Kraft Heinz insider buying dwarfs all others.  While everyone is lamenting the purchase, including Warren Buffett who in a rare error stated publicly that he overpaid for Kraft Heinz, his partner in the deal, Jorge Lemann, buys a $100 million worth of the depressed stock.  Jorge didn’t get to be the 36th richest person in the world according to Forbes, by being stupid. Of course, that is pocket change for Mr. Lemann but the $7 million by van Damme is not. One of the things you have to analyze in insider buying is the significance and meaningfulness of the buy. I’d rather plunge in after a CFO buying his own company stock than a hedge fund titan betting other people’s money.

Lexicon Pharmaceutical is interesting because of their deal with Sanofi collapsed, the stock plunged 80% and insiders stepped up and bought stock. Gabelli upgraded it to buy. Sanofi divorced with a big cash payout. This one requires a lot of research and like most biotechs a lot of science.

Plurasight is an online education company, mostly tech stuff. It’s a fast-growing high multiple tech stock that missed a quarter, badly. It crumbled. Insiders stepped up. We bought some, are analyzing it to determine if we want more or whether we want any. For the time being, we are up 5%. That’s pretty typical on these kinds of situations if you can shoot first, ask questions later.

Sarepta Therapeutics is a battleground stock. Insiders continue to buy and prominent critics like Adam Feuerstein of STAT points out that SRPT inspite of having the only approved Duchenne muscular dystrophy drug has never actually  conducted a statistically significant trial proving efficacy.

Dominion Energy is a large Virginia based utility with an unusually high yielding stock, now just under 5%. Dominion is involved heavily in natural gas transport with LNG facilities in the works. We went all-in on this name as having traded it successfully for years.  It’s unusual and extraordinarily bullish to see large insider buys near a 52 week high.

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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