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For the first time in over a decade, fixed-income investors are enjoying reasonable returns. The Fed seems intent on keeping rates high for longer than stock market participants might like, but it hasn’t yet done great damage to the hopes and fortunes of equity owners. What I mean by this is to look at the 10-year Treasury, the benchmark index which stock market returns are said to compete with. The long-run average annual return of the stock market average is 7%-9% per annum. That still provides a measure of returns significantly better than Friday’s closing 10-year risk-free rate of 3.51%.
The yield curve is deeply inverted, clearly signaling that it doesn’t believe that a One Year Treasury return of 4.65% can be sustained indefinitely. Normally an investor wants to be compensated with higher rates when loaning out money for longer time periods. But this is not a normal state of equilibrium. It cannot last indefinitely. The yield curve will eventually normalize, but whether that is lower short-term rates or significantly higher longer-term rates, remains to be seen. It will have a great impact on investor returns. For now, both fixed-income and equity investors each have something to crow about.
Name: David P Oconnor
Position: Director
Transaction Date: 2022-11-28 Shares Bought: 9,000 Average Price Paid: $114.13 Cost: $1,027,170.00
Company: Prologis Inc.(PLD)
Prologis, Inc. is a self-administered and self-managed real estate investment trust and the only general partner of Prologis, L.P., through which it controls practically all of its properties. The company treats Prologis, Inc., and Prologis, L.P. as a single entity, thus the discussion and analysis pertain to Prologis, Inc. and its consolidated subsidiaries, including Prologis, L.P. The Company makes real estate investments through fully owned subsidiaries and other organizations with which the company collaborates with partners and investors. The company holds a major ownership stake in the co-investment ventures, which may or may not be consolidated depending on the level of influence over the firm. In 1997, Prologis, Inc. became a fully integrated real estate company and was elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended.
David P. O’Connor was appointed to the Prologis board of directors in January 2015. He now serves on the remuneration committee as a member of the Prologis board of directors. He is a private investor and managing partner of High Rise Capital Partners, LLC, and was the co-founder and senior managing partner of High Rise Capital Management LP, a New York-based real estate securities hedge fund manager that operated from 2001 until 2011. From 1994 through 2000, he was a principal, co-portfolio manager, and investment committee member of European Investors, Inc., a real estate investment trust investor. Mr. O’Connor earned a Master of Science in real estate from New York University and a Bachelor of Science from Boston College’s Carroll School of Management.
Opinion: Near shoring of the supply chain should provide an excellent macro backdrop for Prologis. The analyst community seems to be overwhelmingly bullish on Prologis. The the obvious question is why such a poor stock market performer? I just think it matters what you pay for something. Prologis, an obvious, sector winner was just overpriced. I’m not entirely comfortable even at this discounted price as the yield, 2.70%, is still sub par in my opinion. Mr. O’connor clearly feels differently. Perhaps the recent acquisition of Duke Realty will have the board up the dividend.
Name: Jimmy Iovine
Position: Director
Transaction Date: 2022-12-01 Shares Bought: 13,740 Average Price Paid: $73.28 Cost: $1,006,867.00
Company: Live Nation Entertainment Inc. (LYV)
Live Nation Entertainment Inc. is the world’s top live entertainment ticket sales and marketing organization. Ticketmaster sells tickets, offers resale services, and handles marketing and distribution worldwide via websites, mobile applications, retail locations, and call centers. The company aims to increase revenue, profitability, and cash flow by promoting more concerts, selling more tickets, and partnering with more sponsors. The firm secures content and tickets for artists, venues, and sports teams and leagues; the company invests in technology to create creative solutions that expand ticketing, and digital presence, including mobile platforms, and advertising.
Jimmy Iovine has been on the board of directors since 2014. Mr. Iovine is widely recognized as a visionary in the music industry. Iovine co-founded Beats Electronics and Beats Music with Dr. Dre, which were both bought by Apple in 2014. Iovine is also the founder and former chairman of Universal Music Group’s Interscope Geffen A&M Records division. Under Iovine’s leadership, Interscope became home to some of the world’s biggest performers, including Dr. Dre, Nine Inch Nails, U2, The Black Eyed Peas, Eminem, and Lady Gaga. Iovine began his career in the studio, working with artists such as John Lennon, Bruce Springsteen, Patti Smith, Tom Petty, the Heartbreakers, Stevie Nicks, and many more.
