For trade details click on this link to the trades
The curious thing about insider buying is that in spite of how obvious it is that insiders have better information about their company’s prospects than the average investor, following them into the water, rarely feels like a good thing at the time. This week’s buys more than ever seem to illustrate this. Insiders are value buyers and they like to buy when prices are down.
For example, the largest buy that we write above is the CEO and Chairman of Cassi’s $6.1 million purchase of Casi Pharmaceuticals. Although He Wei-Wu is a successful biotech entrepreneur and accomplished scientist, his purchases in CASI haven’t yet borne fruit for him or his fellow investors. Hei-Wu also invests on behalf of various biotech funds which he is a principal.
The biggest gainer of the week is the obscure company, GTY Technology Holdings. Director Harry You and 10% owner was up 61.83% on his purchase of GTYH. GTY [NASDAQ: GTYH] brings leading government technology companies together to offer a comprehensive suite of cloud-based solutions designed to fuel the digital transformation of the public sector. It’s a small $360 million market money-losing company with about $22.8 million in the bank. Unless they are privy to a large government contract, it’s hard to see what You is buying. Then again he is up over 60%
Designer Brands Schotttenstein Chairman bought 902,623 shares at $13.99 per share of this American company that sells designer and name brand shoes and fashion accessories. It owns the Designer Shoe Warehouse store chain, and operates over 500 stores in the United States and an e-commerce website. Wikipedia.
Joseph Schottenstein joined the family party buying 20,000 shares at $21.42. By the end of last week, they were up an astounding 22.89%. Investors haven’t been up that much in over 20 years. It just goes to show you that even a lousy investment can have good returns if you bought it right. We’re not buying.
Green Brick Partners Director Harry Brandlier bought 20,000 shares of this second-tier home builder at $21.42. It’s hard to imagine a scenario more favorable to homebuilders than what we are experiencing now. That may be the problem with the group if there is one. We like GRBK but not up over 15% in a week. If you want to play a micro public homebuilder, our favorite is Harbor Custom Development, HCDI.
Rhythm Pharmaceutical’s CEO David Meeker bought 10,000 shares at $20.17. Unlike many of his biotech peers, he’s up on his company stock an impressive 8.97% The XBI, our favorite biotech ETF is down that much. RYTM is a biopharmaceutical company aimed at developing and commercializing therapies for the treatment of rare genetic disorders of obesity. That will limit upside as even though the public suffers from alarmingly high rates of obesity, it has to be classified as a disease and not just your lazy couch potato ass.
Terry Considine is back for more with Apartment Investment and Management Company, AIV. This time he bought 300,000 shares at $5.72. Apparently, apartments are bigger moneymakers than even single-family homes, at least if you build them yourself. The Wall Street Journal wrote today that homebuilders are finding it more profitable to build homes, rent them out, and sell them to institutional customers that will be a whole subdivision, not just one single-family home.
Another Director has an appetite for real estate. Director Katz bought 345,963 shares of Mack Cali Realty in his nominee name as Managing Partner of Bow Street, LLC, a hedge fund. We’re not paying much attention to hedge fund buys as the smart money is the CFO or VP betting his money, not other people’s. CALI has a large portfolio of office and multifamily properties on the New Jersey waterfront and beyond.
Director Mott bought 62,717 shares of Enzyme, EPZ at $7.97 per share. According to their website, EPZM’spipeline is led by tazemetostat, an internally developed, orally-administered, first-in-class small molecule EZH2 inhibitor, for the treatment of multiple types of hematological malignancies and genetically defined solid tumors. They are currently conducting a comprehensive development program for tazemetostat designed to identify efficient and accelerated pathways to treat as many patients as may benefit.
EPZ is pioneering a new field called epigenetics which refers to a broad biological regulatory system that controls gene expression without altering the makeup of the genes themselves. Gene expression is regulated by HMTs and other chromatin-modifying proteins (CMPs). Abnormal expression of genes that either promote cell growth and survival or that act as tumor suppressors can be caused by errors in CMP function. These genetic changes to CMP function can instigate different types of cancers and other diseases.
According to their website, this scientific approach includes using CRISPR, a gene-editing tool, to efficiently identify targets where we see a clear signal for selective activity in specific tumor types. This approach, in combination with our comprehensive library of tumor cell lines, has led us to a compelling set of HMTs, HATs, and helicases, targets of high interest in cancer.
Almost everything biotechs companies do is beyond the reach of the average investor’s circle of competence. Therefore more than most sectors, we rely on insiders to lead the way. David Mott was the president and CEO of the biotech company MedImmune, where he led the company to its sale to AstraZeneca in June 2007 for $15.6 billion. He knows a thing or two about biotechs. He’s a filer on about eight other biotechs where is he is a director, 10% owner, or nominee director for NEA, a large venture and early-stage investor. Then again Mott’s address is the Yellowstone Club so he’s not hurting for dough. Keep in mind all investments are relative. A few million for Mott is not really moving the needle that much.
Director Paul Manning purchased 739,830 shares of VRCA at $14.75 per share. Verrica Pharmaceuticals, Inc. operates as a clinical-stage medical dermatology company. The Company develops and manufactures pharmaceutical products for the treatment of skin diseases such as molluscum contagiosum and dermatology.
Paul B. Manning is Chairman of the Board of the Company. Mr. Manning is the Chairman and Chief Executive Officer of PBM Capital Group, LLC, a private equity investment firm in the business of investing in healthcare and life-science related companies, which he founded in 2010. Prior to that, Mr. Manning founded PBM Products in 1997, a producer of infant formula and baby food, which was sold to Perrigo Corporation in 2010.
Dir Brown bought 26,996 shares of RCII for $55.56. He filed his paperwork late with the SEC and the dates for this transaction was 2-26 even though it was just reported last week. Surprisingly Rent A Center has only gone up 4.27% since then, underperforming the S&P 500. Rent A Center had a good run last year and is not far from a lifetime high. Apparently Director Brown believes there is more to come.
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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.
We publish a subscription newsletter called The Insiders Report. We offer a free 30-day trial so you have nothing to lose by trying it out. Be sure to carefully read the TERMS OF SERVICE.
Another source for insider buying and selling and much more is FinViz Elite. FinViz stands for financial visualization and they do an amazing job of providing reams of data and the tools to help you get to the bottom of it, the information that helps me make informed decisions and probable outcomes. I’ve been using their site for years and it only gets better over time.
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 believing 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. I basically use it as my own worksheet. If we make money off this endeavor, no one will be more surprised than me. My sincere hope is that self-directed investors can learn from my realms of experience. 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, 4th Best in November 2020, 4th Best in January 2021 (I kid you not, 2 is actually my lucky number. I’m hoping for that in February when were up 15%)
