The tale of the tape is disappointing. After an initial rash of buying, the insiders have disappeared. The most notable buy of the week was Director Stephen Burke’s massive $6.59 million dollar buy of JP Morgan, increasing his holdings by 50%. JPM responded, soaring almost 10% the following day, dragging the beleaguered sector with it. After the close, Key Corp President reported buying 100,000 shares at $10.36. I expect KEY to pop Monday morning absent a market sell-off.
Williams Sonoma Chairman Bellamy stepped up and bought this home cooking retailer, laying out $485,250 to purchase 9600 shares at $50.55. WSM has a great balance sheet and should weather the Covid-19 storm. Ryman Hospitality, parent of Grand ‘Ole Opry, continues to have insider buying, in spite of the fact that no one is booking conventions and gatherings.
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 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.