Not one of the many podcasts and pundits I listen to predicted a rally of 16% magnitude since the October lows. The January rally to date has been raw animal spirts. Obviously, this can’t keep going with the Fed dangling 5% risk-free returns out there. Insider buying is incredibly scarce, even considering the seasonal effects of quarterly earnings blackouts. This is what interested me last week in the thinly populated world of insider buying.
The most exciting event is the new bubble forming around AI, capped off by Microsoft’s $10 billion in investment in OpenAi’s and their overnight ubiquitous quantum leap ahead Chatbox GPT. They already have the calligraphy down reminiscent of other enormous successful companies that knew what a good aspirational image looked like. First to mind, Steve Jobs’s Apple Computer. No sooner had the dust settled on the Microsoft deal, than Shutterstock unveiled a new AI image generator partnered with OpenAi. The stock popped 8% on Friday the first trading day after the announcement. In fact this featured image was made by typing in the title of the blog post. I thought it was pretty damn good too and signed up for the service.
Oh, lord o mamma, show me where the next bubble be. I believe fortunes are quickly made and even faster evaporated in bubble markets.
Name: John Donovan
Position: Director
Transaction Date: 2023-01-25 Shares Bought: 556 Average Price Paid: $451.20 Cost: $250,867.00
Company: Lockheed Martin Corp (LMT)
Lockheed Martin Corporation is an international security and aerospace business specializing in the research, design, development, production, integration, and maintenance of high-technology systems, products, and services. In addition, the firm offers managerial, engineering, technical, scientific, logistical, system integration, and cybersecurity services. Defense, space, intelligence, homeland security, and information technology, especially cybersecurity, are the primary areas of concentration. The firm provides goods and services with military, civil, and commercial applications to domestic and foreign clients, with the primary customers being US government agencies. The organization operates in a complicated and ever-changing global security environment. The goal of 21st Century Security is to combine new and current systems across all domains with sophisticated, open-architecture networking and operational technologies, allowing forces to become more flexible, adaptable, and unexpected.
Donovan served as CEO of AT&T Communications, LLC, a wholly-owned subsidiary of AT&T Inc., from August 2017 until his resignation in October 2019. He was AT&T Inc.’s chief technology officer from April 2008 until January 2012. He was AT&T Technology and Operations’ chief strategy officer and group president from January 2012 until August 2017. Before joining AT&T, Donovan was the executive vice president of product, sales, marketing, and operations at VeriSign Inc. He was also the chairman and CEO of inCode Telecom Group Inc., where he helped cellular operators throughout the globe establish their strategy, and a partner at Deloitte Consulting, where he headed America’s telecom practice. Donovan is the President’s National Security Telecommunications Advisory Committee’s chair, a director of the worldwide cybersecurity business Palo Alto Networks, and the author of many books on advanced networking and organizational leadership.
Opinion: The world looks so dangerous to me that I have to restrain myself from investing everything in the largest U.S. Defense Contractor. On Jan. 24, history was again made when the Bulletin of the Atomic Scientists’ organization moved the seconds hand of the Doomsday Clock closer to midnight. It is now at 90 seconds to midnight, the closest it has ever been to the symbolic midnight hour of global catastrophe. The insider buying by Donovan looks like its part of some quarterly investment program rather than opportunistic buying buy an end of the world prepper.
Name: William S Demchak
Position: President/CEO
Transaction Date: 2023-01-20 Shares Bought: 6,550 Average Price Paid: $153.38 Cost: $1,004,639.00
Company: PNC Financial Services Group Inc. (PNC)
PNC Financial Services Group Inc is one of the biggest diversified financial companies in the United States, with headquarters in Pittsburgh, Pennsylvania. The firm operates activities in retail banking, including home mortgages, corporate and institutional banking, and asset management, offering numerous products and services nationwide. The retail branch network stretches from coast to coast, and the corporation also has important foreign offices in four countries other than the United States. The firm was formed in 1983 by the merger of Pittsburgh National Corporation and Provident National Corporation under the laws of the Commonwealth of Pennsylvania. Through organic expansion, smart bank and non-bank acquisitions and equity investments, and the establishment of numerous non-banking companies, the firm has diversified its geographical presence, business mix, and product capabilities since 1983.
William S. Demchak is the chairman, president, and CEO of The PNC Financial Services Group, one of the biggest and most diverse financial services firms in the United States. Demchak joined PNC as a chief financial officer in 2002. He was designated head of PNC’s Corporate & Institutional Banking in July 2005, responsible for PNC’s medium and large corporate operations, capital markets, real estate financing, equity management, and leasing. Demchak was appointed head of PNC enterprises in August 2010 after being elevated to senior vice chairman in 2009. He was appointed president in April 2012, CEO in April 2013, and chairman in April 2014. Demchak was the worldwide head of Structured Finance and Credit Portfolio at JP Morgan Chase before joining PNC in 2002. Before its merger with the Chase Manhattan Corporation in 2000, he held major managerial positions at JP Morgan. He was an active participant in the development of JP Morgan’s strategic agenda and a member of the company’s capital and credit risk committees.
