Insiders are Nibling- Notable Insider Buy Trupanion TRUP Week ending May 7th

After weeks of near senescence, insiders are nibbling at their own stock. The big gainer for the week, U.S. Silica Holdings up $13.46%, was nearly left for dead. Is there anything left to run with this fracking sand supplier? Ironically the Democratic administration is hell bent on moving the U.S away from petroleum as a transportation fuel. As much as the oil and gas industry supported Trump, his policies were disastrous for their stock prices. Counterintuivately the Democrats are the second coming for oil and gas. The desire to push us off the petroleum crack doesn’t command prices. You can’t wish your way to battling global warming. Policies designed to discourage the use of hydrocarbons are years behind the actual reality. Without trillions of dollars of immediate investment in alternative energy sources, there is no way to wean the world off the tit.

Oil and gas producers are discouraged to drill, investors shun non ESG companies, and the rise in the price of oil and gas far outstrips the available alternatives. We expect much higher oil and gas prices before the pendulum turns. NOTHING boost the prices of oil and gas companies like the rise in the underlying commodities.

We may be in the early stages of a super cycle in oil and gas, the last gasp before the world turns it back on the fuel that drove the industrialization of the world economy for the last 250 years. It won’t be that long before SLC exceeds its pre-oil glut high of $30.

That brings us to the second insider oil and gas buy, Holly Frontier, HFC, and independent refiner. Holly made no money last year; literally none and when it reported earnings this last week investors acted surprised. The insiders were not shocked, though. They realize 2020 was a year like none will likely ever see again for refiners. With the world literally shut down by the pandemic, demand fell off a cliff. Refineries are complicated industrial marvels of engineering and they can’t be shut off and turned on like the kitchen faucet. Holly Frontier insiders know this and they are betting 2021 will be better.

You can bet that when the CEO and CFO are both buying, that stock prices are going higher. CEO Jennings bought 7500 shares at $34.98, Director Myers purchased 10,000 at $34.69. CFO Voiva purchased 20,000 shares on March 11th for $20.75. The last time the CFO traded the stock was December 2019 when he sold 20,000 at $50.88. Patient contrarian investors placing bets now with a 6 -12 month horizon will likely be rewarded Record summer driving and back to work make a far better 2021 than bitcoin in your wallet.

Rayonier separated its land resources businesses from its performance fibers business, creating two independent, publicly traded companies in 2014. The performance fibers business becomes known as Rayonier Advanced Material and has done nothing for shareholders but separate them from their money for the last 7 years.

Will this time be any different? Director Julie Dill must think this time is different, stepping up to the plate to buy 40,000 shares at $7.06 per share. This is her first open market buy since she was appointed to the board in 2018. CFO Troanowski purchased 30,000 shares at an average price of $5.60. These prices must look great to Director Boynton as he bought 200,000 at $1.43 per share back in March of 2020 when stock prices were cratering across the board.

RYAM fell 19% on May 5th on its earnings report. RAYM is getting out of the remaining lumber and newsprint assets with a sale price of $214 million to Green First, a Canadian lumber company. Mind you this is just a $494 million market cap company after its latest earnings disappointment. RBC analyst downgraded the stock to sector perform with a price target of $11. You have to love these downgrades with a 40% upside target. This is the strange world of Wall St. analyst double speak.

You can change the name but can you change the nature of the creature? Apparently, the insiders at Adtalem Global Education think you can. Director Malafronte thinks you can as he purchased 7200 shares of ATGE for $34.04 per share. Scandal-ridden DeVry Univerity emerged as Adtalem after paying a $100 million fine to the FTC for false advertising that 90% of their students seeking jobs in their field of study found them within six months of graduating. This one is just frankly too complicated for us.

Director Tal bought 1366 shares of pharmaceutical giant Eli Lily for $182.84 per share. LLY took a major hit on the disappointing news that a promising Alzheimer’s drug in development had mixed interim results. Frankly, this is exactly the kind of blue-chip buy that gets us salivating at the mouth but the dollar amount leaves us yawning. Pending drug price control clamor from the progressive wing of the Democratic party makes us believe there will be a damper on big pharma stock prices this year. There has certainly been something weighing down biotech for the last two months. The stock is already up a whopping 6.88% from where he bought it. Analysts are still for the most part optimistic about donanemab, the Alzheimer’s drug. Phase 2 data on this drug is not due until 2023.

