Insider buying and selling week ending 3-1-19
Insider buying and selling week ending 3-1-19

In this report, we examine 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.

With earnings season largely over, the hopes of a tsunami of insider buying are gone.  Instead, insiders sold the market at a furious pace. Last week, at least showed a glimmer of a rebound as indicated in the graph above supplied by The Washington Service.

There were few buys last week of any interest.  10% shareholders adjusted their holdings but the only purchases of interest by directors and officers of any companies are outlined below. Normally we exclude buys and sells from 10% shareholders as they generally reflect other people’s money, not the insider management we like to take clues from. The two exceptions were John Paulson’s purchase of $206.3 million of BrightSphere Investment Group and Elliotts International’s purchase of $245.6 million of RoadRunner Transportation Services.  RoadRunner is a large trucker, now 90% owned by Elliott.  BrightSphere is a publicly traded fund of funds hedge fund. We don’t see anything particularly interesting about these investments other than the purchasers themselves.

Buys

KMI Kinder Morgan Founder and Chairman of the Board, Richard Kinder, continues to add to amass shares of his namesake, KMI, purchasing 2,699,304 shares at an average prices of $18.1362 tp $19.33.  Although inconsequential when you own 248 million shares of KMI, the consistency;week-in and week-out buying is highly unusual. These purchases were made near a 52 week high which makes them unusual as insiders tend to buy closer to a 52 week low than its high.

CLR Continental Resources  Harold Hamm, the Chairman, bought 883,977 shares at $44.49 spending $39.3 million to add a small percentage to his holdings of this Bakken oil play.
DVN Devon Energy Dir Henry bought $349.6k of this E&P company after it had multiple downgrades.  It’s been a tough 12 months for energy stocks and they are beginning to attract some buyers.
INVA Innoviva Inc.  Director Bickerstaff bought 15,000 shares at $15.90. Innoviva, Inc. engages in the development and commercialization of pharmaceuticals. The company has long-acting beta2 agonist (LABA) collaboration agreement with Glaxo Group Limited to develop and commercialize once-daily products for the treatment of chronic obstructive pulmonary disease and asthma. Its products include RELVAR/BREO ELLIPTA, a once-daily combination medicine consisting of a long-acting beta2 agonist (LABA), vilanterol (VI), an inhaled corticosteroid (ICS), and fluticasone furoate
COT Cott Corp Three insiders purchased $1.5 million worth of stock. CEO Harrington purchased 33.560 at $14.87, Officer Hinson bought 51.405 shares at $14.88, and Director Stanbrook bought 13,500 at $14.77. Cott Corporation, together with its subsidiaries, operates as a route based service company in North America and Europe. It operates in three segments: Route Based Services; Coffee, Tea and Extract Solutions; and All Other.
Mat Mattel Inc.  Three insiders bought $1.7 million worth of the toymaker and maker of Barbie. The Chairman bought $1.0 million at $14.02, Director Dolan bought 30,000 at $13.96, and the CFO purchased 20,000 at $13.96.  Mattel dropped 15% on February 14th on downbeat guidance.
BHC Bausch Healthcare Chairman of the Board, Joseph Papa bought 30,000 shares at $23.67 of controversial pharmacy company. Insiders have been steady buyers in spite of Wall Street analyst critics. Wells Fargo analyst David Maris on February 20th said Bausch Health’s Q4 results and 2019 outlook further support his negative outlook on the shares. The analyst keeps an Underperform rating on the name with a $9 price target.
GOGO Gogo Inc. Director Towsend buys $1.2 million worth of this ubiquitous airplane wi-fi provider at $4.36 per share. Insiders have been steady buyers of this money-losing company.  Their buys have yet to provide profits to investors following them.
CAI CAI International  CB Myers bought 10,608 at $22.24. CAI fell 12.9% on Q4 earnings. Keefe Bruyette analyst Michael Brown downgraded CAI International to Market Perform and lowered his price target for the shares to $29 from $34. The analyst says he’s moving to the sidelines following CAI’s sales miss in Q4.
Sales

Insiders always find ways to sell with  “planned sales” which in reality is just a legal loophole around the SEC restrictions on insider selling during earnings blackout periods.  Some of the more notable ones are described below.

ROG Rogers Corp  Eight insiders took advantage of 52-week high price of Rogers to unload $4.5 million worth of stock. Rogers Corporation designs develops, manufactures, and sells engineered materials and components worldwide. It operates in Advanced Connectivity Solutions (ACS), Elastomeric Material Solutions (EMS), Power Electronics Solutions (PES), and Other segments.

Needham analyst Sean Hannan raised his price target on Rogers Corp to $155 and kept his Buy rating after its “healthy beat” on Q4 earnings. The analyst also maintains his view that the company is “uniquely poised for notable multi-year themes through Advanced Driver Assistance Systems, electric vehicle, and 5G” technologies and expects revenue growth and margin expansion to accelerate later in 2019.  Since insiders were selling at $155, it’s hard to argue with their inclination to sell.

 

FIVN Five9, Inc.  Six insiders sold $8.7 million worth of stock at prices near $53 per share. We evaluated this company’s software to use for our own marketing needs when it was trading close to $5 per share and elected not to go with it.  In hindsight what a screw up this was. I mean, forget the software, buy the stock. Everything cloud-based including cloud-based telephony ( which is not even a new idea) has gotten stratospheric.  To say that the cloud is a bubble investment is to state the obvious. The granddaddy of all bubble clouds is Salesforce CRM.

CRM Salesforce Insiders continue to print stock options and unload them to the public. This last week, another $19.1 million was sold to the clamoring hordes of investors eager to buy CRM’s lofty stock price.  One day soon, investors will see the emperor has no clothes.  Salesforce is pretty much the inventor of cloud SAS software and has inspired a slew of competitors.  We just switched to Capsule CRM for a fraction of the price with better integration into G-Suite and far simpler interface.  It takes a long time for bubbles to burst, but everything cloud now is in bubble territory.  When everyone has ported their apps to the cloud, there is no longer any differentiation and you have to compete on functionality, price, and ease of use.  Salesforce may lead functionality but it flunks on price and ease of use.  We will get to see this Tuesday when they report earnings if they are showing any of the inevitable slow down in growth, that we are convinced is coming. We are short this name but don’t have much conviction as the foolishness of crowds can last a long time.  As Bernard Baruch, quoted “the market can be irrational longer than you can be solvent”.

ES Eversource Energy Six insiders sold $7.5 million worth of this $22 billion market cap utility company serving 226,000 customers. It serves residential, commercial, industrial, municipal, fire protection, and other customers in Connecticut, Massachusetts, and New Hampshire, the United States. Whoever said utility stocks can be boring. This company has soared nearly three times in price since 2009. With a current yield of 3.07%, it seems hardly worth buying when you can pick off Dominion Energy where insiders are buying and yielding 4.58%.

BRC Brady Corp Six insiders took advantage of lifetime high prices by selling $2.9 million worth of stock options with an average life of 6 years left on them.  Brady Corporation manufactures and supplies identification solutions (IDS) and workplace safety (WPS) products to identify and protect premises, products, and people in the United States and internationally.

Not much here as Brady seems like a decent company more or less overvalued with the market at large.

W Wayfair Five insiders sold $17.1 million worth of Wayfair.  Wayfair has skyrocketed four hundred percent since 2016.  It may simply be a case of insiders taking advantage of outrageous overvaluation.

EL Estee Lauder Companies, Inc. Four insiders sold $73.3 million worth of stock including the Chairman of the Board selling $ 1 Million at $158.45.

 

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.