Nothing like a thousand point drop in the Dow to remind you that stocks don’t go up forever.  Neither do insiders blindly chase their stock price higher.  Just the opposite. They are the ultimate “value” buyer. Tech crashed and burned last week all because an impulsive Japanese billionaire, Masayoshi Son, gambled $45 billion in call options on big tech names. At least that’s what they’d like you to believe.  According to traders, there have been mammoth options trades that include buying call options on stocks like Amazon.com Inc., Adobe Inc., Netflix Inc., Facebook Inc. Microsoft Corp, generating chatter across Wall Street.The following companies had large insider buying last week.  We are digging in to see what they see. For timely updates, follow us on Twitter.


Smile Direct landed a broadside punch to the short sellers. Several insiders bought, the most notable one was CEO  David Katzman’s purchase of $10.3M at $8.07.  The CFO bought $153,800 of SDC at $7.69 while another board member named Katzman bought 663,130 shares at $8.05.  Smile Direct is a lower cost competitor to category killer Invisalign.

Ashford Inc COO Welter bought 47,382 shares at $6.11.  AINC has been crushed by Covid, trading down from $25.41 at its high in February. AINC is a provider fo asset management services to the hospitality industry. It recently received a letter of non compliance from the NYSE.  Dead cat bounces are treacherous to play and we are avoiding this one.

 


Insiders have been buying Flexsteel FLXS and we traded this name for some quick profitable pin action.  CFO Schmidt bought 59,343 shares at $16.63.  A director went along the ride for 5000 shares at $16.73. 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.


Even Coty shareholders get a break in the monstrous enthusiasm for insider buying.  Director Goudet bought $ 1M of this horribly run cosmetic company at $3.56 per share.  When sentiment gets so bad and all investors have thrown in the towel, new shareholders can make big returns if there is minor improvements.  Coty was up in a bad tape this week as well.


Flotek Director Nierenberg comes back for more, buying 163,420 shares at $2.40. Last week Director David Nierenberg bought 690,147 at $2.00. We’re struggling to find the impetus behind this buy.FTK is a beaten down oil and gas service company.  It develops and supplies chemistry and services to the oil and gas industries, and companies that make cleaning products, cosmetics, food and beverages, and other products that are sold in consumer and industrial markets. I guess it can’t get worse.  You decide.

Here’s a new name we haven’t seen before.  Exotic small ship cruise company, Lindblad Expeditions Holdings LIND Director Thomas Smith bought almost $3M of LIND at prices between $10.14 and $11.07.  LIND is a premium price cruise operator with low margins but steady growth. Is it possible that the pandemic will be a longer term boost for small ship cruising at big ticket prices?I don’t know the answer to that but Thomas Smith was CEO of Sotheby’s when it got bought out for a big premium.  He was buying BID stock in late November 2018 and didn’t have to wait long before the company got sold for a 61% premium.  Could Royal Carribean or Carnival Cruise lines be interested in a cheeky high net worth clientele that cruises on Lindblad Expeditions?  You betcha!.  We are going to put some money to work here but not when its up 8.92% on Friday.

 

.
Camping World Holdings’s Marcus Lemonis has been very vocal about his desire to own more of this RV reseller and outdoor life champion. Marcus is the host of the popular CNBC show, The Profit, where he espouses an investment philosophy of the Three “P”s. People, Products, and Process.This week he continues his buying spree with CWH, buying another $700K of Camping World at an average price of $29.04-$32.26.  We all know what is happening with outdoor recreation as people flock to the outdoors in numbers never seen before. Once there is a vaccine, will people put up their RVs and go back to the old ways or will this lead to an enduring change and foster a generation of RV enthusiasts?  We like this name but be careful and not get carried away with the outdoor lifestyle plays. It’s not clear how sustainable this will be in a post Covid world.


International Tower Hill Minerals is notable that Paulson and CO., bought $3.27M at $1.40. THM calls itself the largest independent gold only resource in North America with its reserves located in Alaska.  We normally don’t pay as much attention to 10% shareholders as they often represent hedge funds and not the officers and directors that know the company the best. In this case, you have to take notice of what John Paulson does. He is the person known for making the biggest profitable trade ever, maybe $9 billion dollars buying cheap credit default swaps before the housing melt down in 2008.  He’s reportedly closed down his hedge fund and its remains his family office.Paulson is a long time gold bull and owns 31.8% of THM based on their August investor presentation on their web site.  If you feel like you need to have some gold in your portfolio, this looks like a good play.  According to this presentation THM increases 16x with 0.7x increase in gold price. The current market cap is only 26%of its NPV at $1800 gold.  Beware the stock prices has already gone up 5x this year alone!

Biomarin Pharmaceutical insider director David Pyott bought 12,800 shares at $78.26.  This is a large buy, $1M worth on a big drop in the stock price of BMRN.  BMRN got destroyed after it received a Complete Response Letter on its roctavin application with the FDA.  For small publicly traded biotech companies, this is like a death sentence delivered after jury deliberations.BMRN is not a small biotech, though. It had $1.7 Billion in sales last year and according to the latest filings has $1.38 Billion in cash.  Analysts were all quick to downgrade so it was interesting to see an insider take a bit bite out of the falling sword. Pyott is no novice biotech director either, as he was the CEO of Allergan from 1998 until it was acquired by Activis in 2015.

