Last week pretty much heralded the end of the bear market. True, long-lasting bull markets start with a plethora of insider buying. That’s obviously not happening. I’m trying to figure out what that means. Every significant market correction ended with a near explosion of the insider buying versus selling ratio going vertical. Right now, insiders are cautious. I think we should be too. That doesn’t mean there won’t be anomalies.
Name: John H Stone
Position: President and CEO
Transaction Date: 2023-07-27 Shares Bought: 17,500 Average Price Paid: $116.62 Cost: $2,040,892
Company: Allegion plc (ALLE)
Allegion plc, a leading global supplier of security products and services, guarantees that people, property, and livelihoods are safe and secure wherever they live, work, and flourish. To achieve seamless access and a safer world, the company pioneered safety and security, providing consumers with peace of mind. Seamless access, which permits authorized, automated, and safe transit and movement, offers the most effective and frictionless mobility between sites and regions. Ecosystem growth and cooperation are critical components of giving a perfect experience and allowing the continuous and safe movement of people and things. The company offers diverse market-leading brands and a big and customizable portfolio of security and access control systems and solutions.
John H. Stone is now Allegion Plc president, chief executive officer, and director. Mr. Stone formerly held the post of President-Global Construction & Forestry at Deere & Company. He graduated from the US Military Academy with a bachelor’s degree and earned an MBA from Harvard Business School. Prior to joining Deere & Company, John worked as a Six Sigma Black Belt quality engineer for General Electric and was a U.S. Army infantry officer.
Opinion: This is a healthy buy by a very competent-looking CEO. It’s his second purchase, the earlier one being in October last year doe 12,500 shares at $104.45. Its all electronics, electronics, electronics. The CEO gets it and is leading a long run way transformation turning this access/lock giant into the digital world. They made what looks like a transformational acquisition when they bought Stanley Access Technologies LLC (“Access Technologies”) and assets related to the automatic entrance solutions business from Stanley Black & Decker, Inc. (NYSE: SWK) for $900 million in cash. I don’t like the fact they are domiciled in Ireland which makes them vulnerable to tax haven risks.
Name: Thomas J Kelleher
Position: Co-CEO
Transaction Date: 2023-07-26 Shares Bought: 9,090 Average Price Paid: $55.00 Cost: $499,950
Company: B. Riley Financial Inc. (RILY)
Riley Financial Inc. offers investment banking, brokerage, wealth management, asset management, direct lending, business advisory, valuation, and asset disposition services to a wide range of clients, including public and private companies, financial sponsors, investors, financial institutions, legal and professional services firms, and individuals. The Company invests in and purchases companies or assets with attractive risk-adjusted return profiles to benefit its shareholders. The Company owns and runs several unconnected consumer businesses and makes large brand investments. The Company’s strategy is focused on high-quality firms and assets in sectors where the Company has extensive experience and can use that knowledge to boost operational efficiency and optimize free cash flow. Employees across disciplines often leverage their financial, restructuring, and operational skills in the Company’s direct investments.
Tom Kelleher has been a board of directors member since October 2015 and the Co-Chief Executive Officer since July 2018. From August 2014 until July 2018, he also served as President. Kelleher formerly held the post of Chief Executive Officer of B. Riley & Co., LLC from 2006 until 2014. From the firm’s inception in 1997 through 2006, Kelleher held several high executive roles, including Chief Financial Officer and Chief Compliance Officer. From October 2015 until June 2017, Kelleher sat on the board of directors of Special Diversified Opportunities Inc. Lehigh University awarded him a Bachelor of Science in Mechanical Engineering.
Opinion: B. Riley looks like the rock n’ roll boutique investment banks from the 1980’s like an Alex Brown or H&Q. Not sure this is the right model for today but insiders are aggressive buyers and I like their confidence.
Name: Dustin A. Moskovitz
Position: President, CEO, & Chair/10% Owner
Transaction Date: 2023-07-26 Shares Bought: 160,000 Average Price Paid: $22.48 Cost: $3,596,189
Company: Asana Inc. (ASAN)
Asana is a work management tool that assists organizations in orchestrating work ranging from everyday chores to cross-functional strategic projects. Asana is used by over 139,000 paying clients to manage anything from product launches to marketing campaigns to company-wide goal setting. The platform structures unstructured work, providing clarity, transparency, and accountability to everyone in an organization—individuals, team leaders, and executives—so they know who is doing what and by when. The Asana was founded after seeing firsthand the rising issue of work around work. They saw the coordination issues that Facebook encountered as it grew. Instead of working on projects that produced results, they spent their time in status meetings and extensive email threads attempting to determine who was in charge of what. The company mission is to help humanity thrive by enabling the world’s teams to work together effortlessly.
Dustin Moskovitz is the co-founder and CEO of Asana. Dustin is the CEO of Asana and is committed to delivering a product that enables teams all around the globe to interact seamlessly, as well as driving the company’s award-winning culture. Dustin co-founded Facebook and served as the company’s first Chief Technology Officer and VP of Engineering before launching Asana. Dustin studied economics at Harvard University before joining Facebook full-time in 2004.
Opinion: Moskovitz keeps buying and if they can continue the ARR and net retention roll they are on, the stock will eventually work.
Name: Paul B Manning
Position: Director/10% Owner
Transaction Date: 2023-07-24 Shares Bought: 200,000 Average Price Paid: $5.02 Cost: $1,004,000
Company: Verrica Pharmaceuticals Inc. (VRCA)
Verrica Pharmaceuticals Inc. is a dermatological pharmaceutical firm that creates drugs for skin conditions that need medical attention. The company’s primary emphasis was developing clinician-administered medicines in areas with a significant unmet need. Three product candidates are currently in the pipeline: (i) VP-102, a proprietary drug-device combination containing a GMP-controlled formulation of cantharidin that is being developed for potential use in the treatment of molluscum contagiosum, external genital warts, and common warts, (ii) VP-315, an oncolytic peptide-based injectable therapy for the potential treatment of dermatology oncologic conditions, including basal cell carcinoma, and (iii) VP-103 a second cantharidin based drug device combination for the potential treatment of plantar warts.
