Curious how well insiders are doing with their buys? Scroll the significant buys of the last year.
We’re in a vicious bear market the like of which harks back to the Dot.com bubble bursting for stocks with little or no earnings. That’s most of the cloud stocks and pretty much all the speculative SPAC’s that are getting annihilated by the Great Unwind. The Indices mask the carnage that is happening below the surface. You don’t need to look to Ukraine for the bloodbath. It’s already well underway on the NASDAQ.
There wasn’t much in the way of insider activity last week to write about but I will tell you the one thing that I am certain of. Every major sell-off for the last twenty years or as long as we have the data has ended with a Tsunami of insider buying. Right now we are in the blackout period before earnings. It is always a great time for a bear raid. Historically this is a period of little insider buying but this is downright mendacity. I can only speculate that some insiders are chomping at the bit to buy their crushed stocks. Nonetheless, insiders find lots to sell though, because of the flagrant abuse of the SEC Rule 10b5-1 loophole.
Russia with 100,000 battle-hardened troops poised to invade Ukraine, the price of crude oil making new highs, and the great Federal Reserve pivot set to begin is the classic “a bridge too far”.
It really shouldn’t be a shock to seasoned investors. At some point making money begins to matter. I’ve long scoffed at relative value analysis as a way to cultivate bad habits. It’s addictive and should be banned. Comparing companies by silly metrics as a multiple of sales versus a multiple of earnings seems insane yet the madness of crowd behavior is a well-documented phenomenon. It’s called bubbles and we’ve been in one for quite some time. I love bubble investing- just point me to the next one and make sure you’re not the one standing up when the music dies, So bye-bye, Miss American Pie.
Name: Orthwein Peter Busch
Position: Director
Transaction Date: 2022-01-14 Shares Bought: 10,000 Average Price Paid: $98.54 Cost: $985,384
Company: Thor Industries Inc. (THO)
Thor Industries, Inc. designs, manufactures and sells recreational vehicles (RVs), and related parts and accessories in the United States, Canada, and Europe. The company offers travel trailers; gasoline and diesel Class A, Class B, and Class C motorhomes; conventional travel trailers and fifth wheels; luxury fifth wheels; and motor caravans, caravans, campervans, and urban vehicles. It also provides aluminum extrusion and specialized component products to RV and other manufacturers, and digital products and services for RVs. The company provides its products through independent and non-franchise dealers. The company was founded in 1980 and is based in Elkhart, Indiana. In 1980, THOR Industries embarked on a journey to connect people with nature, and families with each other. Today, the THOR Family of Companies continues the journey by acquiring outstanding outdoor companies which make it easier and more enjoyable for families of all types to create lasting outdoor memories. On the surface, they are the world’s largest manufacturer of recreation vehicles. But in reality, they are so much more. Their family of companies makes it easier and more enjoyable for families like yours to connect with nature—and each other. Together they can Go Everywhere; Stay Anywhere. THOR has grown both organically and through strategic acquisitions in both recreational vehicles (RVs) and buses. Today, the THOR Family of Companies is one of the world’s largest manufacturers of recreational vehicles. Over the years THOR has received many honors for its growth and management success and has become one of the most admired and respected companies, not only in the RV industry but in global business.
Peter Busch Orthwein serves as Chairman Emeritus of the Board of the Company. He retired from his position as Executive Chairman with the Company in 2019. Mr. Orthwein has served as a Director of our Company since its inception, Chairman of our Company from 1980 to 1986, Vice Chairman of our Company from 1986 to November of 2009, and Treasurer of our Company from 1980 to November of 2009. Our Nominating and Corporate Governance Committee and Board believe that his extensive experience with our Company and the industry make him an asset to the Board.
Opinion: The only explanation I have for last week’s collapse in price is that rising crude oil can kill the business. These mobile homes on wheels become too costly to fill up at the pump. You can bet that Mr. Ortwhein knows that. Also, there is the expectation that the poot Pandemic business is going to be softer as there was a lot of pull forward. That’s clearly wrong as well as you can’t pull forward demand if you can’t get the parts to manufacture the RV’s.
From the 10Q” As of October 31, 2021, North American dealer inventory levels continue to be well below optimal stocking levels, which has led to ongoing record backlogs. THOR’s North American RV backlog as of October 31, 2021 increased $8,109,294, or 122.6%, to $14,722,076 compared to $6,612,782 as of October 31, 2020.”