I wonder what the logic was of the three directors that bought over 95,000 shares of PQ Group holdings knowing that 12.5 million share secondary offering by selling shareholders was just days away. Did they not know that the stock would likely go down on that news? Is it possible they were caught unaware? Until we can make some sense of PQG, we’d put this one on the shelf for now even though taking this much of an overhang off the market is a positive development.

PQ Corporation enables environmental improvements and enhances everyday consumer products through collaborative innovation with our customers. Our products reduce air pollution and make products you use every day more environmentally friendly. They are a leading global provider of specialty catalysts, services, and performance chemicals.

10% shareholder, Ralph Bartel and Azzuro Capital added to their 4.56 Million shareholdings of Travel Zoo with a 50,000 share purchase of TZOO at $16.54 per share. Travelzoo is an Internet company that publishes deals from more than 2,000 travel, entertainment and local businesses such as restaurants and spas. It has 28 million members in North America, Europe, and Asia Pacific and 25 offices worldwide. Wikipedia

Travel Zoo has doubled from its October low when the CEO Holger Bartell bought 50,000 shares at $7.80. Even though large shareholders are adding to their holdings it doesn’t inspire confidence to see savvy insiders Like CAO Su and Barltel now selling some shares back in March at $16.74. Most travel stocks have rallied sharply as the pandemic is winding down. We are not sure how much is left and this money-losing venture is not the kind of name you can be late to the party with. Hopefully, the Azzuro Capital Group with Ralph at the helm will be luckier with these buys. They sold massive amounts of shares in the $3 dollar range last March when the world shut down.

Director Ferracone bought 18,000 shares of pet insurance pioneer, Trupanion, paying an average price of $79.60. TRUP has been retreating since its February high of $126.58 and this larger buy of $1.43 million is likely to restore some confidence to punished growth investors. The company just reported Q1 revenue $154.69M, consensus $151.97M. Total enrolled pets was 943,854 at March 31, an increase of 37% over the first quarter of 2020. “2021 is off to a flying start, with revenues up 39% year-over-year, led by growth in subscription pets,” said Darryl Rawlings, founder and chief executive officer of Trupanion. “We’re well positioned in a large, underpenetrated market and have the capital to continue to grow at these accelerated rates.”

This is the first insider buy in TRUP since November of 2019 when Ferracone bought 10,000 shares at $31.50. Just last November he was selling 10,000 shares at $94.57 so for the time being, he looks like he might be on to something. Ferracone has been reward handsomely in the past for his purchases. He also bought 19,000 shares in November 2018 at $25.60 and in 2017 at $16.19. This most recent purchase is his largest, too.

In December of last year, the Company filed to sell 3.6Million shares for certain stockholders. To my knowledge, this sale has not been completed as of yet. Also in October of last year, AFLAC entered into an exclusive alliance agreement giving the insurer rights to sell Trupanion pet insurance in the workspace. Aflac purchased a 9% stake in the company at $55 per share netting the company $192.5 million additional capital on the balance sheets. The investment came with an investment lockup provision of three years and an ownership cap under 10%. The Motley fool just published a glowing article on the Company, certain to give it a bounce Monday

“Trupanion (NASDAQ:TRUP) has all the look of an unbeatable stock to buy in a Biden bull market.

The pet industry may not offer flashy growth prospects like cybersecurity or cannabis, but it’s arguably the most consistent growth opportunity. It’s been more than a quarter of a century since year-over-year U.S. pet expenditures declined. Further, the American Pet Products Association notes that the percentage of American households owning a pet has increased from 56% in 1988 to 67% by 2019-2020. If we’ve learned anything about pet owners, it’s that they’re willing to spend big bucks to ensure the well-being of their four-legged family members.

Trupanion, which recently lifted the hood on its first-quarter operating results, is closing in on 1 million total enrolled pets (943,854 at the end of Q1 2021). Amazingly, this only represents a little over 1% penetration of the U.S. market. In the U.K., about 1 in 4 pet owners purchases insurance for their cat or dog. If Trupanion can achieve a similar penetration rate, its addressable market would be more than $32 billion.

This is a company that’s spent two decades building up rapport with veterinarians and their staff at the clinical level. It’s also the only major companion animal health insurance provider with software capable of handling payment to veterinarians at the time of checkout.

The sky is the limit for Trupanion.”

