All the talking heads made fools of themselves last week. Powel said the economy was doing great; the Dow plummeted, its worst week since October of last year. The market marched in lockstep, giving up on the cyclical recovery trade, hammering banks, energy, material sectors, and lifted the neglected technology growth sector.
The Fed said they got it that inflation was running hotter than they thought, and they might tweak interest rates higher a wee bit sooner. Instead of interest rates going up, long-term interest rates plummeted, and the yield curve flattened.
David Tepper, hedge fund tycoon and owner of the NFL Carolina Panthers, pronounced at the Annual Robin Hood fundraiser, with the hedge fund Illuminati in attendance, “the market still good. ” Maybe he meant still good to short. There are so many economic undercurrents; no one seems to know whether the stock market is forecasting an economic liftoff or reflecting an economic slump with a rise in inflation, the lack of further stimulus, the end of unemployment benefits, and the Pandemic pulled forward demand.
Whatever you make of the dismal science of stock market forecasting, it sure liked like forced selling and margin liquidation at the end of the day to this old hand. Monday’s open is already making me nervous. I’m going through what I own and why I own it, a handly exercise I recommend heartily to all investors.
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Name: Nathan Gilbert E
Position: Director
Shares Bought: 40,000, Average Price Paid: $6.11 Cost: $244,246
Company: Alto Ingredients Inc.
Alto Ingredients, Inc., formerly Pacific Ethanol, is a leading producer of specialty alcohols and essential ingredients. The company is focused on products for four key markets: Health, Home & Beauty; Food & Beverage; Essential Ingredients; and Renewable Fuels. The company’s customers include major food and beverage companies and consumer products companies.
Opinion: Renewable fuels have been a treacherous market, but this Summer with record heat already, a Democrat in the White House who made combating global warming his key policy goal, there’s a chance the political will to bring about some strong government incentives will finally coalesce.
I heard Delta CEO on CNBC last week saying they would use renewable jet fuel if it weren’t so expensive. Renewable diesel is a time that has come, but I wouldn’t bet the farm or anything like that. We own a very small position.
Gilbert Nathan has served as an Advisor to the Board since November 2015. Since November 2019. . Mr. Nathan was formerly a Senior Analyst with Candlewood Investment Group, an investment firm with significant debt and equity investments in the ethanol industry. Before joining Candlewood, Mr. Nathan served as Principal at Restoration Capital Management for 10 years.
Position: Director
Shares Bought: 14,000, Average Price Paid: $17.35 Cost: $242,900
Company: BRT Apartments Corp.
BRT Apartments Corp., a Maryland corporation, is an internally managed real estate investment trust primarily focused on the ownership, operation, and development of multi-family properties. Their multi-family property activities commenced in 2012 and involved their ownership and operation, primarily through joint ventures. Many of their properties are located in the Southeast United States and Texas, but they will consider acquisition opportunities throughout the United States.
Opinion: It’s a good time to own apartments. With home prices going up so sharply, many would-be first-time homebuyers are trapped in a rental market that raises prices every year. The U.S. faces a severe shortage of housing. One recent study put the shortfall at about six million units. If mortgage rates rise, that will only exacerbate the situation leaving a generation feeling like they are shut out from the market. During the mortgage crisis and housing collapse of 2008, many homebuilders went bust, and now with the millennial generation in their peak home-buying years, there is an undersupply of homes. REITs also fare relatively well in inflationary times as they have the ability to raise rates.
Gould Fredric is the Director of BRT Apartments Corp. Mr. Gould has been involved in the real estate industry for more than 50 years as an investor, owner, manager, and chief executive officer of publicly traded real estate entities and real estate investment trusts.
Position: 10% Owner
Shares Bought: 38,630, Average Price Paid: $77.65 Cost: $2,999,811
Company: Safehold Inc.’s mission is to revolutionize real estate ownership by providing a better and more efficient way for owners to unlock the value of the land beneath their buildings. They’ve carefully constructed a ground lease capital solution that prioritizes their customers’ business objectives, unlocking higher cash-on-cash returns and overall IRRs relative to fee simple ownership. With their unique capital solution, building owners targeting a 15% ROE are no longer saddled with owning the underlying land at a 5% ROE.
