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It’s not that things are just heating up over at the giant regulated Midwest utility, Evergy, $EVRG.  The entire grid is about to undergo wholesale change, modernization, and smart management to usher in the world of electric vehicles and government-mandated renewable sources of energy.  The sun doesn’t shine at night and the wind doesn’t blow all day but we all want our power day and night, windy or still.  Electric utilities are the safest bet in town and that hasn’t gone unnoticed by the likes of Warren Buffett or activist managers like Paul Singer at Elliott Management.

 

Name: Wilder C John
Position: Director
Transaction Date: 2021-09-23  Shares Bought: 39,580 Average Price Paid: $63.61 Cost: $2,517,798

Name: Wilder C John
Position: Director
Transaction Date: 2021-09-28  Shares Bought: 39,646 Average Price Paid: $62.92 Cost:$2,494,570

Company: Evergy Inc. (EVRG)Evergy is an American investor-owned utility (IOU) with publicly traded stock headquarters in Topeka, Kansas, and in Kansas City, Missouri. The company was formed from a merger of Westar Energy of Topeka and Great Plains Energy of Kansas City, Missouri, the parent company of Kansas City Power & Light. Evergy is the largest electric company in Kansas, serving more than 1.6 million residential, commercial, and industrial customers in the state’s eastern half. Evergy has a generating capacity of 16,000-megawatt electricity from its over 40 power plants in Kansas and Missouri. Evergy service territory covers 28,130 square miles (72,900 km2) in eastern Kansas and western Missouri. Evergy owns more than 13,700 miles (22,000 km) of transmission lines and about 52,000 miles of distribution lines. Evergy is committed to delivering clean, safe, reliable energy sources today and well into the future. So they’re embracing alternative energy sources to generate more power with less impact on our environment and adopting new technologies that let their customers manage their energy use in ways that work for them. Whether it’s new ways to connect with them, electric vehicle charging stations, or the next innovation around the corner, they’re dedicated to empowering a better future. It generates electricity through coal, hydroelectric, landfill gas, uranium, natural gas, oil sources, and solar, wind, and other renewable sources. The company has approximately 10,100 circuit miles of transmission lines, 39,800 circuit miles of overhead distribution lines, and 13,000 circuit miles of underground distribution lines. It serves approximately 1,620,400 customers, including residences, commercial firms, industrials, municipalities, and other electric utilities.

Mr. Wilder is the Executive Chairman of Bluescape. He serves on the boards of directors of several private portfolio companies and has previously served on the board of many private and public companies, including NRG Energy, Inc. and TXU Corp. He served in executive officer roles in TXU Corp., Entergy Corp., and Royal Dutch/Shell Group. Mr. Wilder received his bachelor of science in business administration from Southeast Missouri State University and holds a master of business administration from the University of Texas.

Opinion: These are massive buys, over $5 million.  The previous week, the CEO and CFO each bought a $half-million worth of EVRG stock.  Regulated utilities as a group have been significant laggards during the last 30 days.  The XLU ( a basket of utility stocks) was down 6.80% while the S&P500 was off by 4.97%. I could say it was the relative weakness of income-producing securities with the rise of the 10 year Treasury but I’m not sure of that. Whatever it is, it doesn’t seem to be anything specific to EVRG.  More than likely it is short term mismatch between cost pressures from rising natural gas and coal prices compared to what utilities have been allowed to charge for the electricity made from these fuels. Ultimately these costs will be passed through to the consumer. It’s the law really but the market is always myopic in the short term.  Public utilities have a compact with their governing authorities. Since they are monopolies, for the most part, they agree to act responsibly and earn an approved rate of return, no more no less to put it simply. On the other hand, if costs rise, as they are now with hydrocarbons, they are allowed to pass these costs along so they can earn their agreed-upon margin.  But Wall Street is notoriously myopic so this short-term thinking is creating some longer-term opportunities.