Opinion: I love investing in monopoly businesses. Some people feel that the recent hubbub about Taylor Swift tickets just serves to reinforce the potential for the Government to break up the TicketMaster Live Nation merger approved in 2010. Although government action is always a risk, a breakup is unlikely in my opinion. Instead, the Taylor Swift concert demand just validates the tremendous underlying fundamentals of the concert business. The company still looks overvalued but considering its rarified place in the consumer category, it might be worth more than a trade.
Name: Matthew Jacobson
Position: Director
Transaction Date: 2022-11-30 Shares Bought: 19,702 Average Price Paid: $70.42 Cost: $1,387,393.00
Company: Datadog Inc. (DDOG)
Datadog is a cloud application monitoring and security platform. The SaaS platform of the company unifies and automates infrastructure monitoring, application performance monitoring, and log management to give clients unified, real-time observability of their whole technological stack. Datadog is used by organizations of all sizes and industries to enable digital transformation and cloud migration, drive collaboration among development, operations, security, and business teams, accelerate application time to market, reduce time to problem resolution, secure applications, and infrastructure, understand user behavior, and track key business metrics. Datadog was founded to shatter this model and improve communication between development and operations teams, allowing for the adoption of DevOps principles.
Matt Jacobson is a general partner at ICONIQ Capital, an investing and venture capital firm, where he has been since September 2013. He also serves on the business’s investment and management committees. Matt is presently a director at GitLab, Collibra, BambooHR, Braze, Sprinklr, Relativity, InVision, Highspot, and Intercom. Before joining ICONIQ Capital, Matt worked for Groupon and Battery Ventures, as well as Technology Crossover Ventures. Matt has a BS in Economics from the University of Pennsylvania’s Wharton School.
Opinion:
Name: Jeffery Michael Watts
Position: Executive Vice-President
Transaction Date: 2022-11-29 Shares Bought: 5,940 Average Price Paid: $50.58 Cost: $300,433.00
Company: Fastenal Co (FAST)
Fastenal Company was founded in 1967 as a partnership and was incorporated under Minnesota law in 1968. The company launched its first location in 1967 in Winona, Minnesota, a community of around 26,000 people today. The company began with a marketing strategy of supplying consumers with threaded fasteners via a branch network in small, medium-sized, and, later, major cities. That mission has grown over time to include a greater variety of industrial and construction materials, encompassing more than nine primary product categories. Similarly, client interactions at the company have expanded to include on-site, Fastenal managed inventory, and eCommerce. Although the company has some walk-in retail business, the vast bulk of transactions is business-to-business.
Mr. Watts has been the executive vice president of international sales since December 2016. Mr. Watts was the vice president of international sales from March 2015 to December 2016. He was the regional vice president of the Canadian region from June 2005 to February 2015. Before June 2005, Mr. Watts held various sales leadership positions at the company.
Opinion: I don’t see what Mr. Watts is seeing.
Name: Robert Robotti
Position: Director
Transaction Date: 2022-11-23 Shares Bought: 66,501 Average Price Paid: $30.05 Cost: $1,998,550.00
Company: Tidewater Inc. (TDW)
Tidewater Inc., a Delaware corporation and listed company on the New York Stock Exchange under the ticker symbol “TDW,” operates a diverse fleet of marine service vessels to provide offshore marine support and transportation services to the global offshore energy industry. The company was incorporated in 1956 and carries out business through wholly-owned subsidiaries in the United States and abroad, as well as through joint ventures where Tidewater owns either a majority or non-controlling stake. The ships and related vessel services generally serve all stages of offshore oil and gas exploration, field development, and production, as well as the construction and maintenance of wind farms.
Robert Edward Robotti is the founder of Robotti & Co. Advisors LLC, Robotti & Co., Inc., and Robotti Securities LLC, as well as the Chairman and Chief Executive Officer of Pulse Seismic, Inc., the president of Robotti Securities LLC, and the Chief Investment Officer of Robotti & Co. Advisors LLC. He is also a board member of AMREP Corp., Tidewater, Inc., PrairieSky Royalty Ltd., and the Catholic Medical Mission Board, Inc., as well as a General Partner of Ravenswood Investments III LP, a member of the New York Society of Security Analysts, Inc., General Partner of Ravenswood Investment Co. LP, Managing Director of Ravenswood Management Co. LLC, and Managing managing member of Ravenswood Investment Co. LLC.
