Mercury General Chairman George Joseph buys $9.2 Million more of this California property and casualty insurer.  MCY  with a current 6.4% dividend yield and a 34 year history of consecutive dividend raises, looks particularly tempting.  It’s off 44% from its high and the Chairman of the Board has bought $24 million worth of the company’s stock in the last 10 days. People are driving less, auto claims are down. The potential loss of reinvestment income due to lower bond rates seems overstated by this drop in price. Besides Mercury has been historically a  relatively bigger player in the equity markets, a bit more like Berkshire Hathaway.

Speaking of which, one notable observation, a director bought over $2 million in Berkshire this week.  Berkshire Hathaway is down 23% YTD and is sitting out the rally with an enormous pile of cash.  It has rarely traded this cheap relative to intrinsic value.  A noted Buffet follower pointed out to me that the last time Berkshire lagged the market by this much was in 1999-2000, the top of the and internet bubble.  Stay at home- They say history doesn’t repeat itself, it rhymes.

Two insider buys shortly after Carrier Global Corp spin off in May from United Technologies leaves me wondering what’s going on. CEO Gitlin bought 57,580 shares at $17.45 and a Director John Greisch bought $610,316 worth at $17.44.  These are two large buys and the future business prospects for heating and air giant are all up in the air ( couldn’t help myself). Carrier Global (CARR)  was upgraded to Overweight from Equal Weight at Barclays on May 11th after the company cut its dividend.

Two insiders bought just under $1 Million in Clipper Realty CLPR at $5.73. Clipper is a NYC residential REIT yielding 5.6%. Go figure that one. I’d need a lot more than 5% to get me involved in NYC real residential real estate.

Lamar Advertising LAMR Director Koerner bought nearly $1 million worth at $58.27, upping his holdings by 69.8%. Lamar is a contrarian play since everyone is clamoring for stay at home stocks, an outdoor advertising billboard company might be as contra stay at home as you can get.

Microcap biotech Mustang Bio MBIO CEO bought 180,000 shares at $2.96.

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 Secform4 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.

Prosperous Trading,

Harvey Sax