On September 15th, Bank of America analysts downgraded EVRG  because it had too high a multiple compared to its peers. He set a price target of $65. What’s clear to me is the analyst community at large doesn’t realize the revolution is about to happen with the regulated electric utility industry.  The adaption of EV vehicles is estimated to increase the usage of the average household by 20-30%. No one really knows where this is going but all roads lead to an increased usage of electricity.  Whether it is streaming, social media, the digitization of your refrigerator and microwave or your doorbell talking into your ear, electricity consumption is going through the roof.

What can ruin this picture? Why aren’t more analysts talking about it?  Insiders are buying it. I’ve been blogging about it. Cost inputs don’t hurt regulated utilities. They are pretty much guaranteed a profit so just raise rates. There’s a time lag but there is certainty about it. You’re not turning the lights off, the air conditioning off, the computer off, the power goes on. It’s at the core of life, like food, water, and air.  Electricity is life itself.

But this doesn’t explain anything really.  Over $6 million insider buys during the last two weeks and the stock goes nowhere? Here’s what we know.

Kansas City, Missouri-based Evergy has been dueling with the hedge fund, Elliott Management, since January 2020.  Elliot, a well-known activist investor, announced a stake in the Company and promoted a sale of Evergy or significant changes to bolster performance. The stock was trading around  $65  at the time of the announced activist’s stake. On February 28th, 2020 the Company entered into an agreement to add two new board members of Elliott’s choosing. They also agreed to a Strategic Review & Operations Committee will explore ways to enhance long-term shareholder value (accounting for applicable legal and regulatory requirements and any other relevant considerations), including through (1) a potential strategic combination (a “Merger Transaction”) or (2) an enhanced long-term standalone operating plan and strategy (a “Modified Standalone Plan”).

One year later Evergy finds a new CEO, David Campbell. Campbell was a plumb pick, Yale graduate, Rhodes Scholar, and Harvard J.D.  Campbell had just sold in May 2019 InfraREIT, a US-based company engaged in owning and leasing rate-regulated electric transmission assets in the state of Texas, to Oncor for $2.2bn. Not taking much time off, Campbell rolled into the CFO position at Vistra. Prior to this Cambell was the CFO of TXU.  This is all one tight-knit family. It gets cozier.

In 2013 through 2014, Mr. Campbell served as president and chief operating officer of Bluescape Resources, an independent investment company, where he oversaw field and business operations.

Meanwhile, Bluescape Energy Partners allied itself with Elliott to put Evergy into play with a $115 million investment. Evergy announced that it has entered into agreements with Bluescape Energy Partners LLC (“Bluescape”) and Elliott Investment Management L.P. (“Elliott”) and certain of their respective affiliates. Wind the clock forward a year, Evergy, Inc. to February 26, 2021As part of the Bluescape agreement, C. John Wilder, Executive Chairman of Bluescape, and former U.S. Senator Mary L. Landrieu will join the Evergy Board of Directors, effective March 1.  In connection with the agreement, Bluescape will be making an equity investment of approximately $115 million in the Company by purchasing newly issued Evergy common shares. Bluescape will have the option to purchase additional Evergy common shares over the next three years at a per-share price that is 20% higher than the current per share market price.

Are things heating up at Evergy? Two new buys by the CEO and CFO last week, the additional purchase of $5million worth of stock by Bluescape and Wilder.  Where there’s smoke there is usually fire. At any rate, if there is not an outright sale, electricity is life itself.

 

 


Finviz Chart

Name: Agree Joey
Position: CEO
Transaction Date: 2021-09-24  Shares Bought: 3,670 Average Price Paid: $67.56 Cost: $247,945

Name: Rakolta John Jr.
Position: Director
Transaction Date: 2021-09-27  Shares Bought:20.273 Average Price Paid: $67.73 Cost: $1,373,114

Name: Agree Richard
Position: Chairman
Transaction Date: 2021-09-24  Shares Bought: 6000 Average Price Paid: $67.06 Cost: $402,360

