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

I thought we had put in some lows in some of the beaten-down tech names but I’m not sure about that after last week’s punishing finish.  Talk about a schizophrenic market. The bond market had a convincing rally with utilities leading the pack as the vibe has gone from a hot economy to one that may already be in recession according to chief market strategist from Charles Schwab, Liz Ann Sonders.   There were few insider trades to add to market confidence.  We’re in the thick of earnings season now and most insiders are restricted due to the quarterly earnings blackout.  This week’s insider buys are large and in some brand names.  If we see a market continuing to go lower without a commiserate pickup in insider buying by the end of July, we’re in worse shape than I am thinking.

 

 

Finviz Chart

Name: Wilmott Timothy J
Position: Director
Transaction Date: 2022-06-28 Shares Bought: 10,000 Average Price Paid: $120.00 Cost: $1,200,000.00
Company: Darden Restaurants Inc (DRI)
Darden Restaurants, Inc., through its subsidiaries, owns and operates full-service restaurants in the United States and Canada. As of May 30, 2021, it owned and operated 1,834 restaurants, which included 875 under the Olive Garden, 533 under the LongHorn Steakhouse, 170 under the Cheddar’s Scratch Kitchen, 81 under the Yard House, 63 under The Capital Grille, 44 under the Seasons 52, 42 under the Bahama Breeze, and 26 under the Eddie V’s Prime Seafood brands.

Since November 2013, Mr. Wilmott, 60, has held the position of Chief Executive Officer at Penn National Gaming, Inc., a prominent owner and operator of gaming, racing, and video gaming terminal operations with a focus on slot machine entertainment. He formerly held the positions of President and Chief Operating Officer of the Company. Before that, Wilmott held the positions of Eastern Division Division President and Chief Operating Officer of Harrah’s Entertainment, Inc. (now Caesars Entertainment Corporation). Wilmott is also the current Chairman of the American Gaming Association and a member of the board of directors of Penn National Gaming, Inc.

Opinion: Darden’s has been around forever and is firmly entrenched in its Middle America franchise with Olive Garden. It’s trading at its lowest comparative ratios whether it’s price to earnings, free cash flow yield, price to owner’s earnings, and enterprise value to EBIT. I have to believe that’s the motivation behind this sizeable purchase from the former CEO of Penn, Wilmott. The Motley Fool just issued a buy alert on the company, citing, that despite macro challenges, Darden is still increasing same-store sales and forecasting a strong 2023. It just raised its dividend payout and authorized a new $1 billion share buyback program. The company utilizes its scale to keep costs down and maintain strong margins. These are similar things that multiple analysts said after Darden’s latest earnings report on June 23rd where it lowered FY23 diluted cont ops EPS $7.40-$8.00 versus the consensus $8.15

The last time Willmot bought stock in Darden’s was March 2020 when he purchased $1M worth of stock at $58.50. Now he is paying more than twice per share for over $1M.  Is this confidence gleaned from such a good investment the first time or is it opportunistic investing?

 

 

Finviz Chart

Name: Rogers John W JR
Position: Chief Operating Officer DKC
Transaction Date: 2022-06-30 Shares Bought: 10,000 Average Price Paid: $102.96 Cost: $1,029,646.00
Company: NIKE Inc. (NKE)
American sportswear firm Nike, Inc., formerly known as Blue Ribbon Sports (1964–1978), is based in Beaverton, Oregon. Bill Bowerman, a track & field coach at the University of Oregon, and Phil Knight, a former pupil, established it as Blue Ribbon Sports in 1964. In 1966, they opened their first store, and in 1972, they unveiled the Nike shoe line. In 1978, the business changed its name to Nike, Inc., and two years later it became public. By the beginning of the twenty-first century, Nike had retailers and distributors in more than 170 nations, and their “swoosh” emblem, a curved check mark, was well-known everywhere.