Opinion: This was a good buy. By the time I noticed it, it was up over 6%. This blue chip paying a 10yr Treasury yield of 3.68% with 12 consecutive years, even during the Pandemic. It is a buy on any pullback, no matter how small it is.
Name: Douglas R Lebda
Position: Chairman & CEO/10% Owner
Transaction Date: 2023-01-23 Shares Bought: 65,062 Average Price Paid: $32.03 Cost: $2,084,204.00
Company: LendingTree Inc. (TREE)
LendingTree, Inc. runs what it considers the largest online consumer platform, connecting customers with the options they need to make smart financial decisions. LendingTree encourages people to shop for financial services the same way they would for airline tickets or hotel stays, evaluating several offers from a national network of over 500 partners in one easy search and selecting the choice that best matches their financial requirements. Mortgage loans, mortgage refinances, home equity loans and lines of credit, reverse mortgage loans, auto loans, credit cards, bank accounts, personal loans, student loans, small business loans, insurance quotations, insurance policy sales, and other related services are among the services provided. Furthermore, the organization provides tools and resources, such as free credit ratings, to help customers compare loans, deposit products, insurance, and other goods.
Doug envisioned a solution to streamline the loan-buying process after experiencing the difficulties and complications of his first mortgage. Customers might visit a website where banks compete for their business instead of physically visiting numerous banks. That was in 1996, and the website you’re reading was born. Doug led LendingTree through a successful IPO in 2000, the dot-com crash in 2001, and a successful sale to IAC/InterActiveCorp in 2003 after it launched nationwide in July 1998. Doug was President and Chief Operating Officer of IAC from 2005 to 2008; then, in 2008, he joined the newly established Tree.com (rebranded as LendingTree) after it branched off from IAC as a separate public business. Doug worked as an auditor and consultant for PriceWaterhouseCoopers before launching LendingTree.
Opinion: This has always been to complex a creature for me to figure out.
Name: Boaz Weinstein/Saba Capital Management L.P.
Position: 10% Owner
Transaction Date: 2023-01-25 Shares Bought: 57,426 Average Price Paid: $30.51 Cost: $1,752,067
Company: ClearBridge Energy Midstream Opportunity Fund Inc. (EMO)
ClearBridge Energy MLP Opportunity Fund Inc. is a closed ended equity mutual fund founded and managed by Legg Mason Partners Fund Advisor, LLC. ClearBridge Investments, LLC manages it jointly. The fund invests in the public stock markets of the United States. It tries to invest in equities of energy firms. The firm mainly invests in the equity shares of MLPs with activities in crude oil, natural gas liquids, and refined products infrastructure. To build its portfolio, it attempts to invest in firms with long-lived assets, stable cash flows, and limited direct commodities exposure. ClearBridge Energy MLP Opportunity Fund Inc. was founded on April 5, 2011 and is based in the United States.
Boaz Weinstein is the founder and Chief Investment Officer of Saba. Saba was created in 2009 by Mr. Weinstein as a spin-off from Saba Principal Strategies. Mr. Weinstein heads a skilled team at Saba, with the senior investment team has worked together for seventeen years. During his career, Mr. Weinstein had dual responsibilities for proprietary trading and market-making at Deutsche Bank. He formed Saba Principal Strategies in proprietary trading to concentrate on credit and capital structure investment. He specialized in credit default swaps, investment-grade, and high-yield bonds as a market maker. Mr. Weinstein worked for Deutsche Bank for eleven years, the final eight as Managing Director, a position he held when he was 27. Mr. Weinstein earned a BA in Philosophy from the University of Michigan, Ann Arbor. Boaz Weinstein was born and raised in New York City, where he attended Stuyvesant High School. Mr. Weinstein is on the Leadership Council of Robin Hood, New York’s biggest anti-poverty group.
Opinion: Insider buying by one of the smartest hedge fund managers. I just listened to a great interview podcast of Boaz (way cool name) on Barry Ritholz Master of Business Bloomberg podcasts.
Name: James Andrew Barker
Position: Director
Transaction Date: 2023-01-24 Shares Bought: 48,435 Average Price Paid: $16.53 Cost: $800,830.00
Company: Banc Of California Inc. (BANC)
Banc of California, Inc., a Maryland corporation founded in March 2002, acts as the holding company for its fully owned subsidiary, Banc of California National Association, a bank with headquarters in California. The Bank is a commercial bank that prioritizes relationships. Through the 32 full-service locations stretching from San Diego to Santa Barbara, the organization provides complete goods and solutions for corporations, business owners, and people throughout California. The corporation has been catering to Californian markets through the Bank and its forerunners since 1941. The Bank provides a range of financial products and services to meet its customers’ banking and financial requirements.
James Andrew Barker leads the Banc of California, Inc. board of directors. He previously held the positions of Co-President of Velocity Vehicle Group and Co-President at Los Angeles Truck Centers LLC (a subsidiary of Velocity Vehicle Group), Executive Director & Group Finance Director at CSG Holdings Ltd., Head-Corporate Finance at I F S Consulting Pty Ltd., and Financial Manager at Dorbyl Ltd. Both Stanford University and the University of the Witwatersrand awarded Mr. Barker undergraduate degrees.
Opinion: This is head scratcher. Low dividend with negative growth history.
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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
