Another dull week for insider buying but not the market. Markets have the worst week of the year.  This hardly comes as a surprise as insiders are an endangered species, the lowest ratio of buying on record according to the Washington Service.  A word to the hopeful, there is always something to buy but expect it to be painful.   The pharmaceutical giant has seen its price plummet since announcing the purchase of Allergan.

Abbivies’s #1 drug, Humira, is coming off patent.  Humira is the brand name of the biologic medicine adalimumab and was first approved for the treatment of rheumatoid arthritis in the US in 2002 and in the EU in 2003. With close to 20 billion US$ in sales in 2018 Humira is the world’s best-selling drug. It accounts for 70% of AbbVie’s total turnover. It is, therefore, no surprise that the company fiercely protects its market monopoly. AbbVie built a web of patents and other exclusivities around the product to keep competitors at bay. Their seeming answer to the patent challenge,  buy Allergan, the company behind Botox and other medicines.

Pharmaceutical stock have been laggards.  So much so that ABBV sports at 6.5% dividend.   Three insiders bought about $6.2million worth of the stock last week.  If the company can show that it can stabilize revenue and profit margins, price appreciation of 10-15% and dividends should easily produce a 20% annualized return. Be prepared for headline risk as drug companies seem to be on every candidate’s whipping boy list. Insiders have sold a ton of ABBV stock over the years.  These recent insider buys are the first time insiders have bought stock in a year.  Not surprising since the stock has declined 25% since those purchases.  ABBV stock was as high as $120 in March of 2018.

Company Insider Relation Type Shares Price Mkt Val Ending % Chng
AbbVie Inc Austin Roxanne Schuh Dir Purchase 10,000  $66.35  $663,500 62,114 19.2%
AbbVie Inc Gosebruch Henry O VP Purchase 30,000  $67.28  $2,018,385 78,039 62.4%
AbbVie Inc Austin Roxanne Schuh Dir Purchase 55,000  $65.86  $3,622,091 117,114 88.5%
Agilysys Inc Srinivasan Ramesh CEO Purchase 11,000  $24.59  $270,490 215,348 5.4%
Bristol-Myers Squibb Co Bertolini Robert J Dir Purchase 11,000  $44.72  $491,920 11,397 2,770.8%
Central Pacific Financial Corp Ngo Agnes Catherine CEO Purchase 8,550  $29.65  $253,508 165,421 5.5%
Central Pacific Financial Corp Yonamine Paul K Chmn Purchase 8,627  $29.65  $255,791 31,025 38.5%
Comfort Systems USA Inc Myers Franklin Chmn Purchase 5,500  $41.89  $230,400 250,000 2.2%
WR Grace & Co La Force Andrew Hudson III CEO Purchase 4,000  $69.04  $276,160 96,391 4.3%
KalVista Pharmaceuticals Inc Cha Albert Dir Purchase 56,367  $16.99  $957,737 1,147,059 5.2%
Mastercard Inc Uggla Lance Darrell Gordon Dir Purchase 1,500  $275.71  $413,561 4,691 47.0%
Merit Medical Systems Inc Frost Ronald COO Purchase 5,000  $40.00  $200,000 21,311 30.7%
Park National Corporation DeRoberts James R Dir Purchase 3,200  $94.00  $300,800 6,100 110.3%
Everest Re Group Ltd Graf John A Dir Purchase 1,020  $244.35  $249,234 9,570 11.9%
SMART Global Holdings Inc Dow Stephen C VP Purchase 17,059  $31.49  $537,179 25,900 193.0%
Solid Biosciences Inc Koppel Adam Dir Purchase 1,881,720  $4.65  $11,177,417 3,871,164 94.6%
Spirit of Texas Bancshares Inc Beall Robert S Dir Purchase 30,000  $21.50  $645,000 145,997 25.9%
Trinity Industries Inc Boze Brandon Dir/>10% Own Purchase 658,796  $19.26  $12,687,027 22,561,698 3.0%
Tesla Inc Denholm Robyn M Chmn Purchase 1,000  $232.72  $232,720 1,000 NEW
Vaccinex Inc Friedberg Albert D Chmn Purchase 1,838,235  $4.08  $8,823,528 7,679,533 31.5%
Vaccinex Inc Zauderer Maurice CEO Purchase 183,824  $4.08  $882,355 1,602,640 13.0%

Insiders sell stock for many reasons, but they generally buy for just one – to make money. THE INSIDERS FUND invests in companies at or near prices that management has been willing to invest significant amounts of their own money in.  After all, who knows a business better than the people running it?  You’ve always heard the best information is inside information.  This is as close to “insider information” that an ordinary investor is likely to see- and it’s entirely legal.  Officers, directors, and 10% owners are required to inform the public through a Form 4 Filing any transaction, buy, sell, exercise, or any other with 48 hours of doing so. This info is available for free from the SEC’s Web site, Edgar, although we subscribe to the Washington Service as they provide a way to manage and make sense of the vast realms of data.

As a rule, 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. Unfortunately, the public information disclosure requirements about these programs referred to as Rule 10b5-1 is horrendously poor.  I also generally ignore 10 percent shareholders as they tend to be OPM (other people’s money) and perhaps not the smart money we are trying to read the tea leaves on.

Of course, unintuitive as it may seem, insiders can also be wrong about their Company’s prospects, they can easily be wrong about how much others will value them, and in many cases, maybe most cases have no more idea what the future may hold than  you or I. In short, you can lose money following them.  We have and we curse aloud, what were they thinking!  Needless to say, past good fortune is no guarantee of future success.  We may own positions, long or short, in any of these names and are under no obligation to disclose that. We welcome your comments on our analysis.

This blog is solely for educational purposes and the author’s own amusement.  Investing with The Insiders Fund is for qualified investors and by Prospectus only. Nothing herein should be construed otherwise.  To learn more about our strategy, visit our website.

If you would like to hear more about how you can get involved with the Insiders Fund, please schedule some time on my calendar


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