Here is the link to the trades-
Once again Bed Bath Beyond BBBY teaches us you can make a lot of money from a bad stock if you buy it right. That’s certainly what Director Suge Gove did after the Company reported earnings, the stock cratered, and every analyst trash talked the company down. Gove scooped up 34,000 shares at $7.89 and by weeks end was up 17%. Not bad, Suge; I bet you wish you could sell. Insiders are subject to short swing rules that prohibit doing just that. BBBY seems on terminal descent with Amazon, Wayfair, and now Coronavirus doing its part to eliminate the neighborhood Bed Bath Beyond store.
HT Hersha Hospitality Trust might be furloughing employees as hotel occupancy rates are at historic lows, but insiders seem to think the company will survive. According to Post on the Fly, Barclays analyst says revpar growth looks to be in the past and near-term demand trends in several segments have improved, giving companies a chance to reduce cash burn and emerge in a “better-than-feared financial position post-crisis, and raises their target to $6. Gee, thanks- both directors bought shares at $5 and they’re up 10.8% since purchasing.
Science Applications International SAIC CFO bought 1,450 shares at $69.90. This is interesting as the CEO bought nearly $1 million back in April with his purchase of 14,300 shares at $70.75. SAIC is a good company, revenue largely secured by Government contracts yet it’s stock has lagged while others have risen. So what gives? SAIC is now trading at the bottom of the trading range. I think you have to look out six months, a likely Biden win and a move toward less defense spending and more rebuilding domestic infrastructure and social needs could explain the lack of enthusiasm for the stock.
So what’s up with the CEO John Curtis’s buy of 18,354 shares of Perpecta PRSP at $21.97 or Director Nolan’s purchase of 4,585 at $21.97? Perspecta is another defense contractor. Jana Partners, an activist investor recently took a stake in PRSP. SAIC is mentioned as a possible acquirer. I’m not a big fan of buying stocks because someone might acquire them unless you have “insider information. Hey, isn’t that what we’re talking about. Now I wouldn’t expect anyone to buy the company tomorrow as that looks like Curtis would be trading on material inside information. Maybe 3-4 months from now you could see a deal?
Two insiders are buyers of Brainstorm Cell Therapeutics. BCLI is tackling tough neurodegenerative diseases like ALS and progressive MS. They are in Phase 3 of a 200 patient trial in ALS or Lou Gehrig disease. Maxim analyst Jason McCarthy raised the firm’s price target on BrainStorm to $20 from $9 after factoring in indications in multiple sclerosis and Alzheimer’s disease, while keeping a Buy rating on the shares. The analyst notes that BrainStorm held a Key Opinion Leader Webinar to discuss expansion of NurOwn cell therapy to Alzheimer’s disease. Perhaps this is the logic behind the two buys we logged this week, COO David Setboun 5000 share buy at $12.95 and Director Abbhi buying 46,779 at $12.99. BCLI made a new lifetime high on Friday. Can you smell a timely secondary coming?
AZZ AZZ Inc insiders, CEO Ferguson and President Lavelle each bought 10,000 and 5,500 shares at $28.94 and $30.83 respectively. AZZ is a global provider of metal coatings services, welding solutions, specialty electrical equipment and highly engineered services to the markets of power generation, transmission, distribution and industrial in protecting metal and electrical systems used to build and enhance the world’s infrastructure. I’m not following these guys into the their stock right now. Perhaps an infrastructure bill will change that.
How would you like Uncle Sam’s post offices as your long term real estate tenant? That’s exactly what you have with Postal Realty Trust PSTL. Its a bit of a no brainer then to understand why CEO Sndrew Spokek bought $1 million of PSTL at $13.03 for nearly a 6% dividend yield.
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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. Unlike the raw, unfiltered data, 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. Don’t let anyone fool you into believe they never make mistakes. No one tracks and understands insider behavior better than us. We’ve been doing it religiously since 2001, when I quit being an insider myself and devoted myself full time to managing my personal investments. 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
