Curious how well insiders are doing with their buys? Click on this link or image above to scroll the significant buys of the last year.

You think there can’t get any less insider buying but it gets worse this week. As much as I want to believe it’s all earnings blackout related, I know it’s not. There are damn few compelling reasons to buy most stocks at these valuations and insiders know it.  Insiders as a group are value buyers, not index chasers or performance mongers.

The modest decline of September has almost been completely released by the relief rally of the last two weeks now that a budget calamity is off the table. The averages hide the truth.  The averages are held up by the strength of a handful of mega tech stocks while about 15% of S&P 500 stocks are more than 20% below 52-week highs, but much larger swaths of the midcap and small-cap universe are down 20% or more. The latter groups are less tech-focused and more susceptible to an economic slowdown.

Historically the last quarter of the year is the best time to be invested in the market.  This year might be different.  The budget games Congress is playing may throw a monkey wrench into this seasonality.  Common sense would tell you that they will come up with a way to pay the Country’s debt and avoid a first-ever default of the U.S. Government.  This current rally is likely a knee-jerk reaction to the short-term fix Congress just approved to avoid driving off the fiscal cliff.

Will we come up with a way to increase the debt ceiling without playing a lot of nerve-wracking political one-upmanship games? I doubt it.  Will we ultimately pay the bills we’ve wrung up? Of course, we just print more money. How hard can that be? We’ll find out soon enough.

 

For trade, details click on this link to the trades

Finviz Chart

Name: ISTAR Inc
Position: 10% Owner
Transaction Date: 2021-10-08  Shares Bought: 13,853 Average Price Paid: $72.18 Cost: $999,910
Company: Safehold Inc. (SAFE)
Safehold Inc. (NYSE: SAFE) is revolutionizing real estate ownership by providing a new and better way for owners to unlock the value of the land beneath their buildings. Through its modern ground lease capital solution, Safehold helps owners of high-quality multifamily, office, industrial, hospitality and mixed-use properties in major markets throughout the United States generate higher returns with less risk. The Company, which is taxed as a real estate investment trust (REIT) and is managed by its largest shareholder, iStar Inc., seeks to deliver safe, growing income and long-term capital appreciation to its shareholders. iStar Inc. (NYSE: STAR) is focused on reinventing the ground lease sector, unlocking value for real estate owners throughout the country by providing modern, more efficient ground leases on all types of properties. As the founder, investment manager, and largest shareholder of Safehold Inc. (NYSE: SAFE), the first publicly traded company to focus on modern ground leases, iStar is helping create a logical new approach to the way real estate is owned and continues to use its historic strengths in finance and net lease to expand this unique platform. Recognized as a consistent innovator in the real estate markets, iStar specializes in identifying and scaling newly discovered opportunities and has completed more than $40 billion of transactions over the past two decades. 

Opinion: I watched from the sidelines before while Safehold launched from $20s to $90 per share in less than two years. Admittedly, I understood the essence of a ground lease, but I didn’t see the scale of this nor the wisdom. I was completely bamboozled by the incredible performance. I included two charts because, after a stellar run, the market seems to be questioning the intrinsic value as well. If SAFE paid a regular, growing and mildly respectable dividend like other REITs, it would be easy to assign a value to it. But it doesn’t. The dividend is less than 1%- I can’t say this business model is anything proven or even decent to invest in. But if I’m wrong, this is the time to reinvest or invest for the first time. The chart looks good and insiders, notably the same insider (Greenberg from AIG) are buying again.

 