Mr. John W. Rogers, Jr., serves as Director of the Company. Ariel Investments, LLC, a privately held money management company that Mr. John W. Rogers, Jr. created in 1983, services individual and institutional investors through its mutual funds and separate accounts. He is the company’s chairman, chief executive officer, and chief investment officer. Mr. Rogers serves as a Trustee for Ariel Investment Trust, a holding company for the six mutual funds his company administers. The Woodrow Wilson Award, given annually to the Princeton University alumnus whose career-best represents a commitment to national service, was given to him in 2008. It is the highest honor bestowed by the university. He co-chaired the Presidential Inaugural Committee in 2009, and more recently, he joined the Board of Directors of the Barack Obama Foundation. Mr. Rogers holds directorships in The New York Times Company, McDonald’s Corporation, and Exelon Corporation.

Opinion: Nike looks expensive to me even after dropping from the end of the year’s $170 loft price. Nike has always had a high multiple due to decades of consistent growth. This usually comes down. Citi analyst Paul Lejuez lowered the firm’s price target on Nike to $116 from $123 and keeps a Neutral rating on the shares. Nike’s Q4 results were slightly better than consensus but its guidance was below consensus and market expectations, Lejuez tells investors in a research note. The lower guidance reflects what management says is a cautious approach to China and an expectation that it will take significant markdowns in the first half of the fiscal year to get inventory back in line, notes the analyst. Lejuez says “there is a lot of Covid-related noise” in China near term and those increasing promotions add the risk that demand will get pulled forward or the Chinese consumer will get used to markdowns and expect them to continue. He believes Nike’s risk/reward is balanced at current share levels.

 

Finviz Chart

Name: Wichterich Michael
Position: Chairman
Transaction Date: 2022-06-24 Shares Bought: 5,000 Average Price Paid: $83.16 Cost: $415,800.00
Company: Chesapeake Energy Corp (CHK)

Name: Dell’Osso Domenic J JR
Position: CEO
Transaction Date: 2022-06-24 Shares Bought: 3,000 Average Price Paid: $82.04 Cost: $246,126.00
Company: Chesapeake Energy Corp (CHK)

Name: Viets Joshua J.
Position: COO
Transaction Date: 2022-06-23 Shares Bought: 1,700 Average Price Paid: $75.19 Cost: $127,820.00
Company: Chesapeake Energy Corp (CHK)
In order to produce oil, natural gas, and natural gas liquids from subterranean reserves in the United States, Chesapeake Energy Corporation, an independent exploration, and production firm, acquires, explores, and develops assets. The company has stakes in the liquids-rich Eagle Ford Shale in South Texas, the natural gas resource plays in the Marcellus Shale in Pennsylvania’s northern Appalachian Basin, the Haynesville/Bossier Shales in northwestern Louisiana, and the Marcellus Shale in Pennsylvania’s northern Appalachian Basin. As of December 31, 2021, it had estimated proven reserves of 661 million barrels of oil equivalent and had interests in around 8,200 gross producing wells, comprising 6,500 wells with working interest and 1,700 wells with an overriding or royalty interest. The business was established in 1989, and Oklahoma’s capital city serves as its base of operations.

In October 2021, Michael A. Wichterich has presided over the board of directors of Chesapeake. Prior to that, he held the positions of Interim Chief Executive Officer of the Company from April to October 2021 and Chair of the Board of Directors from February 2021. The Permian Basin is the company’s primary focus, and Mr. Wichterich is its founder and CEO. Three Rivers Operating Company LLC is a private exploration and production company. Mr. Wichterich worked as the Chief Financial Officer of Texas American Resources, New Braunfels Utilities, and Mariner Energy before forming Three Rivers Operating (NYSE: ME). In addition, Mr. Wichterich started his career at PricewaterhouseCoopers, where he worked on energy audits. ​

In October 2021, Domenic J. Dell’Osso Jr. was chosen to serve as president and CEO. Since November 2010, he has held the positions of Executive Vice President and Chief Financial Officer. Prior to that, he worked from August 2008 until November 2010 as vice president of finance and chief financial officer of Chesapeake Midstream Development, L.P., the company’s sole midstream business. Mr. Dell’Osso worked as an energy investment banker for Jefferies & Co. from 2006 to 2008 and Banc of America Securities from 2004 to 2006 prior to joining Chesapeake.