Company: Agree Realty Corp. (ADC)
Agree Realty Corporation is a publicly-traded real estate investment trust that is RETHINKING RETAIL through the acquisition and development of properties net leased to industry-leading, omni-channel retail tenants.  As of March 31, 2021, the Company owned and operated a portfolio of 1,213 properties, located in 46 states and containing approximately 24.2 million square feet of gross leasable area.  The Company’s common stock is listed on the New York Stock Exchange under the symbol “ADC”.  For additional information on the Company and RETHINKING RETAIL, Over its 23-year history, Agree developed over 40 community shopping centers primarily throughout the Midwestern and Southeastern United States. With an Initial Public Offering of 2.5 million shares in 1994, Agree Realty Corporation commenced operations as a publicly traded Real Estate Investment Trust (REIT). Agree Realty is a $6B+ industry leader in the acquisition and development of properties net leased to the foremost retailers in the United States.  The Agree Team’s expertise and strategic execution seeks to maximize value for all stakeholders. Their innovative development and acquisition strategies, adaptive real estate technology, and extensive capabilities are relied upon by their industry-leading partners throughout the United States. Building upon the foundation of excellence established throughout the past half-century, Agree Realty continues to be a thought leader, rethinking retail in an omnichannel world.

Joey Agree was appointed President & Chief Operating Officer in 2009 and subsequently named Chief Executive Officer in 2013. Mr. Agree has led the transformation of the Company’s real estate portfolio from a $300 million micro-cap development REIT to a $5+ billion diversified retail net lease market leader. Mr. Agree was named EY’s 2018 Entrepreneur of the Year in the Michigan and Northwest Ohio Region. He was also named one of Business magazine “30 in Their Thirties”, one to watch in Real Estate Forum magazine’s “40 under 40”, as well as Crain’s Detroit Business “Forty under 40”.

Opinion: The investment community isn’t crazy over retail REITS and neither am I. I don’t see the benefit of buying into a 3.88% yielding REIT where the underlying growth is threatened by the disruption of shopping patterns due to Door Dash, Amazon, etc.

 

Finviz Chart

Name: Saville Kendall
Position: Director
Transaction Date: 2021-09-24  Shares Bought: 4,857 Average Price Paid: $58.00 Cost: $281,706
Company: A-Mark Precious Metals Inc. (AMRK)
A-Mark Precious Metals, Inc., together with its subsidiaries, operates as a precious metals trading company. It operates in three segments: Wholesale Sales & Ancillary Services, Secured Lending, and Direct-to-Consumer. The company sells gold, silver, platinum, and palladium in the form of bars, plates, powders, wafers, grains, ingots, and coins, as well as markets precious metal products on television, radio, and the internet, as well as through customer outreach services. It also provides financing and other services relating to the purchase and sale of bullion and numismatics; provides a storage solution for precious metals and numismatic coins; and offers a range of logistics services, including storage, delivering, shipping, handling, receiving, processing, drop-shipping services, packing, and inventorying of precious metals and custom coins, as well as TDS’ storage and asset protection services. In addition, the company provides custom fabricated gold and silver bullion and other specialty products, as well as various services comprising consignment and customized finance programs; and a platform of turn-key logistics services. Further, it engages in commodity hedging, as well as borrowing and lending transactions. The company serves mints, industrial manufacturers, and fabricators, encompassing electronics and component parts companies, refiners, coin and bullion dealers, e-commerce retailers, banks and other financial institutions, commodity brokerage houses, retail customers, industrial users of precious metals, investors, investment advisors, collectors, and retail customers. It has operations in the United States, the rest of North America, Europe, the Asia Pacific, Africa, and Australia. A-Mark Precious Metals, Inc. was founded in 1965 and is headquartered in El Segundo, California.

Kendall Saville served as Chairman of the Board of JM Bullion for seven years. He co-founded PlayUSA, the largest legal US iGaming media network which was acquired by Catena Media (STO: CTM), and served as a primary consultant to Catena Media from 2016 to 2019. Mr. Saville’s investment specialty is in store-of-value businesses, and his focus for nearly a decade has been investments in cryptocurrency technology, including the largest cryptocurrency exchange in the Middle East, and decentralized finance. Kendall earned his Bachelor of Arts in Business Economics from the University of California, Santa Barbara. In 2021, Kendall Saville’s i15 Media and Ocean View Marketing iGaming assets were acquired by Catena Media, and he has resumed his work as a primary consultant managing strategic growth projects for iGaming. Mr. Saville’s extensive experience in search engine optimization (SEO), digital marketing, and cryptocurrency provides the Board with valuable insight in matters of business planning and growth strategy

Opinion: It’s interesting that AMARK’s business is doing well while gold itself is taking a breather.  The stock has been a good performer and is likely to continue to do so but I am taking a pass here. There are more exciting opportunities and understandable ones.