Finviz Chart

Name: Bensen Peter J
Position: Director
Transaction Date: 2021-10-11 Shares Bought: 5,000 Average Price Paid: $55.75 Cost: $278,740
Company: Lamb Weston Holdings Inc. (LW)
Lamb Weston Holdings, Inc. produces, distributes, and markets value-added frozen potato products worldwide. It operates through four segments: Global, Foodservice, Retail, and Other. The company offers frozen potatoes, commercial ingredients, and appetizers under the Lamb Weston brand and various customer labels. The company also offers its products under its owned or licensed brands, such as Grown in Idaho and Alexia, and other licensed brands, as well as under retailers’ brands. In addition, it engages in the vegetable and dairy businesses. The company serves retail and foodservice customers, grocery, mass, club, specialty retailers, businesses, independent restaurants, regional chain restaurants, convenience stores, and educational institutions. Lamb Weston Holdings, Inc. was founded in 1950 and is headquartered in Eagle, Idaho. The Foodservice segment comprises branded and private label frozen potato products sold throughout the United States and Canada. The Retail segment consists of consumer-facing retail branded and private label frozen potato products sold primarily to grocery, mass merchants, club, and specialty retailers—the Other segment is composed of vegetable and dairy businesses. The company was founded on July 5, 2016, and is headquartered in Eagle, ID.

Mr. Bensen retired from McDonald’s Corporation, following a 20-year career, in 2016. He served as Chief Administrative Officer of McDonald’s from 2015 to 2016. Before that, he served as Corporate Executive Vice President and Chief Financial Officer of McDonald’s from 2008 to 2014, when he was promoted to Corporate Senior Executive Vice President and Chief Financial Officer, a position he held until 2015. During his tenure as Chief Administrative Officer and Chief Financial Officer, Mr. Bensen also had oversight responsibility for information technology, supply chain, and other support departments. Before joining McDonald’s in 1996, Mr. Bensen was a senior manager at Ernst & Young LLP. He is also a director of Lamb Weston Holdings, Inc. Mr. Bensen joined the CarMax board in 2018.

Opinion: French fries would definitely be a value play. There’s no exponential growth opportunity peddling french fries that I can see.  Pandemic-related opening buys are old news now. The market is a forward-looking discounting mechanism. How far forward is something we can debate.  The consensus is six months.  I think the reopening plays have come and gone. I don’t see a catalyst and it’s a nominal buy by a director who probably is paid this much for showing up to a Zoom board meeting.

 

Finviz ChartName: Loza Jose De Jesus
Position: Director
Transaction Date: 2021-10-06  Shares Bought: 10,000 Average Price Paid: $15.65 Cost: $156,500
Company: Limoneira CO. (LMNR)
Limoneira Company operates as an agribusiness and real estate development company in the United States and internationally. The company operates through four segments: Fresh Lemon, Lemon Packing, Avocados, and Other Agribusiness. It grows, processes, packs, markets, and sells lemons. The company also grows avocado, oranges, specialty citrus, and other crops, including Moro blood oranges, Cara Cara oranges, Minneola tangelos, Star Ruby grapefruit, pummelos, pistachios, and wine grapes. It has approximately 6,000 acres of lemons planted primarily in Ventura, Tulare, San Luis Obispo, and San Bernardino Counties in California; and Jujuy, Argentina, as well in Yuma County, Arizona, and La Serena, Chile; 900 acres of avocados planted in Ventura County; 1,400 acres of oranges planted in Tulare County, California; and 900 acres of specialty citrus and other crops. In addition, the company rents residential housing units and commercial office buildings and leases approximately 500 acres of its land to third-party agricultural tenants. Further, it is involved in organic recycling operations; and the development of land parcels, multi-family housing, and single-family homes. The company markets and sells its lemons directly to the foodservice, wholesale, and retail customers; avocados to a packing and marketing company; oranges, specialty citrus, and other crops through Sunkist and other third-party packinghouses; and wine grapes to wine producers. Limoneira Company was founded in 1893 and is headquartered in Santa Paula, California.

Mr. Loza has come full circle after growing up on Limoneira’s main ranch in Santa Paula with his family in the 1970s. Mr. Loza began his produce experience by joining youth crews at Limoneira. he began working for various production companies, built operations in Mexico. He grew sales in Europe, Asia, and Canada. As mangoes gained popularity in the U.S., Mr. Loza started several companies to accelerate the growth of this important fruit. In 2004, he began Freska Produce, which became one of the country’s largest providers of mangos. The company also provides avocados as well as refrigeration services to strawberry growers. Freska has strategically located distribution centers and grows international sales of mangos, avocados, and other compatible products.