Opinion: Admittedly, I don’t understand the appeal of the paltry 0.65% dividend yield that the ground leases that Safehold has built a REIT provides. Still, it’s certainly doing well in the market. SAFE was one of the best performing securities in 2019 and now seems headed for another strong year.
Position: Director
Shares Bought: 19,000, Average Price Paid: $26.08 Cost: $500,457
Company: CLARIVATE Plcis a global leader in providing trusted insights and analytics to accelerate the pace of innovation. Their vision is to improve the way the world creates, protects, and advances innovation.
Opinion: Sounds sexy. Roedel might be just taking advantage of the sharp price drop. Stifel analyst Shlomo Rosenbaum said he hadn’t seen anything that would justify the magnitude of a 20% drop in Clarivate’s stock price in conjunction with an equity raise that he argues “was well telegraphed at the time of the ProQuest acquisition announcement. He views the pullback as an attractive buying opportunity and thinks the stock can potentially move up to $40 if the company can execute well with the ProQuest acquisition. Rosenbaum keeps a Buy rating and $34 price target on Clarivate shares.
The public version of Clarivate is a Churchill Spac formed in May of 2019. Everything about SPACs smacks to me of financial opportunism for the elite few that have spun up the abomination to start with. I put them right up there with lousy financial offerings like private equity IPO exits except laden with cumbersome debt. Instead, these financial engineers and sponsors have managed to lift 20% or more of the equity to rent their supplied capital, just like the Medieval practices of landowners and sharecroppers.
Richard W. Roedel is the former Chairman and CEO of the accounting firm BDO Seidman LLP and served as managing partner of its Chicago and New York Metropolitan area offices. Mr. Roedel serves on Brightview Holdings, Inc., Six Flags Entertainment Corporation, LSB Industries, Inc., and Luna Innovations Incorporated. Mr. Roedel also currently serves on the board of directors of IHS Markit Inc. but will not be seeking reelection when his current term expires at its annual general meeting of stockholders in April 2020. Mr. Roedel has previously served on Lorillard, Inc., Sealy Corporation, BrightPoint, Inc, Broadview Holdings, Inc.
Name: Roby William B
Position: Director
Shares Bought: 9,078, Average Price Paid: $33.12 Cost: $300,642
Company: California Resources Corp(NYSE: CRC) is an oil and natural gas exploration and production company committed to the environmentally sustainable and responsible development of its properties. CRC explores for, produces, gathers, processes, and markets crude oil, natural gas, and natural gas liquids. CRC has a large portfolio of lower-risk conventional opportunities in California’s four major oil and gas basins: San Joaquin, Los Angeles, Ventura, and Sacramento.
Opinion: CRC was spun off in 2014 from Occidental Petroleum as a California-centric oil and gas play. At the time, the thinking was that it was better to get out from under the increasingly environment-friendly and hostile oil and gas California market. It just emerged from a prearranged bankruptcy that removed a lot of that $5 billion debt. Since coming public again, the stock has been a barn burner. Oil stocks have been laggards for a decade. They appear to be breaking out now for reasons I’ve written extensively on, such as disincentives to find new sources, onerous regulations, and ESG investing will all make it more difficult and costly to find oil. Electric car hype cannot keep up with a world still glued to hydrocarbons.
Apparently, Director Roby thinks there is more to come. Since 2015, Mr. Roby, 60, has served as the Chief Executive Officer of Shepherd Energy, LLC. From 2013 to 2014, he acted as Chief Operating Officer of Sheridan Production Company, LLC. From 2000 to 2013, he held several U.S. and international management positions with Occidental Petroleum Corporation, most recently as Senior Vice President, Worldwide Operations and Production/Facility Engineering.
Name: Holdsworth Mark Keith
Position: Director
Shares Bought: 53,818, Average Price Paid: $7.38 Cost: $397,053
Company: RF Industries Ltd
RF Industries is a leading designer and manufacturer of innovative interconnect products and complex cable assemblies across diversified, high-growth markets including wireless carriers and infrastructure, and industrial. The Company’s products include RF connectors, coaxial and custom cable assemblies, fiber optic cables, wiring harnesses. The Company’s leading-edge connectivity solutions are used throughout the growing and evolving wireless infrastructure. The Company was named to Forbes’s “100 Best Small Companies” list. RF Industries is headquartered in San Diego, California with operations in New York, New Jersey, and Connecticut.
