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Another week of near-nonexistent insider buying, accompanied by many stocks making 52-week highs or all-time highs.

Harvey Sax

Another week of near-nonexistent insider buying, accompanied by many stocks making 52-week highs or all-time highs.  Beat and raise quarters by Meta, Microsoft, and Amazon pushed the averages higher even with the Fed-dampening interest rate cut expectations and Friday’s blowout job numbers. The market reversed direction Friday and headed higher. Once the rash of normal insider selling after earnings subsides, the market seems higher to me. If it quacks like a duck, walks like a duck, and swims like a duck, it’s a bull market, especially if you own Microsoft, Nvidia, and Amazon.   Apparently, you don’t need insider participation for a bull market, but it sure makes me queasy knowing that all bear markets end when insiders start buying, not selling.  Nonetheless, we have large bets on Mr. Softie and Amazon, clearing lifetime highs in the AI bubble.

 

Name: Ron A. Bloom
Position: Director
Transaction Date: 2024-02-01 Shares Bought: 25,000 Average Price Paid: $20.24 Cost: $506,095
Company: Cleveland-Cliffs Inc. (CLF)

Cleveland-Cliffs, Inc. is North America’s largest flat-rolled steel producer. The company was founded in 1847 as a mine operator and is now North America’s largest manufacturer of iron ore pellets. They are vertically integrated from mined raw materials, direct reduction iron, and ferrous scrap to primary steelmaking and downstream finishing, including stamping, tooling, and tubing. They are North America’s leading steel supplier to the automobile sector, and the broad offering of flat-rolled steel products allows it to serve a wide range of other markets. The company is headquartered in Cleveland, Ohio, and employs about 27,000 people across our activities in the United States and Canada. The large operating footprint gives the operational leverage and flexibility to maintain competitive margins across the business cycle. They also have a unique vertically integrated profile that includes mining raw materials, direct reduced iron, and ferrous scrap, as well as primary steelmaking and downstream finishing such as stamping, tooling, and tubing.

Mr. Bloom is currently Vice Chairman and Managing Partner of Brookfield Asset Management’s Private Equity Group. He is also a partner in Commonweal Ventures, a venture capital firm that invests in early-stage digital startups. Mr. Bloom served on the United States Postal Service’s Board of Governors from August 2019 to December 2021 and was the Board’s Chair during his last year. Mr. Bloom formerly worked as a Vice Chair and Managing Director at Lazard. Before joining Lazard, Mr. Bloom was Assistant to the President for Manufacturing Policy, where he oversaw policy creation and strategic planning for the Administration’s efforts to reinvigorate the manufacturing sector. Before joining the White House, he worked as Senior Advisor to the Secretary of the Treasury, where he assisted in the reorganization of General Motors and Chrysler LLC. Mr. Bloom obtained his undergraduate degree from Wesleyan University and graduated with honors from Harvard Graduate School of Business Administration.

Opinion:  When the Nippon Steel buyout of U.S. Steel hits the regulatory wall, expect Cleveland Cliffs to be the not-so-white knight in suiting. 

Name: Sergio Traversa
Position: Chief Executive Officer
Transaction Date: 2024-01-29 Shares Bought: 100,000 Average Price Paid: $3.87 Cost: $386,738
Company: Relmada Therapeutics Inc. (RLMD)

Name: Chuck Ence
Position: CA and CO
Transaction Date: 2024-01-29 Shares Bought: 38,970 Average Price Paid: $3.87 Cost: $150,920
Company: Relmada Therapeutics Inc. (RLMD)

Relmada Therapeutics, Inc. is a clinical-stage biotechnology firm dedicated to the development of esmethadone (d-methadone, dextromethadone, REL-1017), an N-methyl-D-aspartate receptor antagonist. Esmethadone, a methadone isomer, is a novel chemical entity that has the potential to address significant unmet medical needs in the treatment of central nervous system diseases and other disorders. Their flagship product candidate, esmethadone, is being developed as a fast-acting oral medication for the treatment of depression and other conditions. On October 15, 2019, the company released top-line results from research REL-1017-202. This was a double-blind, placebo-controlled Phase 2 clinical trial to assess the safety, tolerability, and efficacy of two oral doses of REL-1017, 25 mg once a day and 50 mg once a day, as an adjunctive treatment in patients with major depressive disorder who had an inadequate response to 1 to 3 adequate antidepressant treatments with an antidepressant medication.

Sergio Traversa is a businessman who created Medeor, Inc. and has previously led seven other businesses. Dr. Traversa currently serves as Chief Executive Officer and Director of Relmada Therapeutics, Inc. Dr. Traversa has previously held positions such as Independent Director at Actinium Pharmaceuticals, Inc., President, Chief Executive Officer, CFO, and Director at Cactus Ventures, Inc., Chief Executive Officer of Medeor, Inc., Principal at Ardana Capital Management LP, Marketing Manager-Hospital Business Unit at Eli Lilly & Co., Chief Executive Officer & Director at Camp Nine, Inc., and Chief Executive Officer & Director at Relmada Therapeutics. He obtained his undergraduate degree at the University of Turin and his MBA from The Leonard N Stern School of Business.

Charles Ence is the current Chief Accounting and Compliance Officer. From August 2003 to June 2019, Mr. Ence served as Chief Financial Officer/Corporate Controller for New Age Beverages Corp/Xing Beverages, LLC, based in Denver, Colorado. He helped oversee the company’s expansion to 46 states domestically and 10 countries overseas, with sustained growth and profitability during his tenure.  Before joining New Age, Mr. Ence was a senior executive, Planning Manager, and Director of Finance at Quantum Corp. Following Quantum, he worked as the Director of Finance and Investor Relations at On Command Corporation. Mr. Ence started his career with PepsiCo. Mr. Ence worked with PepsiCo for 12 years, rising through the ranks from financial analyst to planning supervisor, planning and analysis manager, and finally controller. He earned a Bachelor of Arts in Business Administration and Accounting from Southern Utah University in 1984 and a Master of Business Administration in Finance from Arizona State University School of Business in 1985.

Opinion: Biotech is having a bit of a merger frenzy. Insider buying is so rare that anything with beta and buying rockets higher.  Buying binary outcomes up 20% on this is not a repeatable recipe for sucess.

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 You can be an insider, too– by clicking here

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,

Harvey Sax
Insomniac Hedge Fund Guy