Opinion: I like this business model. Instead of turning lemons into lemonade, it’s more like turning lemons into track houses and condos.  This is a thinly traded stock and not very well understood. We own a small amount of this and have traded around it. Eventually, Loza will sell the family business or grow it larger. Be patient and buy on dips. You really can’t go wrong unless the California drought ruins agriculture in the state.

 

Finviz Chart

Name: Kane Matthew Ryan
Position: Director
Transaction Date: 2021-10-06  Shares Bought: 128,160 Average Price Paid: $2.70 Cost: $346,032
Company: Akerna Corp. (KERN)
Akerna Corp. provides enterprise software solutions that enable regulatory compliance and inventory management in the United States and Canada. The company offers MJ Platform, an enterprise resource planning compliance system to the cannabis industry, including state-legal marijuana, hemp, and CBD industry; and Leaf Data Systems, a compliance tracking system designed for government agencies. It also provides consulting services to the cannabis industry; business intelligence, infrastructure as a service tool, which delivers supply chain analytics for the cannabis, hemp, and CBD industries; and Last Call Analytics, a subscription analytics tool for alcohol brands to analyze their retail sales analytics. In addition, the company operates a seed-to-sale platform that allows cultivators to track and report various stages of their cannabis growing operations, production, and sales processes. Further, it offers cannabis cultivation management and software to manage and optimize operational workflow in business analytics; and cannabis tracking technology that provides seed-to-sale-to-self data. Akerna Corp. was founded in 2010 and is headquartered in Denver, Colorado.

Matt Kane is the Co-Founder, Board Member, and former Co-CEO from 2005-2019 of Greenshades Software. He is also a Co-Founder and Board Member of Welltality, where he served as CEO from 2014-2018. Matt’s background is in building, growing, and scaling software companies. He has been a member of the MJ Freeway Board of Directors since 2015 and earned his MBA from Warrington College of Business at the University of Florida and B.S. in Computer Information Systems from Jacksonville University.

Opinion: Although up 7% to $2.91 on the news of this buy,  they clearly don’t know what they are doing at Akerna. Can $KERN rise from the dead? Halloween is the time of year for it.  If not now, likely never. The smartest thing I have seen from management to date is when the founder, Jessica Billinsley unloaded sold some of her shares at $10 back in 2020.

2020-06-16
Sale
2020-06-17
4:57 pm
Akerna Corp. KERN Billingsley Jessica
Jessica Billingsley Living Trust
CEO
Chairman
10% Owner
110,000 $10.05 $1,105,585 1,155,802
(Indirect)
View
2020-06-08
Sale
2020-06-10
5:27 pm
Akerna Corp. KERN Billingsley Jessica
Jessica Billingsley Living Trust
CEO
Chairman
10% Owner
70,000 $10.49 $734,487 1,265,802
(Indirect)
View

Perhaps things are changing.  As I advised the new CFO a couple of years ago, you have to do one thing really well in the software business and build upon that.  You don’t start by doing everything in the marijuana industry and trying to patch it all together to enact their seed-to-sale vision.  Akerna wants to own Enterprise resource planning (ERP) for the cannabis industry.  Akerna wants to be the software that organizations use to manage day-to-day business activities such as accounting, procurement, project management, risk management and compliance, and supply chain operations. You can’t do this by buying all kinds of disparate software companies just because you have a currency in the form of your stock.

You have to start with something and do it really well. Maybe then, and it’s a big if-perhaps you can eventually vertically integrate your software. Akerna had a foothold in compliance. They should have built on that from the beginning. $KERN will not have enough capital from the latest vulture financing they just completed.  They sold $20 million of notes but will only receive $14.6 million as they have to pay use some of it to pay back previous loans from the same lender. Plus they will owe more stock from warrants they issued- in the unlikely but entirely possible meme-ridden nonsensical market. These kinds of predatory financings are horrible for emerging companies but Akerna had little choice. No conventional banker would loan money to them with their continued operational losses.

I’d be very careful investing in this stock. It’s definitely tradeable but not an investment with the current management. That doesn’t mean it can’t rise sharply in this crazy meme market. Maybe Akerna will buy a crypto mining software company to help manage the “seed to sale “mantra they have going.  Then I’m all in for at least a few minutes.

 


 

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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 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