Opinion:
Name: Jeffrey Gould
Position: CEO
Transaction Date: 2022-11-28 Shares Bought: 14,445 Average Price Paid: $20.15 Cost: $291,076
Company: BRT Apartments Corp.(BRT)
BRT Apartments Corp. is an internally managed real estate investment trust, or REIT, that specializes in the acquisition, management, and, to a lesser extent, the development of multifamily properties. The company’s primary interests include multifamily property ownership, management, and development. The company typically owns multifamily properties like townhomes, mid-rise apartments, or garden apartments that offer residents access to amenities like a clubhouse, swimming pool, laundry rooms, and cable television. The typical length of a residential lease is one year, and security deposits up to the amount of one month’s rent may be required. These properties have a large percentage of their units leased at market rates.
Jeffrey A. Gould now holds the positions of Director and Senior Vice President of One Liberty Properties, Inc., President, Chief Executive Officer, and Director at BRT Apartments Corp. In addition, Mr. Gould serves as managing general partner at Gould Investors LP, principal at UJA-Federation of New York; member of Young Presidents’ Organization, Inc., World Presidents’ Organization, and Chief Executives Organization, Inc.; principal at Federation Employment & Guidance Service, Inc.; director and senior vice president at Georgetown Partners, Inc.; and member-New York Finance Committee at Real Estate Board of New York, Inc.
Opinion: I like BRT as apartment REITS with a decent dividend yield like BRT’s 4.8% dividend have the wind behind their sails as home ownership gets increasingly priced out of many first-time home owners’ reach.
Name: Alan Yu
Position: CEO/Chairman
Transaction Date: 2022-11-30 Shares Bought: 47,900 Average Price Paid: $14.06 Cost: $673,453.00
Company: Karat Packaging Inc. (KRT)
Karat Packaging Inc. is a fast-expanding specialist distributor and select producer of eco-friendly disposable food service goods and associated things. The firm is a quick provider of food and take-out containers, bags, dinnerware, cups, lids, cutlery, straws, specialty beverage components, equipment, gloves, and other goods for the food service sector. Products from the firm are available in plastic, paper, biopolymer-based, and other biodegradable formats. Customers who are increasingly concerned about sustainability will appreciate the company’s Karat Earth® line, which offers environmentally friendly options. Customers can get customized solutions from the company, which include new product development, design, printing, and logistics services.
Alan Yu is the founder of Lollicup USA, Inc., and Karat Packaging, Inc. He is also the Chief Executive Officer of Lollicup USA, Inc., and Karat Packaging, Inc.
Opinion:
Name: Kelcy L Warren
Position: Chairman
Transaction Date: 2022-11-23 Shares Bought: 1,300,000 Average Price Paid: $12.39 Cost: $16,107,000.00
Company: Energy Transfer LP. (ET)
Energy Transfer LP, a Delaware limited partnership, trades its common units. Additionally, the corporation has assets in other companies, such as publicly listed master limited partnerships Sunoco LP and USAC. Cash flow for Energy Transfer comes from distributions relating to its ownership in its subsidiaries, such as USAC and Sunoco LP. Energy Transfer’s main liquidity needs include distribution to partners, general and administrative costs, and debt servicing obligations. After satisfying the liquidity above criteria, Energy Transfer distributes any remaining cash to its unitholders every quarter.
Kelcy L. Warren is the Executive Chairman of the Board of Directors of Energy Transfer LP and has been a leader in the energy industry for nearly 40 years. Mr. Warren co-founded Energy Transfer in 1996, which began as a small intrastate natural gas pipeline operator and is now one of the industry’s largest and most diversified publicly traded energy companies. Today, the Energy Transfer family of partnerships includes Energy Transfer LP, Sunoco LP, and USA Compression Partners LP.
Opinion: This is a no-brainer; above average yield of 8.46%, massive insider buying in one of the largest oil and gas infrastructure, pipeline plays out there.