Name: Considine Terry
Position: Director
Transaction Date: 2021-09-28  Shares Bought: 305,375 Average Price Paid: $6.92 Cost: $2,113,882
Company: Apartment Investment & Management (AIV) Aimco is a Real Estate Investment Trust focused on property development, redevelopment, and various other value-creating investment strategies, targeting the U.S. multifamily market.

Opinion: Rents are going up around the country.  Everyone wants to be in a multifamily.  It’s always a heightened risk investing in areas that everyone wants in on.  Combine record low rates with massive buildings and you’re setting the stage for investing at the top. Nonetheless, Considine knows all that but it buying over $5million in stock.  It starts with the separation of the operating arm from the management arm leaving investors somewhat dazed and confused by what management is doing.

I’m in that camp. Aimco plans to reinvest earnings to facilitate growth and, therefore, does not presently intend to pay a regular cash dividend. Aimco is focused on providing superior total-return performance to shareholders, primarily through capital appreciation driven by accretive investment and active portfolio management over multi-year periods. Aimco does not plan to pay a regular cash dividend.  That just doesn’t sit right with me as REITS are by law supposed to return the lion’s share of their earnings to shareholders.  Things are confusing enough without AIV.

Name: Jabbour Anthony
Position: CEO
Transaction Date: 2021-09-28  Shares Bought: 14,000 Average Price Paid: $68.84 Cost: $963,701
Company: Black Knight is a leading provider of integrated software, data and analytics solutions to the mortgage and consumer loan, real estate and capital markets verticals. Their solutions facilitate and automate many of the mission-critical business processes across the homeownership lifecycle.

Opinion: This is a complicated company formed from spinoffs and takeovers, run by a CEO that has two jobs. Jabbour is also the CEO of private equity-owned Dun and Bradstreet, DNB.  There are not many stocks with significant insider buying that are trading worse than where insiders bought but Jabbour is an example of both.  I’d avoid both companies. At some price, almost everything is a buy. I just don’t know that price. Avoid.

Name: Kukes Simon
Position: CEO & 10% Owner
Transaction Date: 2021-09-30-21  Shares Bought: 76,914 Average Price Paid: $1.46 Cost: $112,488

Name: Kukes Simo
Position: CEO
Transaction Date: 2021-09-28  Shares Bought: 99,126 Average Price Paid: $1.42Cost: $140,764
Company: Pedevco PEDEVCO Corp (NYSE American: PED), is a publicly-traded energy company engaged in the acquisition and development of strategic, high-growth energy projects in the United States. The Company’s principal assets are its Permian Basin Asset located in eastern New Mexico and its D-J Basin Asset located in Weld and Morgan Counties, Colorado. PEDEVCO is headquartered in Houston, Texas.

Opinion: We looked at this purchase last week and didn’t write it up because, in the scheme of the multimillion purchases in the oil patch, it seemed like a thinly traded secondary play.  It was just that until Will Meade with his Twitter followers blew up the name with a couple of Tweets late in the day Friday. PED had a 66 million share day, 26x times the average trading day volume.  If this isn’t a warning sign of excessive speculation, I don’t know what is.  PED closed the day up 27.7% on the day and 48% from where Kukes was buying.


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COO Douglas Edward Jones purchased 7,000 shares at $14.31 of $NEOG
Opinion: The company announced, Reports Q1 revenue of $132.35M vs. $128.31M a year ago. “During the first quarter of our 2023 fiscal year. Full article at: https://www.theinsidersfund.com/2022/10/insider-buying-week-9-30-22/

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Insiders sell the 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 many 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 are 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 me. 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)