Insiders Largely Immune from Tech Momentum Sell-Off

Cassava is an early state biotech working on a novel approach to Alzheimer’s.  Two buys, one particularly large by the 94 year old director Sanford Robertson ignited the stock.  Director Roberston bought 1,491,759 shares at $6.98 after the news of positive phase 2 results.  SAVA will need to raise money before long.  Alzheimer’s is the golden fleece of the biotech industry.  We have been following SAVA since the first insider buys by Robertson last December in the $2 range.  It’s CEO Remi Barbier bought 100,000 shares at $5.31 in December too.   SAVA is a battle ground stock as the first results from their trial in Phase 2b was disappointing and the stock plunged as low as $1.63.  It’s been fighting its way back and the company stated that it would re-examine this Phas2b results and when they did this, they found a different conclusion.  This small trial was largely funded by the NIH.  Cassava Sciences with $25 million in the bank, isn’t capitalized or staffed enough to run a pivotal AD trial with thousands of patients and dozens of study locations that would be needed to advance their patented molecule, sumifiliam.  If you don’t like the results you get the first time, try again?

Director Behrens bought 30,000 shares of IGM Biosciences IGMS at $60.78. Piper Sandler analysts named IGMS as a potential takeover candidate in the oncology field. Kathleen has made a fortune betting on Sarepta Therapeutics where she is also a director.  Dr. Behrens also served as the President and Chief Executive Officer of a private oncology services company, KEW Group Inc., based in Cambridge, Massachusetts, from January 2012 to July 2014. In January 2019, Dr. Behrens was appointed to the board of directors of IGM Biosciences, a private biotech company that is developing IgM antibodies, initially for oncology indications. In May 2019, Dr. Behrens was appointed to the Board of Directors of MiMedx Group Inc.—a biopharmaceutical company developing, manufacturing, and marketing regenerative biologics utilizing human placental allografts—and was named Chairperson.  She knows what she is doing.Dr. Behrens holds a BS in biology and a PhD in microbiology from the University of California, Davis.
We wrote in the blog, “Do you want to go to a party?” This is the fourth insider buying large amounts of this embattled retailer facing the perfect storm.  The pandemic is tough on most brick and mortar retailers but those in the party supply business face a triple whammy; siege from Amazon, lock downs, and restrictions on social gatherings. This may be just too much for Party City. I wrote that I don’t see lightning striking twice here in the same place but maybe I got it wrong. Director Matthews continues this contrarian play buying 188,500 shares of party supply company, Party City Holdco at $2.65.  This is incredibly bullish activity considering he bought 250,000 shares back in end of August for $2 per share.  Insiders have been buying Flexsteel FLXS and we traded this name for some quick profitable pin action. Insiders continue to buy this name even with the tremendous run up in price.  CIO McClaflin bought 2,791 shares at $21.05 and Director Kaness bought 8,000 at $21.33.  There have been steady insider buying all year with no sellers. Flexsteel’s core competencies are the design and production of furniture for residential and contract applications. Flexsteel sells to 50 countries around the globe and is carried by more than 1,200 retailers. The pandemic has been good for home and home/office furniture makers. This one merits further analysis.

Guess Inc. is an American clothing brand and retailer. In addition to clothing for both men and women, Guess markets other fashion accessories such as watches, jewelry, perfumes, bags and shoes.  Retail is tough if you’ve got brick and mortar and GES has been on a slide for years now.  That didn’t stop CEO Alberini from buying 83,000 at $12.05.  That’s a big sign of confidence and the stock responded appropriately up 13.94%.

Charles & Colvard Director Sykes ls bought 258,004 shares of moissanite and synthetic diamond jeweler at $0.78 per share.  This makes a lot of sense to me as cash strapped millennials are now the natural buyers of engagement rings and they are on a budget.  Besides being shrewd shoppers, millennials know the naked eye can’t tell the difference. CTHR hasn’t shown any consistent growth in sales but with 13.99M in cash and no debt they should have the runway to get to the other side of the pandemic. I’d like to find a solid reason to go all in on this name in spite of the 13.51% bump the insiders buy already gave it.

Franchise Group CEO and 10% owner bought $3.74 Million worth at $24.99.  FRG  is an operator of franchised and franchisable businesses and uses its operating expertise to drive cost efficiencies and grow its brands. Franchise Group’s business lines include Liberty Tax Service, Buddy’s Home Furnishings, Sears Outlet, American Freight and The Vitamin Shoppe.  B.Riley analyst Susan Anderson said FRG could benefit from changing consumer behavior as they cut back on travel and shift to home improvement and health. That may be the case but I can think of better ways to play this.

Biohaven Pharmaceuticals, Director David Nierenberg bought 6,678 at $59. Biohaven is a development and commercialization company focused on advancing therapies for which there are currently no adequate treatment options .Their current clinical programs span a range of innovative, late-stage product candidates targeting neurological diseases. Biohaven combines internal assets with intellectual property licensed from leading biopharma companies and academic institutions and is rapidly progressing multiple compounds in clinical trials across three platforms: calcitonin gene-related peptide (CGRP) receptor antagonism, glutamate modulation, and myeloperoxidase (MPO) inhibition.

All developmental biotechs are risky investments and that is one of the reasons we look to insiders to validate our judgement.   When they have no products approved, it’s easy for investors to paint a rosy picture.  Once they have an approval under their belts, its show me time. That’s the case for BHVN.  They have a migraine drug, Rimegepant approved.  Migraine is one of the most common neurological diseases, and it affects more than 16% of people in Western countries. Biohaven has blockbuster potential but it is now show me time.  We own it too.

FLOTEK INDUSTRIES INC FTK Director David Nierenberg bought 690,147 at $2.00. We’re struggling to find the impetus behind this buy.  I guess it can’t get worse.  You decide. Flotek generated second quarter 2020 consolidated revenue of $8.9 million for three months ended June 30, 2020 compared to $34.7 million in the second quarter 2019 and declined 54.3% from $19.4 million on a sequential basis. Consolidated revenue continues to be impacted by a volatile macro-environment for U.S. onshore drilling and completion activity, further impacted by global economic events, as well as concerns related to COVID-19 pressuring productivity and customer demand.

FTK is a global, technology-driven company that develops and supplies chemistry and services to the oil and gas industries. Flotek operates and/or distributes its products in seven domestic and international markets. The Company, which now operates in the Energy Chemistry Technology sector, offers products and services, some of which are patented, and experience in fluid systems applications that are responsive to industry demands in both domestic and international markets.

GOLUB CAPITAL BDC Inc. GBDC Mezzanine lender Golub has been steadily rising since its March pandemic plunge. It now yields 8.81%. CEO Golub bought 87,200 at $12.72.  GBDC is an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company. The Company makes investments primarily in one stop (a loan that combines characteristics of traditional first lien senior secured loans and second lien or subordinated loans) and other senior secured loans of middle-market companies that are, in most cases, sponsored by private equity firms. GC Advisors structures its one stop loans as senior secured loans, and obtains security interests in the assets of the portfolio company that serve as collateral in support of the repayment of these loans. This collateral may take the form of first-priority liens on the assets of the portfolio company.