Morgan Stanley’s head of equity strategist Mike Lee stood out from the herd last year calling the market sell-off in 2022. Not only did he get it right, but he also stuck with his guns and didn’t back down during the many gut-wrenching bear market rallies last year. He’s been bearish since the market rally last Fall and has doubled down on what is turning out to be one of the most embarrassingly bad and brazen market calls I’ve heard in some time. He’s not alone, though. Almost every pundit I read or listen to, says the same thing. Don’t fight the Fed. Interest rates are going up. Earnings are going down. Sell stocks.
Fittingly, the market has gone nearly straight up this year continuing its upward trajectory from the September 2022 lows. The S&P 500 information technology sector is up more than 14% this year in one of the best performances since the heyday of the dot.Com era. As usual, the market does what it does best, making a fool out of the most people it can most of the time. To say this is a humbling business is an understatement. There’s a good reason why Warren Buffett will tell you he has no idea of what the market is going to do today, tomorrow, or even next year. Predicting short-term moves in the market is really impossible. Only naive people, scoundrels, or paid shrills even bother to try.
I managed to hear Mr. Wilson repeat his convincing bear market message at iConnection last week in Miami along with other similar warnings from pundits managing mega bucks. iConnections Global Alt is the largest hedge fund allocator event in the country. Thousands of allocators (that means people that can write big checks) and money managers (those are the people that want those big checks) gathered in Miami for the largest capital speed dating event in the world. Alpha Wealth Funds had 32 meetings in two days as part of the event which boasted 14,000 meetings overall in the same two days.
I might have thrown real-life eggs at Mr. Wilson but they only served granola bars and bananas for breakfast at the massive hedge fund conference. He has single-handedly cost investors millions in potential paper profits with his convincingly bearish prognostications. Some consolation for The Insiders Fund partners, we rarely take too seriously any analysts or market gurus. If there is any consolation for Mr. Wilson, he can say that insiders as a group are not buying this market rally either.
The featured image of this blog post was created by Shutterstock’s newly acquired artificial intelligence software from OpenAI. It has its limitations though. I instructed Shutterstock’s image generation software to egg Mike Wilson of Morgan Stanley but it refused to do so because of copyright liability concerns. The image is as close to embarrassing as I could produce.
Name: Steven A Miron
Position: Director
Transaction Date: 2023-01-31 Shares Bought: 2,500 Average Price Paid: $384.35 Cost: $960,875.00
Company: Charter Communications Inc (CHTR)
Charter Communications Inc., a prominent supplier of internet connections and a cable operator, provides many users in 41 states via the Spectrum brand. Through a sophisticated, high-capacity, two-way telecommunications network, we deliver a full range of cutting-edge residential and business services, including Spectrum Internet®, TV, mobile, and phone. Spectrum Business® provides the same range of broadband products and services for small and medium-sized businesses and unique features and applications to boost productivity. In contrast, Spectrum Enterprise provides highly tailored, fiber-based solutions for larger businesses and government organizations. Spectrum Reach® offers unique production and advertising in today’s media landscape.
Steven A. Miron is the Chief Executive Officer of Newhouse Broadcasting Corp and the Chief Executive Officer of Advance and Advance Communication Corp. Mr. Miron also serves on the boards of Discovery, Charter Communications, Crouse Health Foundation, and the Jewish Community Foundation of Central New York. He formerly worked as a Principal at MetroVision of North America, Inc., a Principal at NewChannels Corp., the Chief Executive Officer of Spectrum Sunshine State LLC, and a Principal at Time Warner Cable, Inc. Mr. Miron is a director of Discovery, Inc. and has previously served on the boards of C-SPAN, the National Cable & Telecommunications Association, and CableLabs. Mr. Miron formerly served on the CTAM Board of Directors and executive committee, as well as the Emma Bowen Foundation, CTAM Educational Foundation, Crouse Health Foundation, and the Jewish Community Foundation of Central New York. Mr. Miron graduated from American University with a bachelor’s degree.
Opinion: This has to be a fiber-to-the-curb play as cord-cutting has killed the cable TV business and cellular is way too competitive for any more players. Admittedly I don’t get it but there are some big purchases happening here including the November 2022 $10 Million buy of Director Zinterhofer. You have to assume they know something. I can’t imagine Comcast or anyone else for that matter buying Charter but the lack of imagination is a common investors’ deficit.
Name: John G Morikis
Position: Chairman & CEO
Transaction Date: 2023-01-27 Shares Bought: 2,207 Average Price Paid: $226.70 Cost: $500,327.00
Company: Sherwin Williams Co (SHW)
The Sherwin-Williams Company, founded in 1866 and incorporated in Ohio in 1884, develops, manufactures, distributes, and sells paint, coatings, and related products primarily to professional, industrial, commercial, and retail customers in North and South America, with additional operations in the Caribbean region, Europe, Asia, and Australia. The Company publishes segment information in the same manner management organizes its Company internally for measuring performance and making resource allocation choices. Each shop in the American Group division caters to the requirements of architectural and industrial paint contractors and do-it-yourself homeowners. Consumer Brands Group provides a diverse portfolio of branded and private-label architectural paint, stains, varnishes, industrial products, wood finishes products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks, and adhesives to retailers and distributors in North America, China, and Europe.