Name: John G. Nackel
Position: Director
Transaction Date: 2022-11-28 Shares Bought: 20,000 Average Price Paid: $10.13 Cost: $202,600.00
Company: Pennant Group Inc. (PNTG)
The Pennant Group, Inc. is a prominent provider of high-quality healthcare services to patients and residents of all ages in the United States, particularly the expanding senior population. The organization strives to be the supplier of choice in the areas it serves by utilizing an innovative operating strategy. On October 1, 2019, the firm completed a spin-off from its previous parent company, The Ensign Group, Inc., which transferred to the company all of its home health and hospice agencies, as well as nearly all of its senior residential companies. As of December 31, 2021, the firm operated numerous lines of business in Arizona, California, Colorado, Idaho, Iowa, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin, and Wyoming, including home health, hospice, and senior living.
John G. Nackel Ph.D. has been a member of the Ensign Board of Directors since his election in June 2008. He is presently the chairman and CEO of Three-Sixty Advisory Group, LLC, as well as the founder and general partner of the Wavemaker Three-Sixty Health, LP venture fund. Dr. Nackel founded Three-Sixty in 2007 to consult with premier health systems, payers, physicians, medical technology firms, and other providers. Wavemaker 360, which was founded in 2018, invests in early-stage healthcare firms focused on value-based payment. Dr. Nackel is a 25-year veteran of Ernst & Young, where he served as global managing director of health care and advised healthcare organizations. Dr. Nackel was also the CEO of Ingenix Consulting, a United Healthcare company.
Opinion:
Name: Douglas Cahill
Position: CEO
Transaction Date: 2022-11-30 Shares Bought: 129,000 Average Price Paid: $7.71 Cost: $993,945.00
Company: Hillman Solutions Corp.(HLMN)
Name: Robert O Kraft
Position: CFO
Transaction Date: 2022-11-30 Shares Bought: 65,000 Average Price Paid: $7.65 Cost: $497,380.00
Company: Hillman Solutions Corp.(HLMN)
Name: Scott Kelley Moore
Position: CTO
Transaction Date: 2022-11-29 Shares Bought: 13,000 Average Price Paid: $7.59 Cost: $98,605.00
Company: Hillman Solutions Corp.(HLMN)
Hillman Solutions Corp. and its wholly-owned subsidiaries are one of North America’s major suppliers of hardware-related items and merchandising services to retail marketplaces. The Hillman Group, Inc., a fully owned subsidiary, conducts the primary business. Hillman Group’s goods are mostly sold through hardware shops, home centers, mass merchants, pet supply stores, and other retail outlets in the United States, Canada, Mexico, Latin America, and the Caribbean. Thousands of small parts, such as fasteners and associated hardware; threaded rod and metal forms; keys and accessories; builder’s hardware; personal protective equipment, such as gloves and eyewear; and identifying items, such as tags and letters, numbers, and signs, are available. Services such as the design and installation of merchandising systems, the maintenance of appropriate in-store inventory levels, and break-fix for the robotics kiosks help to support product sales.
Mr. Cahill accepted the position of Executive Chairman and Senior Executive Officer at Hillman on July 25, 2019. Mr. Cahill worked with CCMP from July 2014 until July 2019 as a managing director and member of the investment committee. He joined the CCMP as an executive adviser in March 2013. From May 2010 to December 2012, Mr. Cahill worked as president and chief executive officer of Oreck, a company that makes upright vacuums and other cleaning supplies. During his 13 years with Olin Corporation, a maker of metals and chemicals with a wide range of products, Mr. Cahill held several management and senior positions. Mr. Cahill serves on the boards of Junior Achievement of Middle Tennessee and the Owen Graduate School of Management at Vanderbilt University.
Mr. Kraft has been Hillman’s Chief Financial Officer and Treasurer since November 2017. Before joining Hillman, Mr. Kraft was the President of CVS Health Corporation’s Omnicare segment and an Executive Vice President from August 2015 to September 2017. Mr. Kraft served as Omnicare, Inc.’s Chief Financial Officer and Senior Vice President from November 2010 until August 2015. Mr. Kraft joined PriceWaterhouseCoopers LLP in 1992 and was promoted to partner in 2004. He is a qualified public accountant. Mr. Kraft is presently a director of Medpace Holdings, Inc.
Opinion: This seems like insiders taking advantage of cheap stock prices. The 13% runup on the news seems to indicate speculation.