Thor is deeply undervalued by most fundamental metrics. The discounted cash flow value as provided by Old School Value is $141.24 with a 7.5% discount rate and modest growth assumptions of just 2.95% growth rates. I suspect that once demand levels out the real growth rate is quite a bit higher as all these millennials turn into their parents. The trailing 12 mo P.E. ratio is just a modest 6.18 and P/FCF is 9.70, all stunningly low versus the market. I’ve attached the Old School Value PDF on valuation. Please help support their service. It’s the only site left that I know of that can provide you with detailed financial analysis such as DCF at an affordable price. Tell Mike I sent you.
So are we falling into the feared value trap as the stock completely fell out of bed last week when value stocks as a group handled the sell-off far better than growth? THOR is down 11.39% from the deeply depressed price Orthwein purchased AND he just purchased it. Ouch. We know as we followed Mr. Orthwein into the stock. The answer to that question is probably not.
The balance sheet is healthy and the stock ranks high in our proprietary valuation methodology which we happen to share just like open-source code. See the checklist at Perfect Ten. When you search ‘perfect 10’ on our website the blog pulls up a 2013 report Apple, if not a perfect 10, Very Close.
One of the intangible things we look for from insider buying is information that is not known to the general public. The efficient market theory is kind of a self-serving argument as share price discovery by definition reflects all known information. What we are looking for from insider activity is the unknown information, the misunderstood information, or the catalyst that will radically impact the stock market’s pricing discovery mechanism. In the case of Thor Industries, it might be the electrification of the EV market. I mean why not? THOR looks like the leader. Actually, they may be the only entrant, could I dare say- they might become the Tesla of recreational vehicles? They own Airstream and that’s a brand that Elon actually loves if this photo below is any proof.
Airstream Enters the EV Era with Thor eStream RV Concept
A trailer park owned by SpaceX on the west side of Boca Chica village.Photograph by Eli Durst
Winnebago WGO has similar financial metrics as THO but lacks insider buying and the towable segment like Airstream and other brands that Thor Industries has. Both of them fell off a cliff last week and the only explanation is the threat of $150 oil if sanctions take hold if Russia invades. Camping World Holdings behaved in a similar manner. Oddly enough crude oil futures declined slightly on Friday.
Perhaps
Name: Moorman Charles W
Position: Director
Transaction Date: 2022-01-20 Shares Bought: 15,000 Average Price Paid: $83.76 Cost: $1,256,445
Company: Oracle Corp. (ORCL)
Oracle Corporation provides products and services that address enterprise information technology environments worldwide. Its Oracle cloud software as a service offering includes various cloud software applications, including Oracle Fusion cloud enterprise resource planning (ERP), Oracle Fusion cloud enterprise performance management, Oracle Fusion cloud supply chain and manufacturing management, Oracle Fusion cloud human capital management, Oracle Fusion cloud advertising and customer experience, and NetSuite applications suite. The company also offers cloud-based industry solutions for various industries; Oracle application licenses; and Oracle license support services. In addition, it provides cloud and license business’ infrastructure technologies, such as the Oracle Database, an enterprise database; Java, a software development language; and middleware, including development tools and others. The company’s cloud and license business’ infrastructure technologies also comprise cloud-based compute, storage, and networking capabilities through its Oracle cloud infrastructure as a service offerings. Further, it offers infrastructure offerings comprising Oracle autonomous data warehouse cloud service, Oracle autonomous transaction processing cloud service, Internet-of-Things, digital assistant, and blockchain. Additionally, the company provides hardware products and other hardware-related software offerings, including Oracle engineered systems, enterprise servers, storage solutions, industry-specific hardware, virtualization software, operating systems, management software, and related hardware services; and consulting services. The company markets and sells its cloud, license, hardware, support, and services offerings directly to businesses in various industries, government agencies, and educational institutions, as well as through indirect channels. Oracle Corporation was founded in 1977 and is headquartered in Austin, Texas.
Wick Moorman was appointed to Oracle’s Board of Directors May 2018. He is currently a senior advisor to Amtrak, where he previously served as president and CEO from August 2016 until January 2018. Prior to that and until 2015, Moorman was CEO (from 2005) and chairman (from 2006) of Norfolk Southern Corporation. From 1975 to 2005, he held various positions in operations, information technology, and human resources at Norfolk Southern Corporation. Moorman serves as a director of Chevron Corporation and previously served as a director of Duke Energy Corporation and Norfolk Southern Corporation.
Opinion: Oracle’s is in a lot of businesses, traditional legacy Gorilla in the database business, and has made a strong move into the cloud. After all, that’s survival and I give Ellison kudos as he has seen the writing on the wall. It’s a giant organization and Ellison has done a masterful job at staying relevant compared to IBM and others that have lost their way. Oracle moved their headquarter to Austin, Texas in 2000.