John G. Morikis serves as Chairman, President, and Chief Executive Officer of the Sherwin-Williams Company, a worldwide leader in the paint and coatings business. He was appointed Chairman of the Board in January 2017 and President and Chief Executive Officer in January 2016. (CEO). Mr. Morikis began his career as a Sherwin-Williams Management Trainee in 1984 and is the program’s first alumnus to be appointed CEO. For more than 30 years, Mr. Morikis has held increasingly important roles within the Company, including President and General Manager of the Paint Stores Group and President and Chief Operating Officer. Mr. Morikis has had the privilege of working with Sherwin-Williams’ outstanding employees as they succeeded and expanded the firm together over his career.
Opinion: Perfect contrarian play. Housing is in the shitter but it won’t stay that way. Obviously, the market feels that way since SHW already gained back the ground it just lost after announcing Q4 earnings and lowering guidance. Or perhaps the CEO buying $500k worth of stock gave investors some of their confidence back. The problem though is that Sherwin Williams at 31 times trailing earnings is not a cheap stock going into a challenging macro environment for home builders. Last year Morris bought a similar amount of stock and this kinda smells like a mandatory corporate stock ownership plan. Directors are required to own a minimum of 5,000 shares of common stock. So what’s a 2200 share purchase by the CEO that earned nearly $15 million last year in total comp? Not much in my opinion.
Name: Gregory Hayes
Position: Director
Transaction Date: 2023-02-01 Shares Bought: 10,250 Average Price Paid: $97.75 Cost: $1,001,938
Company: Phillips 66 (PSX)
Phillips 66 is an energy manufacturing and logistics firm. Midstream, Chemicals, Refining, and Marketing and Specialties are its four business segments (M&S). Midstream transports crude oil and other feedstocks; delivers refined petroleum products to market; provides terminaling and storage services for crude oil and refined petroleum products; transports, stores, fractionates, exports, and markets natural gas liquids; and gathers, processes, transports, and markets natural gas. The Chemicals division manufactures and sells ethylene and other olefin products; aromatics and styrenics goods like benzene, cyclohexane, styrene, and polystyrene; and specialty chemical products, including organosulfur chemicals, solvents, catalysts, and drilling and mining chemicals. At 12 refineries in the United States and Europe, the Refining division converts crude oil and other feedstocks into petroleum products such as gasoline, distillates, aviation fuels, and renewable fuels.
Gregory J. Hayes serves on the Phillips 66 board of directors. He is a member of the human resources and compensation, public policy, and sustainability committees. Hayes is the Chairman and Chief Executive Officer of Raytheon Technologies Corporation (“Raytheon”), a post he has held since June 2021. Hayes previously served as Raytheon’s President, Chief Executive Officer, and Director from April 2020 to June 2021; Chairman and Chief Executive Officer of United Technologies Corporation (“UTC”) from 2016 to April 2020; and President, Chief Executive Officer, and Director of UTC from 2014 to 2016. Hayes formerly served on the board of Nucor Corporation from 2014 until 2018. Hayes has a bachelor’s degree in economics from Purdue University and is a Certified Public Accountant.
Opinion: Phillips 66 is a solid diversified energy midstream and refining giant but the only way to make money in PSX over the last four years has been by trading it. Unless Phillips breaks out of its trading range, I would have to think this pattern persists. This is Directory Haye’s first open market purchase since being appointed a director in July of 2022. Oddly enough he could have bought the stock a lot cheaper last July- but he didn’t. Granted PSX deserves a premium valuation given its investment grade rating and its broadly diversified business but the market isn’t awarding it a market multiple with the looming electrification of the transportation fleet.
Name: Terrence Wright
Position: Director
Transaction Date: 2021-08-04 Shares Bought: 20,090 Average Price Paid: $49.74 Cost: $999,300.00
Company: Golden Entertainment Inc (GDEN)
Golden Entertainment Inc owns and operates a diverse entertainment platform with a portfolio of gaming assets focused on the casino and distributed gaming activities (including gaming in our branded taverns). The company’s portfolio has ten casino sites in Nevada and Maryland. The distribution gaming operations of the company include the installation, maintenance, and operation of slot machines and amusement devices in non-casino locations such as restaurants, bars, taverns, convenience stores, liquor stores, and grocery stores in Nevada and Montana, as well as the operation of branded taverns targeting local patrons in the greater Las Vegas, Nevada metropolitan area. GCI Lakes, Inc. was formed in Minnesota in 1998, and the name was then changed to Lakes Gaming, Inc. in August 1998, Lakes Entertainment, Inc. in June 2002, and Golden Entertainment, Inc. in July 2015.