Opinion: RF is a small-cap company with a market cap of about $73.9 million. Hot hand investment banking boutique B.Riley raised their target price to $9 on June 2nd based on “rapidly improving business”. The Company reported on June 14th, the highest current backlog in the company’s history. They would be a beneficiary of any infrastructure plan to roll out 5G and broadband. Director Holdsworth bought 19,400 shares on 4-16 for $6.99 per share and 27,898 shares on 4-9 at $6.88 per share. This most recent buy is the largest dollar amount and the highest price yet. This is an extremely bullish sign and we would aggressive buyers at the 200 day moving average of $7.05.
Mr. Holdsworth, 55, has been a Board member since December 2020 and currently serves as a member of the Audit Committee, the Nomination and Corporate Governance Committee, and the Compensation Committee. From 1999-2018, Mr. Holdsworth was a Co-Founder, Managing Partner, and an Operating Partner of Tennenbaum Capital Partners, LLC (“TCP”), a Los Angeles-based private multi-strategy investment firm that was acquired by BlackRock, Inc. in August 2018, and was a Managing Director at BlackRock until April 2019. Additionally, Mr. Holdsworth is the Founder of Holdsworth & Co., LLC, a private family office. Mr. Holdsworth has over 20 years of board experience and specializes in active management oversight, strategy, M&A activity and complex financings. He has also served as a board director or board chairperson of several public and private companies in a variety of industries. Mr. Holdsworth is currently a Director of Parsons Corporation (NYSE: PSN),
Name: Starr Kevin P
Position: Director
Shares Bought: 17,842, Average Price Paid: $56.05 Cost: $999,983
Name: Greene Barry E
Position: CEO
Shares Bought: 8,800, Average Price Paid: $56.32 Cost: $495,627
Company: Sage Therapeutics Inc. is a biopharmaceutical company committed to developing novel therapies with the potential to transform the lives of people with debilitating disorders of the brain. They are pursuing new pathways intending to improve brain health, and their depression, neurology, and neuropsychiatry franchise programs aim to change how brain disorders are thought about and treated.
Opinion: This is clearly a big bet on the company’s Zuranolone drug undergoing Phase 3 trials. Analysts across the board gave a Bronx cheer to the Phase3 WATERFALL study data, stating that the “marginal” HAMD improvement over placebo on Day 15 and a lack of separation on Day 42 was “disappointing.” Once a foregone conclusion, there are now risks to approvability, if not headwinds to commercial usage. The best thing I read of the many comments was William Blair analyst, Lugo, who said the study supported registration but only believed a marginal benefit for Zuranolone at the 50 mg dose, limiting the commercial opportunity for the product and will likely lead to payer pushback. Further, given the recent approval of Biogen’s (BIIB) Aduhelm in Alzheimer’s disease, the analyst questions how focused Sage’s marketing partner will be in building out the market for the novel therapy in depression versus focusing on the large Alzheimer’s opportunity. Lugo sees Zuranolone “as only ever finding a niche.” He believes see peak U.S. sales will be around $975M, with profits shared equally with Biogen.
CEO Greene and Director Kevin Starr are voting with their dollars and clearly think there is more life in this story. Kevin is a proven operational leader with more than 25 years of experience building and operating leading biotech companies. Barry E. Greene joined Sage as CEO in December of 2020, bringing more than 30 years of biopharmaceutical industry experience to this position. He previously joined the Sage Board of Directors in October of 2020. Before Sage, he served as president of Alnylam Pharmaceuticals, Inc. since 2007, and he previously held the chief operating officer position when he first joined the company in 2003.
Position: Director
Shares Bought: 5,106, Average Price Paid: $58.79 Cost: $300,182
Company: Ares Management Corp
Ares Management Corporation (NYSE: ARES) is a leading global alternative investment manager operating complementary, integrated investment groups that invest across the credit, private equity, and real estate markets. Ares Management’s investment groups collaborate to aim to deliver innovative investment solutions and consistent and attractive investment returns for fund investors throughout market cycles.