In February 2022, Josh J. Viets was named executive vice president and chief operating officer. His most recent position was Vice President, Delaware Basin for ConocoPhillips’ Permian Basin Business Unit. In 2002, Mr. Viets started working at ConocoPhillips. He has since held a number of technical and managerial positions both in the United States and the United Kingdom. In operations, engineering, subsurface, and asset management, he has held executive positions. Early in his career, he supported a variety of properties across the ConocoPhillips portfolio as a reservoir and production engineer.

Opinion: The entire oil and gas group, the best performing sector this year, recently retraced a significant portion of those gains YTD. For example, Chesapeake is down almost 40% from its highs. Insiders are obviously viewing this pullback as a buying opportunity. I think they’re right. Electricity demand is expected to soar due to increased electrification of the transportation fleet. There are only limited ways to make electricity.  Natural gas, coal-fired solar wind, and hydroelectric. 

Record drought just about assures no growth in the already mature hydroelectric industry.   Renewables as desirable as they may be are just ungodly expensive and cumbersome to replace always available natural gas and coal. Nuclear is being decommissioned and ungodly slow to permit and build. Coal is well, coal. A dirty fuel of last resort.

World events have proven that fighting Russia while depending on them for natural gas is proof of one of our most obvious political and governmental blunders in history.  It’s an absolute no-brainer to understand we will be hooked on fossil fuels for much longer than the population is beginning to understand and more than likely we will never get off of natural gas until the planet runs out of it. 

We’re estimated to have 100 years of supply in the US but we’re supplying natural gas to an increasingly larger part of the world and that’s going to make a big dent in the 100-year supply. Natural gas is a commodity that could really go up in value as well as the companies getting it out of the ground,

 

Finviz Chart

Name: Staffieri Michael David
Position: Chief Operating Officer DKC
Transaction Date: 2022-06-2 Shares Bought: 20,000 Average Price Paid: $77.70 Cost: $1,554,000.00
Company: Davita Inc (DVA)
DaVita Inc. serves chronic kidney failure patients with renal dialysis treatments. In outpatient dialysis facilities, the firm runs renal dialysis centers and provides related lab services. It also offers outpatient, hospital inpatient, and home-based hemodialysis services; it operates clinical laboratories that perform standard laboratory testing for dialysis and other physician-prescribed laboratory tests for ESRD patients, and it manages and administers outpatient dialysis clinics. Furthermore, the firm offers disease management services to 16,000 patients in risk-based integrated care plans and 7,000 patients in other integrated care plans, as well as vascular access services, clinical research programs, physician services, and complete renal care services.

In March 2014, Michael D. Staffieri was appointed chief operating officer of DaVita Kidney Care. He held the position of Senior Vice President, Kidney Care, from July 2011 until February 2014. Since his initial hire in July 2000, Mr. Staffieri has held a variety of positions with us, most recently serving as our Vice President of Operations and New Center Development from March 2008 to July 2011. Mr. Staffieri previously worked in finance for Arthur Andersen LLP from 1999 to 2000 before joining our company.

Opinion: I’ve always wanted to own Davita. It has the Berkshire Hathaway imprimatur. It is one of Warren Buffett’s protege managers’ largest holdings. I would imagine that Berkshire Hathaway will soon add to its 36 million shareholdings. This is a large purchase by someone who ostensibly understands the business as well as anyone, the Chief Operating Officer.

