Nice thing about math, there is not much point in debating it. The numbers are the numbers and some insider buys are much better than others. This dynamic spreadsheet will show you which ones. Here is the link to the trades-

Warren Buffet bought $1.5 billion of Bank of America’s stock on the open market last week and no one is even talking about it.  It wasn’t that long ago that the news that Buffet was buying would cause of stampeded of buying by his followers.  Apple crushes 2nd quarter earnings, announces 4 for 1 stock split, it’s stock skyrockets making all time high; meanwhile, Apple’s largest shareholder, Berkshire Hathaway’s stock barely moved for the week while the market makes all time new highs.  Uncle Warren isn’t feeling the love.  People may say he’s lost his way, but I think there is a new generation of investors who don’t know how to count.  It’s all about fast money, hit it and move on to the next strike or strike out.  Cost or what you pay is irrelevant because they are not really investors, just day traders playing hot potato. “Hot potato pas it on, pass it on, pass it on, hot potato pass it on, you…are..it!”

Uncle Warren was back in his favorite mode, Pac-Man on the open market. What’s another $522 million of Bank of America. at $24.65? He’s truly getting on in years. Did he forget that he just bought over $1.2 Billion earlier this week at $23.99 to $24.22.  Adding insult to injury, Warren’s favorite insurance executive, Jain Ajit, the Vice Chairman sold a $ million dollars worth of his Berkshire Hathaway stock.  Actually this is only a small fraction of his holdings but still…..

Long time director, Dale Wolf, bought 2000 shares of fallen market darling eHealth at $71.06. EHTH plunged 30% on the quarterly earnings announcement. According to TIF fave, Fly on the Wall, “Raymond James analyst Gregory Peters lowered the firm’s price target on eHealth to $115 from $165 and keeps an Outperform rating on the shares. While eHealth reported results that were ahead of estimates and included 54% y/y Medicare revenue growth and a 7.3% y/y reduction in costs per approved Medicare member in Q2, Peters says the stock sold off ~30% as member churn increased to 42% and Medicare Advantage LTVs were revised 4% lower.”  There is a high probability you can get a dead cad bounce from this buy and we’ll throw in a few dollars for the kitty Monday morning.

Director Stephen Luzco has a thing for AT&T and its not because its making him money.  Luzco, I guess is a value investor (dying breed) and the former CEO of Seagate, the disk drive behemoth which means he’s used to being out of vogue.  We made a lot of money following him in the past on Seagate but it wasn’t easy and the only fun part was walking away with more money than we started with.  AT&T will be a tortured investment.  They pay an enormous dividend, 7%, but the stock hasn’t recovered at all from its March lows.  T has a massive debt burden but in a 5G world where we are all social distancing, it’s hard to imagine anyone giving up their cell phone coverage no matter how dire their economic condition could get.

CEO and 10% owner Scott Bok dropped a cool $1.628 million on the investment banker, Greenhill & Co Inc. buying 148,614 shares at $10.96.  This is a value play but honestly don’t see why GHL is even a public company. The stock has steadily trended down over the last two years and must be disheartening when you’re pitching new M&A clients.

 

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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