Insider buying versus selling

The next month will tell everything.  Every meaningful rout in the market has ended when a crescendo of insider buying has restored confidence and validated values.  We are not there yet but the question is will we get there when the 4th quarter blackout period ends.  Right now we are in a period where most insiders are prohibited from buying stock so close to the quarter end. This graph below shows a significant tick up in insider buying, the highest its been in a year but considering how grim the news is, I’d like to see a crescendo of buying and we’re not there yet. Note the graph to the left. The redline is insider buying.

 

 

Buys

MWK Mohawk Industries- Billionaire Director Balaceen continues his accumulation of this global carpet maker buying $28.1 million at $121.11.  He has purchased shares as high as $180 share.

GSAT Globalstar Chairman Monroe bought $55.7 million at $.036 per share.  This stock has been an unmitigated disaster Last year he bought $43.3 million at $1.57.  We see no reason to buy this stock

BRK.A Berkshire Hathaway Inc.  Officer/Dir Jain Ajit, who runs the conglomerate’s insurance business, bought $19.9 million worth of this iconic stock.  Berkshire is a good proxy for the market at large now so this is a very interesting buy.

LGF.A Lions Gate Entertainment Corp Chairman Rachesky continues to buy a falling knife with his purchase $11.1 million worth of this leading movie maker at an average price of $14.23.  This might be good timing as he sold hundreds of millions in 2015 at $31.60.

SGF Scientific Games  and Rev Revlon Billionaire Ronald Perlman added to his losing positions  at SGF with $9.2 million purchase at $15.27 and Revlon with $5.3 million at $23.93. Revlon is acting well as his previous purchase was at $21.06 and $16.87.  We own a little SGF at significantly higher prices.  SGF might be a play on the legalization of online gambling on NFL games which is now legal in NJ as well as Nevada and maybe become legal in many more states. That’s a big untapped market.

CHK Chesapeake Energy Corp- Director Archie Dunham doubles down on this domestic E&P play with a $5.1 million purchase at average price of $2.12.  We like natural gas plays but it will require some more analysis as CHKP has diversified into oily liquids like crude in recent years and oil is plunging in price. A Total of 5 insiders bought $5.9 million worth of stock last week.

PAH Platform Specialty Products Corp.  Chairman Franklin bought $3.8 million at $10.95.  There has been consistent insider buying in this specialty chemical products company. It operates through two segments, Performance Solutions and Agricultural Solutions. The Performance Solutions segment offers a range of specialty chemicals, such as surface and coating materials, functional conversion coatings, electronic assembly materials, water-based hydraulic control fluids, and photopolymers. The Agricultural Solutions segment engages in the development, formulation, registration, marketing, and distribution of crop protection solutions, including BioSolutions products and seed treatments for various crops and applications.

GMS GMS Inc.  Dir Ross bought $3.1 million of this wallboard, suspended ceilings systems, and related construction products company.

DOVA Dova Pharmaceuticals 5 insiders bought $2.9 million of this plunging specialty pharmaceutical manufacture after the CEO and Chief Commercial officer were terminated.  On December 17th, Dova Pharmaceuticals (DOVA) announced that David Zaccardelli has been appointed president and CEO. Zaccardelli brings specialty pharmaceutical executive leadership and operational expertise, including most notably, serving in several senior management roles at United Therapeutics (UTHR). In addition, Jason Hoitt, a seasoned pharmaceutical sales and marketing executive, joins Dova as CCO. Alex Sapir, the company’s prior president and CEO, is no longer president and CEO, effective as of December 16. 

Sales

Nothing too out of the ordinary showed up last week in sales.  It’s become increasingly difficult to read the tea leaves regarding the $ millions of dollars of sales every week due to the proliferation of the Sarbanes Oxley era loophole of 10b5-1 trading plans. The notable exceptions are as follows:

HMSY HMS Holdings Corp 5 insiders sold a combination of stock and exercises worth $18.4 million stock at prices from $34.21 to $35.25. HMS Holdings Corp., through its subsidiaries, provides cost containment solutions in the United States healthcare marketplace. It provides coordination of benefits services to government and commercial healthcare payers.

RAMP LiveRamp Holdings Inc.  3 insiders sold $1.8 million of stock at prices from $43.46-$44.40. LiveRamp Holdings, Inc. provides identity and data connectivity for powering exceptional customer experiences. The company offers IdentityLink, an identity resolution platform that connects people, data, and devices across the physical and digital world, powering privacy-compliant, people-based marketing that allows consumers to better connect with the brands and products they love.

TPC Tutor Perini 3 insiders sold $1.4 million worth of stock. The largest being, the Chairman, who sold 75,000 shares at $16.13.Tutor Perini Corporation, a construction company, provides diversified general contracting, construction management, and design-build services to private customers and public agencies worldwide. .

In this report, we examined open market purchases from employees  and directors ending the week of October 5 2018. Insiders sell stock for many reasons, but they generally buy for just one – to make money.  As a standard, we only look at material amounts of money, $200 thousand or more, as anything less could just be window dressing. The bar is different with selling, because the natural state of management is to be sellers. This is because most companies provide significant amounts of management compensation packages as stock. Therefore, with selling, we analyze for unusual patterns, such as insiders selling 25 percent or more of their holdings or multiple insiders selling near 52 week lows.Another red flag are large planned sale programs that start without warning. We generally ignore 10 percent shareholders as they tend to be OPM (other people’s money) and not the SMART money we are trying to go to school on.  Although this info is available for free from the SEC’s Web site , Edgar, we subscribe to the Washington Service as they provide a way to manage and make sense of the vast realms of data.
To learn more about our strategy, visit our website here. We welcome your comments on our analysis. We may own positions, long or short, in any of these names and are under no obligation to disclose that.