You can’t say you were not warned. I’ve been clear with my thoughts about the misguided policy of the Federal Reserve raising rates to thwart inflation. Chairman Powell morphed chameleon-like into a new version of Paul Volker, a Paul Volker light at Jackson Hole in August 2022. He set the global economy on a tightening course that is academically correct but economically wrong. Reference this post from Insider Buying Week 8-26-22 Jerome Powell Debuts at Jackson Hole as “ChuckyIt was a blood-red day on the map of the market. As I wrote then, it’s true now.
We have spent all of man’s history on a quest for energy. Electricity demand is unsatiable. It only goes in one direction, up, and it’s accelerating. It may take hundreds of years or a millennium to wean off hydrocarbons in a meaningful way. After all, man began burning wood and coal to stay warm in caves.
Being green and made in America isn’t going to be cheap or quick. Slowing down demand from interest rate hikes will be a painful way to address supply shocks. Raising the cost of capital with interest rate hikes increases the cost of everything. It’s not only possible but likely to have super spikes on the way to cleaner and more sustainable energy. If you don’t explore for more oil and gas, you won’t get any more. Rising interest rates, ESG, and Government incentives can cause this. Technology may save us, but the Federal Reserve is making the cost of scientific breakthroughs more expensive, not less.
Inflation is going to be systemic for a while for the following reasons.
- Reshoring or nearshoring for geopolitical reasons will drive up the cost of many goods until new supply chains are established. Prices will inevitably stabilize, but the timing is uncertain. Zeihan has got it right in his best-selling book, The End of the World is Just the Beginning.
- Decarbonization is incalculably expensive. The world has had an unquenchable thirst for energy since cavemen. That will not change; it will be a long and expensive path to net zero carbon.
Insiders are buying very little. Almost all Form 4 activity is hedge funds and 10% owners. This is other people’s money, and we don’t put the same gravitas as a CFO or a CEO ponying up large amounts of their own money. With risk-free returns likely above the inflation rate, many stocks are overvalued. It shows in this week’s slim pickings too.
This market is hard. Stay with us. You need insiders to illuminate the way through this darkness. You can be an insider, too– by clicking here
Name: Donald W Duda
Position: Chief Executive Officer
Transaction Date: 2023-09-21 Shares Bought: 23,245 Average Price Paid: $21.80 Cost: $506,636
Company: Methode Electronics Inc (MEI)
Methode Electronics Inc. is a global leader in bespoke engineered solutions, with sales, engineering, and production facilities in North America, Europe, the Middle East, and Asia. They design, build, and manufacture mechatronic devices for Original Equipment Manufacturers, leveraging their diverse technology portfolio for user interface, light-emitting diode lighting systems, power distribution, and sensor applications. Transportation (including automotive, commercial vehicle, e-bike, aerospace, bus, and rail), cloud computing infrastructure, construction equipment, consumer appliances, and medical devices are among the end markets for the products. The company is handled, and its financial results are disclosed in four segments: automotive, industrial, interface, and medical.
Mr. Duda has been Methode’s Chief Executive Officer since May 2004 and President since 2001. Mr. Duda joined the Company in March 2000 as Vice President of Interconnect Products Group. Before joining Methode, Mr. Duda worked for Amphenol Corporation, a manufacturer of electrical connections, most recently as General Manager of its Fibre Optic Products Division from 1988 to November 1998.
Opinion: Duda is going out with a dump and not a bump. Methode Electronics announced that Donald Duda, president and CEO, will retire from Methode. He will continue to lead the company until a successor has been named and will work with the new CEO through a transition period.
Name: joey Agree
Position: President & Ceo
Transaction Date: 2023-09-26 Shares Bought: 10,000 Average Price Paid: $56.10 Cost: $561,000
Company: Agree Realty Corp (ADC)
Name: John Jr Rakolta
Position: Director
Transaction Date: 2023-09-26 Shares Bought: 20,000 Average Price Paid: $55.73 Cost: $1,114,600
Company: Agree Realty Corp (ADC)
Agree Realty Corp is a fully integrated real estate investment trust that focuses on owning, acquiring, developing, and managing retail properties net leased to top-tier tenants in the industry. Richard Agree, the company’s current executive chairman, founded it in 1971, and its common stock debuted on the New York Stock Exchange in 1994. The Operating Partnership, in which the Company is the sole general partner and owns a 99.5% common interest as of December 31, 2021, is where all of the Company’s assets are maintained, and its activities are carried out directly or indirectly. According to the Operating Partnership’s partnership agreement, the Company is in charge of and fully controls how the Operating Partnership operates.
Joey Agree was designated President and chief operating officer in 2009 and Chief Executive Officer in 2013. Mr. Agree was selected EY’s 2018 Entrepreneur of the Year in the Michigan and Northwest Ohio Region. Joey Agree received a BA in Political Science from the University of Michigan and a Juris Doctorate from Wayne State University Law School, where he was named a Dean’s Scholar. He is a member of the State Bar of Michigan, the Young Presidents’ Organisation (YPO), the Urban Land Institute (ULI), the International Council of Shopping Centres (ICSC), and the National Association of Real Estate Investment Trusts (NAREIT). He has spoken on various commercial real estate panels and in interviews nationwide.
