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 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.

Instead of a crescendo of buying, we saw the reverse, a stunning drop in buying. Even with the blackout, insiders could rush a buying plan into effect (Rule 10b5-1) just as they do with sales. Instead, they have folded.  The saving grace, though, is they are not rushing into selling, either.


SGM Scientific Games- Billionaire Chairman of the Board, Ronald Perlman, shows conviction, dropping a cool $21.0 million on 1,300,000 shares at an average price of $16.12

PSEC Chairman Barry bought $13.0 million at $5.90per share.  PSEC yields 11.25% at Monday’s close. PSEC is a mezzazine loan hedge fund.

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.