I wrote in last week’s blog post, that “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 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.


LJPC La Jolla Pharmaceuticals – Biotech kingpin, Kevin Tang laid out a cool $7.0 million to buy 1,300,000 shares at $5.37. On January 14th, Jeffries analyst, Eun Yang, upgraded LJPC to hold while lowering her price target to $6 from $13.

MDT Medtronic Chairman Ishrak bought 12,000 shares of the giant medical device company at $84.05.  CFO Parkhill also bought 3000 shares at $88.37. Medtronic sold off after a presentation last week at JP Morgan Healthcare conference. This is the kind of blue-chip name we like to buy on weakness when insiders step up to take advantage of the price decline.

LNDC Landec Several insiders purchased $750.0K worth of LNDC at average prices of $11.23-$11.25. Landec is in the process of transitioning from a fresh packaged vegetable company to a branded, natural foods company.

VRCA Verrica Pharmaceuticals Chairman Manning purchased $530.8K at an average price of $10.13. Verrica announced positive topline results from its Phase 3 pivotal trials for the treatment of molluscum contagiosum, a highly contagious skin disease affecting primarily children, with no current FDA approved treatment.

In this report, we examined open market purchases from employees and directors. . 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 from 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 is 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.