NovoCure Chief Commercial officers Shah bought 4200 shares at $85.01.According to Fly on the Wall,  Piper Sandler analyst Jason Bednar reiterated an Overweight rating and $89 price target on NVCR shares after the company announced multiple leadership team transitions, including appointing CFO Wilco Groenhuysen to COO, promoting Ashley Cordova to CFO and promoting Frank Leonard to a newly created role of Chief Development Officer.NovoCure Limited is a commercial-stage oncology company. The Company is engaged in developing a cancer treatment centered on a therapy called TTFields, the use of electric fields tuned to specific frequencies to disrupt solid tumor cancer cell division.

Quidel Corp got crushed along with all the other Covid testing plays when Abbot announced their $5 15 minute test and the Government approved an emergency use along with  a $750 million commitment to buy them.  We’ve been trading QDEL well and bought a little more after these latest buys. Several analysts came to their defense.  Two large insider buys, CEO purchase of $874 K worth of stock at $174.99 and Director Strobecks’ purchase of 7,700 shares at $166.07 lead us to believe that Mr. Market may have gotten it wrong. 

Director Costellos takes the plunge with $428,163 of Citigroup at $54.48.  Banks have been horrid performers with the Fed’s policy of zero rates, the Government’s forbearance on all kinds of loans, and the general economic malaise of the pandemic.There has been a lot of insider buying in the regional banks and of course, Warren Buffet bought a bunch of Bank of America BAC while simultaneously unloading Well Fargo, WFC.  C will move when banks move.  For our money, we’d rather load up on JP Morgan when the time is right, ideally when its cheap enough for Jamie Dimon to buy.

GOLUB CAPITAL BDC Inc. GBDC Mezzanine lender Golub has been steadily rising since its March pandemic plunge. It now yields 8.81%. Chairman Lawrence Golub added his name to the buyers list with a purchase of 84,792 shares at $13.29.  GBDC is an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company.

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 company better than the people running it.  This common sense approach to investing has outperformed the market by 400% since 2001, the year I quit being an insider myself and started investing with this proven strategy.

If you would like to hear more about how you can get involved with the Insiders Fund, please email, call, or schedule some time on my calendar.   The Fund admits new investors and accepts additional investments on the 1st of each month.

Harvey Warren Sax
Founder and Manager of Alpha Wealth Funds
Hedge Fund Insomniac Guy
hsax@alphawealhfunds.com
wk  (435) 658.1934
cell  (435) 962.4554

Hedge Funds

Warren Buffett would be the first to tell you that emerging fund managers can often outperform legendary investors such as himself because smaller size funds have so many more opportunities to move the needle.  Alpha Wealth Funds currently offers three unique emerging funds.

The Insiders Fund focuses exclusively on what insiders are buying and selling.  Portfolio manager Harvey Sax has deployed this strategy since 2001 with 4x return of the market during that time. According to the portfolio manager, the market is not cheap by any means, fundamental or historic, NONE THE LESS, there are always situations that the crowd has missed.  These are most often highlighted by large insider buys.

Theta Funds has a 7-year track record with exceptionally low volatility, a beta far lower than the market.   It ‘s manager, Russell Kellites has been recognized numerous times by Barclay Hedge, a leading independent 3rd party data vendor, as best in its class. Morningstar ranked Mr. Kellites, the #1 fund manager in his peer group for 2018.

The Volatility Advantage Fund, our newest fund, is a long-short equity fund that adds time value to your portfolio through options contracts and volatility hedges. It is designed to create excess returns from the irrational yet predictable over-reactions to news events and market gyrations. Volatility Advantage Fund is not for the faint of heart but has the potential to make large Alpha.

Separately Managed Accounts

We offer separately managed accounts.  A separately managed account is a portfolio of individual securities.  Your accounts are not commingled with others and are in your complete control.  Our four model portfolios, back-tested, and independently verified have each outperformed their benchmarks by double digits.

Financial Planning

Our Financial Planners are all held to the highest standards of the CERTIFIED FINANCIAL PLANNER™ designation. The plan we develop for you is independent of our products and services.  You can enact it  yourself or if you prefer to have us do the work, the financial plan fee may be waived in part or in its entirety. This is a high touch service that guarantees it will answer the questions you are asking or its free. Our money back guarantee is limited in that we will continue to work on your financial plan with no limit to hours spent until you are 100% satisfied.

The Standards of Professional Conduct (Standards) define financial planning as “the process of determining whether and how an individual can meet life goals through the proper management of financial resources.”  We will always act as a fiduciary.

Disclaimer: All investments involve risk. Past performance is no guarantee of future results.  Hedge funds are for accredited investors and are sold by prospectus only.  SMA accounts are Independently designed and tabulated by Alpha Lab Creative. The projected performance and volatility levels described herein do not represent the performance of the Managed Account or of any other account. Rather, the performance results shown reflect the hypothetical returns achieved through backtesting. Hypothetical performance results do, however, have inherent limitations. Hypothetical returns do not represent performance results that were achieved by any investor in any account and are calculated through the retroactive application of the Adviser’s model portfolio configuration.