I am dismayed by the lack of animal spirits. We are now two weeks into the earnings season and I see no pick up in insider buying. In fact, there is a substantial drop in buying.  Insiders find ways to sell with their so-called “planned sales” which in reality is just a legal loophole around the SEC restrictions on insider selling during earnings blackout periods.

Buys

FSK FS KKR Capitol Corp – Officer Daniel Pietrzak purchased 50,000 shares on 1/17/18 at $5.88 per share.  This increased his holdings by 141.9%.

Daniel Pietrzak is a Member of KKR and a portfolio manager for KKR’s private credit funds and portfolios. His is a member of the Global Private Credit Investment Committee, Europe Direct Lending Investment Committee and KKR Credit Portfolio Management Committee.

Prior to joining KKR, Mr. Pietrzak was a managing director and the co-head of Deutsche Bank’s structured finance business across the Americas and Europe. Previously, he held various roles in the structured finance and credit businesses of Societe Generale and CIBC World Markets. He started his career at Price Waterhouse in New York and is a CPA.

Mr. Pietrzak holds an MBA in Finance from the Wharton School of the University of Pennsylvania and a BS in Accounting from Lehigh University.

Suffice it to say, Mr. Peitrzak knows a thing or two about the contents of the portfolio. FSK is a high yield closed in fund offered by KKR yielding over 11% as of Friday’s close. FSK is a publicly traded business development company (BDC) focused on providing customized credit solutions to private middle market U.S. companies. They invest primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market U.S. companies to achieve the best risk-adjusted returns for our investors.

We like this security as it is trading substantially below its net asset value and KKR is one of the largest managers in the country of mezzanine debt.

Sales

HDS HD Supply Activist investment firm Jana Partners (TradesPortfolio) disclosed on June 27 it trimmed its stake in HD Supply Holdings Inc. (HD) by 24.33%.

The New York-based investment firm, which was founded in 2001 by Barry Rosenstein, picks stocks using a value-oriented, event-driven approach, meaning it will push management to make changes in order to improve performance.

According to GuruFocus real-time picks, Jana sold 2.2 million shares of Atlanta-based HD Supply for an average price of $43.37 per share. It now holds 6.8 million shares, which represent 9.15% of the portfolio.

GuruFocus data reveals the firm has made an estimated gain of 21% on the investment since the first quarter of 2016.

VMW VMWARE VP Maurizo sold 36,848 shares at $146.79, 31.8% of his holdings. Morgan Stanley Analyst Keith Weiss downgraded VMware to Equal Weight from Overweight after its P/E multiple expanded nearly 50% to be in line with peers, which he believes fully reflects the company’s recent fundamental outperformance.

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.