According to Post on the Fly,  DaVita faces the risk of a multi-year overhang after the SCOTUS ruling, says Barclays. After the Supreme Court ruled in favor of Marietta Memorial Hospital Employee Health Benefit Plan in a fight with DaVita and remanded the case back to the lower courts, Barclays analyst Sarah James said the ruling against the company presents the risk of a multi-year sentiment overhang. She had previously sized the bear cash risk at 6%-12% EBIT, but believes investor sentiment is “shifting to broader pressure with a bear scenario closer to 10%-20%,” James tells investors. The analyst, who said the roughly 10% stock reaction is in line with her expectations, keeps an Equal Weight rating and $128 price target on DaVita shares

 

Finviz Chart

Name: Bortz Jon E
Position: CEO/Chairman
Transaction Date: 2022-06-30 Shares Bought: 26,000 Average Price Paid: $16.54 Cost: $429,988.00
Company: Pebblebrook Hotel Trust (PEB)
An investment firm for hotels that are internally managed is called Pebblebrook Hotel Trust. The business conducts itself as a real estate investment trust (REIT). With a focus on coastal regions, Pebblebrook Hotel Trust is set up to buy and invest in hotel properties predominantly in American cities. The hotels are situated in Seattle, Washington; Stevenson, Washington; Bethesda, Maryland; Boston, Massachusetts; and Washington, D.C. also in California’s West Hollywood. In May 2014, Prescott Hotel, a 160-room establishment in San Francisco’s Union Square, was purchased by Pebblebrook Hotel Trust. The Nines Hotel, a 331-room luxury hotel in downtown Portland, was purchased by Pebblebrook Hotel Trust in July 2014. It is situated across from Pioneer Square.

Jones Lang LaSalle, Inc., LaSalle Hotel Properties, Pebblebrook Hotel Trust, and Jones Lang Lasalle Hotels were all formed by Jon E. Bortz. He is now the Chairman, President, and Chief Executive Officer of Pebblebrook Hotel Trust, as well as the President, Chief Executive Officer, and Director of Portland Hotel Trust (a subsidiary of Pebblebrook Hotel Trust). He is also a past director of the American Hotel & Lodging Association, Inc. and the Ahla Foundation, Inc. Jon E. Bortz previously served as Managing Director-Investment Advisory Division at Jones Lang LaSalle, Inc., as well as President-Hotel Investment & Development at Jones Lang Lasalle Hotels (a subsidiary of Jones Lang LaSalle, Inc.), Chairman & Chief Executive Officer of LaSalle Hotel Properties, and Member-Advisory Board of Governors at National Association of Real Estate Investment Trusts, Inc.

Opinion: I scoured the news and see nothing to account for the precipitance drop in price.

 

Name: Coppola Edward C
Position: President
Transaction Date: 2022-06-30 Shares Bought: 60,000 Average Price Paid: $8.75 Cost: $525,000.00
Company: Macerich Co (MAC)
The company’s roots may be traced back to the Macerich Real Estate Company, which was created in New York in 1964 by Mace Siegel and Richard Cohen, who named their company after combining their first names. In the United States, the Macerich Company is a real estate investment trust (REIT). The Macerich Partnership, L.P., the company’s majority-owned partnership, is in the business of buying, owning, developing, redeveloping, managing, and leasing regional and community shopping complexes.

Macerich Co. was started by Edward C. Coppola. He serves as Vice Chairman and President of this business. Additionally, Mr. Coppola serves on the board of Strategic Hotels Capital, Inc., is a member of the Pension Real Estate Association, The Real Estate Roundtable, the National Association of Real Estate Investment Trusts, Inc., and the International Council of Shopping Centers, Inc.
Mr. Coppola previously belonged to the Urban Land Institute. He graduated from Drake University with a master’s degree after earning his undergraduate degree from the University of Notre Dame.

Opinion: Is a 6.72% dividend worth the risk of a heavily indebted mall store. It hasn’t been so far.

 


 

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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 within 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. SECForm4 is one of the smaller ones but I like supporting Frank. He is not arrogant. He’s helpful and has great prices. He also trades on his own data so I like people that eat what they kill.

“Typos Modus Operandi” if you can’t figure out what I meant
you shouldn’t be reading my emails anyway. In other words, the typos are free.

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.

qThe 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.q

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, 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’ comments, 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