Ambassador Rakolta formerly served on the Board from August 2011 to September 2019, when he was appointed US Ambassador to the UAE. Before his confirmation, Mr. Rakolta was the chairman and CEO of Walbridge, a privately held construction company. Mr. Rakolta is a member of the Metropolitan Affairs Corporation and the Coalition for Detroit School Children. He is a director and member of the Executive Committee of the Detroit Regional Chamber and a member of the boards of directors of New Detroit, Inc., the College for Creative Studies, and Business Leaders for Michigan. Mr. Rakolta was appointed Honorary Consul General of Romania to the United States in 1998. Marquette University awarded him a Bachelor of Science in Civil Engineering in 1970.
Opinion: This is a tried and true way to earn money from Triple-A Net leases. Agree Realty’s 2023 Q2 earnings report shows that 99.7% of its portfolio is leased under triple net leases. According to BARD,67.9% of its annualized base rents are generated from investment-grade retail tenants. Investment grade companies have a credit rating of BBB- or higher from Standard & Poor’s or Baa3 or higher from Moody’s Investors Service. I like it, and when rates come back down to earth, which they will, this and other rate-sensitive stocks will soar. ADC is currently yielding 5.3%, very close to the 2 YR Treasury. When interest rates fall back to earth, ADC will look very pretty. I’d start buying now.
Name: Richard N Massey
Position: Chief Executive Officer
Transaction Date: 2023-09-26 Shares Bought: 50,000 Average Price Paid: $18.66 Cost: $933,200
Company: Cannae Holdings Inc. (CNNE)
Cannae Holdings Inc. primarily acquires stakes in operating firms and actively manages and operates a core group of those companies they are committed to supporting in the long run. The company also wants to take major equity ownership holdings in firms where they have the potential to manage or significantly affect quality and bring the strength of their operational knowledge to each of our subsidiaries. They are a long-term owner who gains control and governance rights of other firms primarily to engage in their lines of business, and they have no time limitations in determining when to sell or dispose of their enterprises. Their long-term ownership and active involvement in company management and operations help maximize the value of those enterprises for the shareholders.
Rick Massey is the CEO of Cannae Holdings, Inc. and a member of the Cannae Holdings board of directors. Mr. Massey most recently partnered with Westrock Capital Partners and Bear State Advisors, both multifamily investment firms. From January 2006 to January 2009, Mr. Massey was Chief Strategy Officer and General Counsel of Alltel Corporation, the fifth-largest wireless provider in the United States. Mr. Massey previously worked as Managing Director of Stephens Inc., a private investment bank, from 2000 to 2006, during which time his financial consulting practice focused on software and information technology companies. Mr. Massey is also a director of Cannae portfolio firms Dun & Bradstreet Corporation and Alight, Inc. Mr. Massey previously served on the boards of Fidelity National Financial, Black Knight, Inc., Fidelity National Information Systems, and FGL Holdings. He also serves as a director of the Oxford American Literary Project and Chairman of the Arkansas Razorback Foundation.
Opinion: Related party lawsuits and a group of so-so companies, Restaurant Group, Dun & Bradstreet, Paysafe, Alight and Sightline, what’s there not to like?
Name: Dale Andres
Position: Chief Executive Officer
Transaction Date: 2023-09-26 Shares Bought: 50,000 Average Price Paid: $5.40 Cost: $270,000
Company: Gatos Silver Inc. (GATO)
Gatos Silver Inc. is a precious metals exploration, development, and production business based in Canada to become a top silver producer. They were created on February 2, 2011, when the predecessor, Precious Metals Opportunities LLC, transitioned to a Delaware corporation from a limited liability company in December 2009. Sunshine Silver Mines Corporation was formed on March 1, 2011, when Los Gatos Ltd. combined with and into them. Sunshine Silver Mining & Refining Corporation was established in 2014. In October 2020, they completed their initial public offering, part of which allocated to the stockholders their equity stake in Silver Opportunity Partners LLC, which owned their investment in the Sunshine Complex in Idaho and changed the name to Gatos Silver, Inc. The company’s principal focus is on the operation of the LGJV in Chihuahua, Mexico.
Dale Andres, Chief Executive Officer, joined GSI in 2021 and has more than 30 years of expertise in the resource industry. Mr. Andres is currently the Chief Executive Officer of the Company’s wholly-owned Mexican subsidiary, Minera Luz del Sol. Mr. Andres formerly worked at Teck Resources Limited as Senior Vice President, Base Metals Senior Vice President, Copper; Vice President, Copper Strategy and North American Operations; Vice President, Gold and International Mining, and General Manager of Underground Mines. Dale Andres earned his bachelor’s degree from Simon Fraser University and a master’s from Queen’s University.
Opinion: A speculative Canadian mining company. This is the perfect definition of how to make a small fortune in the stock market, start with a large one.
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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 with any stock market experience 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 of 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, we analyze unusual patterns with selling, 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 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.
This blog is solely for educational purposes and the author’s own amusement. Think of the blog as part of my personal investment journal that I am willing to share with the DIY investor. There are also many parts that I am not willing to share if I think it could influence trading action or be detrimental to the Fund’s partners. We could be long, short, or have no position at all in any of the stocks mentioned and express no written or implied obligation to disclose any of that.
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,
