan Drug Designation to pamrevlumab for the treatment of patients with IPF, LAPC, and DMD. Pamrevlumab also received Fast Track designation from the FDA for the treatment of patients with IPF and LAPC. That’s the steak- the sizzle is that pamrevlumab is in two phase 2 studies for Covid-19.
Park Hotels and Resorts PK is one that initially popped then dropped. If you believe that people will one day venture out again and travel and stay in luxury hotels, this is one to buy. I for one do believe that. The American novelist Scott Fitzgerald is supposed to have said once to Ernest Hemingway, ‘You know, the rich are different from you and me. ‘ Hemingway replied, ‘Yes. They’ve got more money. When people do travel, they will want to stay in places they know have taken the precautions to sanitize thoroughly and not just any old Air-Nb. When I get rich again, I’m staying in Park. If you can hold on long enough PK just might make you rich as its trading for almost a third off its high. Buy below $11.50 if you can. Park has 60 hotels in places you used to want to go to.
If you’re just ordinary rich and want a solid dividend payer with some upside potential, you’ll buy Bristol Myers right now. BMY is yielding over 3% and has a slew of investor events this coming week. From a chart perspective, its trading near the bottom of the range and looks like it could pop. I wouldn’t say following Director Pailwal is particularly instructive even though he plopped down $500k to buy 9,174 shares of BMY at $54.50 because he bought a similar amount in 2018 for $52.40. That’s a bid on the boring side of the risk/reward equation but investors will pick up a $.45 dividend soon as BMY goes ex on July 2.
Esteemed value investor and mega hedge fund operator, Jeffrey Uben’s purchase of AES Coproration AES bears looking into. His company, ValueAct Holdings has purchased about $10 million worth of stock over the last two months between $11.67 and $12.22. AES is down from $21 at the end of February and seems unjustified in our opinion. The 4% plus dividend yield pays you to wait.
Advanced Auto Parts, Inc CEO purchased 7,285 shares oat $136.13. Three days later the stock was up 8.51%, not a bad return. People are driving more and riding public transportation less due to the pandemic. This is good for auto parts. Buy AAP on a pullback.
Change Healthcare CHNG Healthcare informatics ought to be a good business. It’s not for Change. Not sure exactly why but the financials are stunningly bad. Usually when the CFO buys $1,2 million worth of stock near an all time low, it bears looking into the trash can to see if you are missing something hiding in the bottom of the can. According to Fly on the Wall, Piper Sandler analyst Sean Wieland lowered the firm’s price target on Change Healthcare to $19 from $22 and keeps an Overweight rating on the shares. Change guided to year-over-year revenue declines that only start to recover in Q4 of fiscal 2021, Wieland tells investors in a research note. The analyst, however, remains comfortable with the financial model, sees room for upside to guidance and has confidence that management will execute on accelerating growth in fiscal 2022 “if not before.” Post the company’s Q4 results he recommends being long Change Healthcare and selling Inovalon (INOV). Wieland is “intrigued by the valuation disconnect between these two highly levered, healthcare IT roll-ups.”
McKesson Corporation (“McKesson”) contributed the majority of its technology solutions segment and Change Healthcare Inc. (formerly HCIT Holdings, Inc.) contributed substantially all of Change Healthcare Performance, Inc.’s (formerly Change Healthcare, Inc.) legacy business to Change Healthcare LLC (the “Joint Venture”) in 2017. Taking from the most recent 10k, this is not a simple story, They sprawl across the vast network of payers and providers. David Einhord’s Greenlight Capital disclosed in May it had acquired a large position in CHNG for $11.40 per share and called it the “backbone of the healthcare internet”. This is one to put up on your screen to see if they can get some leverage from all the pieces they have put together
Insiders sell stock for many reasons, but they generally buy for just one – to make money. You’ve always heard the best information is inside information. Everyone who has any experience at all in the stock market pays close attention to what insiders are doing. After all, who knows a business better than the people running it? 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 SECForm4 as they provide a way to manage and make sense of the vast realms of data. I’ve tried a lot of vendors and SECForm4 is one of the most customer friendly and responsive I’ve used. This is as close to “insider information” that an ordinary investor is likely to see- and it’s entirely legal.
BEWARE– Following insiders can be hazardous to your financial health unless you know what you are doing. The Insiders Fund blog informs you of the purchases that count, the ones that are just window dressing into deceiving the public that all is hunky dory, and those that are just flat out other people’s money and should be just discarded like bad fish. 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 and options. 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. Also planned sales that just pop up out of nowhere are basically sales and are seeking cover under the Sarbanes Oxley corporate welfare clause. 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. THE INSIDERS FUND invests in companies at or near prices that management has been willing to invest significant amounts of their own money in. 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
The Insiders Fund was the 4th best long-short equity fund in the world in 2019