Opinion: I wouldn’t make much of this buy. Clearly, ARES has been kicking butt this year as there have been plenty of sellers as well. It’s interesting to note that ARES owns a ton of CRC and has been selling.
Presently, Antoinette Cook Bush is Executive VP & Global Head-Government Affairs at News Corp. She is also Chairman of The HistoryMakers and Treasurer & Director at News Media Alliance and on the board of 9 other companies. In her past career, she was Executive Vice President of Northpoint Technology Ltd., Partner at Skadden, Arps, Slate, Meagher & Flom LLP, and Chairman at Newseum Institute.
Position: Director 10% Owner
Shares Bought: 270,000, Average Price Paid: $36.53 Cost: $9,862,296
Company: Continental Resources Inc
Continental Resources (NYSE: CLR) is a Top 10 independent oil producer in the U.S. Lower 48 and a leader in America’s energy renaissance. Based in Oklahoma City, Continental is the largest leaseholder and one of the largest producers in the nation’s premier oil field, the Bakken of North Dakota and Montana.
Opinion: Harold is back at it, buying oil at the top of a multi-month rise in oil price. He is the original last of the living oil wildcatters. Having pioneered the Bakken, Harold is telling us that oil is still got legs. I tend to agree.
Name: Zoley George C
Position: CEO
Shares Bought: 166,644, Average Price Paid: $6.75 Cost: $1,124,047
Company: The GEO Group is committed to providing leading, evidence-based rehabilitation programs to individuals while in-custody and post-release into the community through the GEO Continuum of Care®. GEO’s diversified services platform provides unique capabilities for delivering educational and vocational programs, cognitive behavioral and substance abuse treatment, and faith-based services. In short, GEO is a private prison and halfway recovery house operator.
Opinion: Mr. Zoley is GEO’s Chairman of the Board, Chief Executive Officer, and Founder. He served as GEO’s Vice Chairman and Chief Executive Officer from January 1997 to May 2002. Mr. Zoley has served as GEO’s Chief Executive Officer since the company went public in 1994. Zoley knows the Company and the business. He was a significant buyer at higher prices but laid off. Perhaps there was a bad stench in the shifting political winds. He’s back for whatever reason, and so is the Reddit crowd that sniffed out large short interest and identified GEO for its squeeze potential. ESG investors won’t touch the private prison operator. This is a trade if you can get it cheaper.
Name: Moskovitz Dustin A
Position: CEO Chairman 10% Owner
Shares Bought: 320,000, Average Price Paid: $48.10 Cost: $15,392,454
Company: Asana Inc is a web and mobile application designed to help teams organize, track, and manage their work. Forrester, Inc. reports that “Asana simplifies team-based work management. Asana helps teams orchestrate their work, from small projects to strategic initiatives. Headquartered in San Francisco, CA, Asana has more than 100,000 paying customers and millions of free organizations across 190 countries. Global customers such as Amazon, Japan Airlines, Sky, and Under Armour rely on Asana to manage everything from company objectives to digital transformation to product launches and marketing campaigns.
Opinion: Holy Moly. The Mosk has conviction, having bought 1,550,000 shares of his own stock back in the last 10 days at prices between $39.49 to $48.10. The market has finally woken up and sent the stock soaring into the dismal close on Friday.
In all the years I’ve been doing this, I’ve only seen one insider spend this kind of money buying his own stock, and that was Richard Kinder at Kinder Morgan. That didn’t work out so well for the general public. If this is a preplanned 10b5-1 trading buy, it would be helpful to us near do wells to explain what he sees.
Asana is a software-as-a-service designed to improve team collaboration and work management. It helps teams manage projects and tasks in one tool. Teams can create projects, assign work to teammates, specify deadlines, and communicate about tasks directly in Asana. It also includes reporting tools, file attachments, calendars, and more.
Dustin Moskovitz is the co-founder and CEO of Asana. As Asana’s CEO, Dustin is dedicated to creating a product that helps the world’s teams collaborate effortlessly, in addition to leading the company’s award-winning culture. Prior to founding Asana, Dustin co-founded Facebook and served as the company’s first Chief Technology Officer and VP of Engineering.
Insiders sell the 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 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 many 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 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 are horrendously poor. Also, planned sales that just pop up out of nowhere are basically sales and seek 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. 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)