Combine that with the recent insider buy, a technically oversold stock, I’ll be shocked if it doesn’t go up 5% on Monday. We bought shares on Friday, but probably not enough. I’ll likely buy more on the open Monday if it’s not up more than $2. I’m still very leery of the looming secondary but I have to believe that long-time director Ferracone has a handle on this. Fanboy Evercore analyst Mark Mahaney started it with a buy on April 5th with a $100 price target. Insanely bullish analysts at Cannacord and Lake Street raised their targets to $150 at the February top. Beware of getting carried away with growth stories. The most money I’ve seen people lose is with growth and momentum stocks.

Amphenol Director Livingston purchased 20,000 shares of this electronics giant at $65.92. It reminds me of water water everywhere and not a drop to drink. All you hear about is the semiconductor shortage. APH is wrapped tightly around all things electronic. Amphenol Aerospace is one of the largest manufactures of interconnect products in the world for Military, Commercial Aerospace and Industrial Markets. It recently purchased MTS systems, a leading electronic measurement company, further embedding itself into the digitally connected world. We like this buy and would recommend it having bought it ourselves. We’d add to any pullback. Although at the top of its range, It’s hard to see how longer-term investors lose here.

Livingston has been a board member since December of 2018 but this his first open-market buy. Insiders usually buy their stock when it’s cheap but here’s an example of an insider buying close to its lifetime high, usually a very bullish sign. Business is good and it’s going to stay good and likely get even better.

Intel Director Weisler purchased 4.464 shares for $56. As much as I’d like to believe this was a vote of confidence for the beleaguered American chip champion, it’s more than likely just a new director buying the obligatory amount of shares. Until I see the new CEO of Intel buying several million of INTC, I’m not counting this one on the ledge. I do think that will happen though. Intel is too big and too American to lose the global chip wars. The U.S has too much riding on its success. Plus INTC is a good black swan stock to hold in case the South China sea heats up and investors start to worry about the reliability of TSMC.

Masimo VP McClenahan purchased 1000 shares of MASI at $231.62. Masimo is a global medical technology company that develops, manufactures, and markets a variety of noninvasive patient monitoring technologies, hospital automation solutions, home monitoring devices, ventilation solutions, and consumer products. They took Phillips to the mat on a patent challenge on the pulse oximeter patent. MASI invented it and won $600 million in cash awards and agreement to license it to Phillips. It’s been off to the races ever since then when MASI was around $35 per share. It’s been languishing in this $225 range for a year now having sold off from its $274 high. This is one that looks ripe on the charts for a bounce. Our proprietary divergent RSI signal is flashing green. MASI is highly like to have a tradeable bounce. BTW McClenahan is the corporate counsel. Is there another patent win in the near future? The recent 10 k states they believe competitors may be violating now or in the future their intellectual property rights. Specifically, they mention action they initiated against Apple in January of 2020.

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Insiders sell stock for many reasons, but they generally buy for just one – to make money. You’ve always heard the best information is inside information. Everyone who has any experience at all in the stock market pays close attention to what insiders are doing. After all, who knows a business better than the people running it? 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 SECForm4 as they provide a way to manage and make sense of the vast realms of data. I’ve tried a lot of vendors and SECForm4 is one of the most customer-friendly and responsive I’ve used.

We publish a subscription newsletter called The Insiders Report. We offer a free 30-day trial so you have nothing to lose by trying it out. Be sure to carefully read the TERMS OF SERVICE.

Another source for insider buying and selling and much more is FinViz Elite. FinViz stands for financial visualization and they do an amazing job of providing reams of data and the tools to help you get to the bottom of it, the information that helps me make informed decisions and probable outcomes. I’ve been using their site for years and it only gets better over time.

This is as close to “insider information” that an ordinary investor is likely to see- and it’s entirely legal.

BEWARE– Following insiders can be hazardous to your financial health unless you know what you are doing. Unlike the raw, unfiltered data, The Insiders Fund blog informs you of the purchases that count, the ones that are just window dressing into deceiving the public that all is hunky-dory, and those that are just flat out other people’s money and should be just discarded like bad fish. 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 and options. 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. Also planned sales that just pop up out of nowhere are basically sales and are seeking cover under the Sarbanes Oxley corporate welfare clause. 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. Don’t let anyone fool you into believing they never make mistakes. No one tracks and understands insider behavior better than us. We’ve been doing it religiously since 2001 when I quit being an insider myself and devoted myself full time to managing my personal investments. 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. THE INSIDERS FUND invests in companies at or near prices that management has been willing to invest significant amounts of their own money in. 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

The Insiders Fund was the 4th best long-short equity fund in the world in 2019, 4th Best in November 2020, 4th Best in January 2021 (I kid you not)