Mr. Manning has been a Verrica Pharmaceuticals Board of Directors member since December 2015 and has served as Chairman since December 2017. He is the Chairman and CEO of PBM Capital Group, LLC, a private equity investment business focusing on healthcare and life sciences that he formed in 2010. Mr. Manning previously started PBM Products in 1997, a manufacturer of infant formula and baby food, which he sold to Perrigo Corporation in 2010. He has served on the boards of directors of Perrigo Corporation, Concordia Healthcare Corporation, AveXis, Inc., and Dova Pharmaceuticals, Inc. Sobi acquired this publicly listed pharmaceutical business. Mr. Manning earned his bachelor’s degree in microbiology from the University of Massachusetts.
Opinion: I’ not excited about the wart business.
Name: Ruben S Martin
Position: Director/10% Owner
Transaction Date: 2023-07-21 Shares Bought: 333,159 Average Price Paid: $2.20 Cost: $731,435
Company: Martin Midstream Partners L.P. (MMLP)
Martin Midstream Partners L.P. offers petroleum product and byproduct terminalling, processing, Storage, and packaging services, mainly in the United States. Terminalling and Storage, Transportation, Sulphur Services, and Natural Gas Liquids are the company’s four business segments. Terminalling and Storage is the company’s segment that owns or operates 14 maritime shore-based terminal facilities and 13 specialized terminal facilities that offer Storage, refining, blending, packaging, and handling services to manufacturers and suppliers of petroleum products and byproducts. This division also provides land leasing services to oil and gas industries, lubricant, fuel storage, and handling. Its Transportation business transports petroleum products, byproducts, petrochemicals, and chemicals with a fleet of 700 vehicles and 1,200 tank trailers, 27 marine tank barges, 15 inland push boats, and one articulated offshore tug and barge unit.
Ruben S. Martin is the general partner’s Chairman of the Board and Director. Mr. Martin was the Partnership’s President, Chief Executive Officer, and Director from 2002 until 2020. Mr. Martin has been President and Chairman of the Board of Directors of Martin Resource Management Corporation since 1981, and he has served in several other roles since 1974. Mr. Martin graduated from the University of Arkansas with a bachelor’s degree in Industrial Management.
Opinion: Better names in the midstream business for your dollars.
Name: DeMichele Michael, Farhad Nanji
Position: 10% Owner
Transaction Date: 2023-07-26 Shares Bought: 7,105,388 Average Price Paid: $0.61 Cost: $4,361,239
Company: Yellow Corp. (YELL)
Yellow Corporation is a holding corporation that provides various transport services to its consumers. The firm operates one of North America’s biggest and most extensive less-than-truckload (“LTL”) networks, with local, regional, national, and international capabilities. The Company provides a comprehensive range of transportation services for industrial, commercial, and retail items in national, regional, and international markets, principally by operating owned or leased equipment in its North American ground distribution network. Transportation services include clothing, appliances, automobile parts, chemicals, food, furniture, glass, machinery, metal, non-bulk petroleum, rubber, textiles, wood, and other manufactured products or components. The Company offers LTL and truckload services, which aggregate shipments from many clients on a single trailer.
MFN Partners Management, co-founded two years ago by Michael DeMichele, a former partner at Baupost Group & hold 10% stock ownership of yellow corp. Farhad A. Nanji established MFN Partners Management LP. Mr. Nanji serves on the Private National Mortgage Acceptance Co. LLC boards and PennyMac Financial Services, Inc. He formerly worked as an Engagement Manager at McKinsey & Co., Inc., as Managing Director at Highfields Capital Management LP, and as an Associate at HighVista Strategies LLC. He obtained his undergraduate degree from McGill University and MBA from Harvard Business School.
Opinion: Hedge fund doubling down on a difficult situation as YELL aims to sell off its profitable third party logistics firm, Yellow Logistics while bankrupting the corporate parent under the burden of labor wars with the Teamsters. Beyond my pay grade to figure this one out.
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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 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 a 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, are horrendously poor. Also, planned sales that pop up out of nowhere are basically sales and are seeking cover under this corporate welfare loophole. I also generally ignore 10 percent shareholders as they tend to be OPM (other people’s money) and perhaps not the smart money on which we are trying to read the tea leaves. I say generally because some 10% shareholders are great investors. Think Warren Buffett, Icahn, and others
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.
A big callout to my assistant Ambreen who sets up this conversation by listing the notable buys that I’ve identified. She probes the 10k for a reasonable description of the business. I’ve found that to be the most accurate and succinct place to find out what a business actually does. The websites and marketing material are just that, poorly disguised marketing material for many. I should know that better than most if you at my past involvement in building the 1st websites for many Fortune 500 companies.
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.
This blog is solely for educational purposes and the author’s own amusement. Don’t rely on this blog. Think of the blog as part of my personal investment journal that I am willing to share with the DIY investor. We welcome your comments on our analysis, but please do your own research. Investing with The Insiders Fund is for qualified investors and by Prospectus only. Nothing herein should be construed otherwise. THE INSIDERS FUND prefers to invest in companies at or near prices that management has been willing to invest significant amounts of their own money in, but we have no requirement to do so. We also invest in many companies in anticipation of future insider buying or with the expectation that there is none at all.
You can be an insider, too– by clicking here
Prosperous Trading,