Name: Shashank Samant
Position: Director
Transaction Date: 2022-11-29 Shares Bought: 100,000 Average Price Paid: $4.55 Cost: $454,620.00
Company: Rackspace Technology Inc. (RXT)
Rackspace Technology is a prominent provider of end-to-end multi-cloud technology services. The business designs build, and operates cloud environments for customers across all major technology platforms, regardless of technology stack or deployment type. The firm collaborates with customers at every stage of their cloud journey, allowing them to upgrade apps, create new products, and embrace cutting-edge technology. The company assists businesses of all sizes in managing their cloud transition, making sense of their IT infrastructure, migrating data to the cloud, optimizing their cloud presence on an ongoing basis, and managing tasks best left to manage hosting or other mature platforms.
Shashank Shankar Samant is the current Chairman of GlobalLogic, Inc. He also serves on the boards of six additional firms. He previously worked for HP, Inc. as Director-Worldwide Professional Services, International Business Machines Corp. as Principal, Ness Technologies, Inc. as President, and Mastech Corp. as Country Director-Canadian Operations. Samant has over 30 years of expertise in technology, product development, and services and is the President and Chief Executive Officer of GlobalLogic Inc., a Hitachi Group Company. Samant formerly served as President of Ness Technologies, an IT services firm, where he created and expanded their product engineering services division. He graduated with honors from the University of Pune.
Opinion: I’m clueless here. I didn’t even know RackSpace, one of the original customer-centric website hosting providers, was still in business.
Name: Jason Marc Adler
Position: Director
Transaction Date: 2022-11-28 Shares Bought: 52,900 Average Price Paid: $3.04 Cost: $160,556.00
Company: Cronos Group Inc. (CRON)
The Cronos Group is a cutting-edge international cannabis firm dedicated to developing cannabis research, technology, and product development to create disruptive intellectual property. It also aims to create an iconic brand portfolio. The Company created the United States segment on September 5, 2019, as a consequence of acquiring four Redwood Holding Group, LLC companies. Redwood produces, markets, and distributes dietary supplements containing cannabinoids derived from U.S. hemp and cosmetic goods through retail, hospitality, and e-commerce partner channels in the country. The cultivation, production, and marketing of cannabis and cannabis-derived products for the medical and adult markets are activities of the Rest of the World operating segment.
Jason Marc Adler, who founded AlphaBet Partners LP, Saiers Capital LLC, Alphabet Ventures LLC, and Geronimo LLC, is the managing partner of Gotham Green Partners LLC. Mr. Adler also serves as a principal in AlphaBet Partners Group LP and a member of the board of Cronos Group, Inc. Mr. Adler has held the positions of CEO and managing member at Alphabet Ventures LLC, CEO of Saiers Capital LLC, and CEO of Alphabet Partners LP in the past. The University of Rhode Island awarded Mr. Adler a bachelor’s degree.
Opinion: We blogged about this last week. Adler continues to add to his holdings. I don’t know the reasoning for Adler’s recent interest, but it’s getting my attention. Altria sells no cannabis recreationally in the U.S., although they have a minority interest in PharmaCan, a U.S. distributor and licensee of cannabis. Just last Friday, the Government passed H.R. 8454, the “Medical Marijuana and Cannabidiol Research Expansion Act,” which establishes a new registration process for conducting research on marijuana and for manufacturing marijuana products for research purposes and drug development.
The recreational and medicinal demand for cannabis products has not created any consistently profitable public companies in this space. Speculative fortunes have been lost. The market has a good understanding of the recreational demand for cannabis, but I think the medical market is just getting started. Other than a small approved use for epilepsy, there haven’t been any medically or statically validated medicinal markets. I think that could change. Probably the biggest untapped pharmaceutical market in the world is for nonaddictive pain medicine. Various combinations of cannabinoids are promising. Cronos has a strategic deal with Ginko Bioworks to manufacture rare cannabinoids at compelling prices versus conventional cultivation. More and more states are opening their doors to medical marijuana.
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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 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 within 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. SECForm4 is one of the smaller ones but I like supporting Frank. He is not arrogant. He’s helpful and has great prices. He also trades on his own data so I like people that eat what they kill.
The bar is different from selling because the natural state of management is to be seller. 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 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. Do your own analysis. They can easily be wrong, and in many cases, maybe most cases have no more idea what the future may hold than you or me. In short, you can lose money following them. We have and we curse aloud, what were they thinking!
We like Fly on the Wall for keeping up with what events might be happening, analysts’ comments, and whatever else could be moving the stock. Dow Jones news service is an essential tool but many services pick up their feed like they do Bloomberg. For quick financial analysis, it’s hard to beat Old School Value.
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. 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