Terrence L. Wright is a businessman and entrepreneur who created Westcor Land Title Insurance Co., Nevada Title Co., and Service1st Bank of Nevada, among other enterprises. Mr. Wright is now the Chairman of Westcor Land Title Insurance Co., the Chief Executive Officer of Nevada Construction Services, Inc., and the President of Nevada Title Co. Terrence L. Wright is also a member of the boards of Golden Entertainment, Inc. and The UNLV Foundation (where he served as Chairman), as well as the Illinois State Bar Association. He previously served as Chairman of The Nevada Land Title Association, Member of the California State Bar Association, Chairman of the Young Presidents’ Organization, Inc., Chairman of The Las Vegas Global Economic Alliance, Chairman of the Council for a Better Nevada, and Director of Service1st Bank of Nevada. Mr. Wright graduated from DePaul University with a master’s degree and an undergraduate degree.
Opinion: Recessions are not good for gambling stocks. Have you heard that we are headed for a slowdown? The signs are evident everywhere except in the most important thing that matters, jobs.
Name: Douglas R Lebda
Position: Chairman & CEO/10% Owner
Transaction Date: 2023-01-30 Shares Bought: 18,268 Average Price Paid: $38.63 Cost: $705,740.00
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: I’ve got one bet going in online lending, and that’s SoFi with its diversified stream of revenues and its one-stop-shop wooing of millennials and Gen Z. I don’t want to try and guess what’s on Lending Tree’s balance sheet.
Name: Patrick P Gelsinger
Position: CEO
Transaction Date: 2023-01-31 Shares Bought: 9,000 Average Price Paid: $27.83 Cost: $250,449.00
Company: Intel Corp (INTC)
Name: David Zinsner
Position: EVP/CFO
Transaction Date: 023-01-30 Shares Bought: 9,050 Average Price Paid: $27.78 Cost: $251,389.00
Company: Intel Corp (INTC)
Intel provided silicon to Silicon ValleyIntel, and its employees have had a tremendous effect on the world for over 50 years, promoting business and society by producing breakthrough ideas that radically transform lives. Intel is now using its reach, size, and resources to assist its customers in realizing the full potential of digital technology. Work relentlessly to enhance semiconductor design and manufacturing to aid customers in addressing the most urgent difficulties. Integrate intelligence into the cloud, network, edge, and every kind of computing device to unleash what CEO Pat Gelsinger describes as the four superpowers: Al, pervasive connectivity, cloud to the edge, and ubiquitous computing. The four incredible technological developments driving the digitalization of everything are now big business considerations.
Patrick Gelsinger is the CEO of Intel Corporation and a member of its board of directors. Gelsinger returned to Intel on February 15, 2021, where he had worked for 30 years. Before returning to Intel, Gelsinger was the CEO of VMware. He helped VMware become a worldwide leader in cloud infrastructure, corporate mobility, and cyber security while in that post, almost doubling the company’s annual revenues. Gelsinger was chosen the greatest CEO in America in 2019 by Glassdoor, an annual assessment. Before joining VMware in 2012, Gelsinger was president and chief operating officer of EMC’s Information Infrastructure Products business. He supervised engineering and operations for data storage, data computing, backup and recovery, RSA security, and enterprise solutions.
David Zinsner is the executive vice president and chief financial officer of Intel Corporation (CFO). He oversees Intel’s worldwide finance division, which includes finance, accounting and reporting, tax, treasury, internal audit, and investor relations. Zinsner was executive vice president and CFO of Micron Technology Inc. until January 2022, when he joined Intel. During his tenure at the firm, he was a senior leadership team member and was in charge of the global finance organization and investor relations. Zinsner has more than 20 years of financial and operational expertise in the semiconductor, manufacturing, and technology industries.
Opinion: Intel has become a value trap and until its growth trajectory can resume, I wouldn’t expect much here. These are relatively small buys after yet another disappointing earnings announcement.
Name: Barry Sloane
Position: Chairman & CEO
Transaction Date: 2022-21-31 Shares Bought: 13,565 Average Price Paid: $17.93 Cost: $243,184.00
Company: NewtekOne Inc. (NEWT)
NewtekOne Inc is a non-diversified closed-end management investment company that is domestically managed and has decided to be regulated as a BDC under the 1940 Act. The executive officers administer the company’s investing operations, which the Board oversees. The firm’s investment purpose as a BDC is to create both current income and capital appreciation largely via loans generated through the business finance platform, which the company refers to as an “ecosystem,” and equity investments in specific portfolio businesses that the company controls. Furthermore, the firm has built a financial and technology-based business model that allows the company and its managed portfolio businesses to recruit and process SMB customers at a low cost.
Barry Sloane, the founder of Newtek Business Services Corp. and Aegis Capital Markets, Inc., is the Chairman, President, and Chief Executive Officer of Newtek Business Services Corp. and the Chief Executive Officer of Newtek Technology Solutions (a subsidiary of Newtek Business Services Corp.). Mr. Sloane formerly worked as the Senior Vice President of DLJ Real Estate Capital Partners LLC, the President of Aegis Capital Markets, Inc., the Senior Vice President of Credit Suisse (USA), Inc., and the Managing Director of Smith Barney, Inc.
Opinion: As a rule, I don’t like BDCs. They are black boxes that too often turn into black holes. This is a small purchase, borderline painting the tape. Mr. Sloane makes millions running this company. You’d think he would spend millions purchasing the stock near its 52-week lows, but he isn’t.
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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