Oracle doesn’t have the growth potential of many other tech companies but after the recent price drops it’s trading at a more reasonable valuation. Oracle blew out its earnings on December 9th and the stock rose 17% the following day with multiple analyst upgrades. Then just a few days later they announced on the 20th they would buy Cerner for $95 in an all-cash deal. and the stock Unlike some on the Street, I like the Cerner deal. Cerner is one of two companies that have a throat lock around the hospital system in this country. Epic is the other one and it is private so there are no comparables.
Name: Moskovitz Dustin A
Position: CEO Chairman 10% Owner
Transaction Date: 2022-01-13 Shares Bought: 750,000 Average Price Paid: $63.57 Cost: $45,489,978
Name: Moskovitz Dustin A
Position: CEO Chairman 10% Owner
Transaction Date: 2022-01-19 Shares Bought: 1,250,000 Average Price Paid: $54.38 Cost: $67,971,300
Company: Asana Inc. (ASAN)
Asana is a web and mobile application designed to help teams organize, track, and manage their work. Forrester, Inc. reports that “Asana simplifies team-based work management. Asana helps teams orchestrate their work, from small projects to strategic initiatives. Headquartered in San Francisco, CA, Asana has more than 100,000 paying customers and millions of free organizations across 190 countries. Global customers such as Amazon, Japan Airlines, Sky, and Under Armour rely on Asana to manage everything from company objectives to digital transformation to product launches and marketing campaigns. Asana, Inc. offers a work management platform. The Company’s platform enables teams to orchestrate work, from daily tasks to cross-functional strategic initiatives. With its solution, Asana enables individuals to manage and prioritize across each of the projects. Its solution enables individuals to collaborate with teammates and have visibility into each team member’s responsibilities and progress. The Asana solution aids the team leads to manage work across a portfolio of projects or processes. The Company enables executives to communicate company-wide goals, monitor status, and oversee work across projects to gain real-time insights into which initiatives are on track or at risk. Asana is powered by its multidimensional data model called the work graph. The work graph captures and associates work units, the people responsible for executing those units of work, the processes in which work gets done, information about that work, and the relationships across and within the data.
Dustin Moskovitz is the co-founder and CEO of Asana. As Asana’s CEO, Dustin is dedicated to creating a product that helps the world’s teams collaborate effortlessly, in addition to leading the company’s award-winning culture. Prior to founding Asana, Dustin co-founded Facebook and served as the company’s first Chief Technology Officer and VP of Engineering.
Opinion: I wish Moskovitz would jus tender for the whole Company. Perhaps he will, and rethink this whole going public nonsense now that the Company has gone cash flow positive and shouldn’t have to access the equity markets again. Last week I wrote about DocuSign and Asana because there was insider buying in both of those names. DocuSign got crushed with the other fallen NASDAQ cloud stocks. This is truly a case of throwing the baby out with the bathwater.
DocuSign is down 9.9% from the previous week when the CEO purchased shares. As a small DocuSign customer, I’m familiar somewhat with the product. When it first came public there was some concern that Adobe with its giant Adobe Creative Cloud footprint could crush them, basically give away the signature feature as part of the Acrobat upgraded product. Now I realize that Docusign is actually an existential threat to Adobe’s Acrobat which is a stale, outmoded technology. It’s just another standard that’s likely to be disrupted by DocuSign.
Ironically JP Morgan’s brilliant analyst covers both companies and he just downgraded DocuSign after they guided lower on their sales pipeline at just 19-20% growth at their last quarterly update. I will give the analyst credit he knows the numbers and the two companies but I don’t understand the logic of keeping it underweight at this price. His DCF model said that the Company was worth $175. I mean at Friday’s closing price of $116.13 that’s just a 34% return. Most people I know would be happy with that kind of return in their portfolio. Not to mentions that the TAM for E signature is gigantic and DocuSign is just getting started in owning this market and perhaps others. We are big buyers of DocuSign and not Asana.
I feel very differently about the two company’s products and services. In the case of an economic recession, Asana has very little insulation from it. DocuSign has become an indispensable way of doing business in multiple industries. There is no turning back from the digital signature, the electronic agreement, and the entire workplace transformation underway before and only accelerated by the Pandemic. Asana has numerous competitors. Perhaps they don’t have all the bells and whistles but Microsoft Team, SalesForce Slack, Google Workspace- well, they’ll get there if they want to. And that’s just the largest companies in the world targeting collaboration. There are dozens of smaller nimbler competitors, including Evernote and many more.
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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. Do your own analysis. They can easily be wrong about, 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!
We like Fly on the Wall for keeping up with what events might be happening, analysts comment, and whatever else could be moving the stock. Dow Jones news service is an essential tool but many services pick up their feed like they do Bloomberg. For quick financial analysis, it’s hard to beat Old School Value.
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. 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
