“Strange days have found usStrange days have tracked us downThey’re going to destroyOur casual joysWe shall go on playing or find a new town”- the Doors 1967

 

We had some technical difficulties with The Insiders Report in getting our payment module to work.  So until we can figure out where the theme and the payment module collide, The Insiders Report is free. Unfortunately, there isn’t much in the way of insider activity to write about, but that’s not stopping the market from lifting. The Dow soared 748 points, and the S&P rose 2.37% on Friday ending one of the best weeks in recent memory yet the S&P 500 is trading exactly where it was a month ago.

In a strange feat, the CBOE Volatility Index, VIX commonly referred to as the “fear index” barely moved, down just 0.80%, near 30, an elevated level that indicates more wild swings ahead. It is indeed strange days. Friday was the first day in October that the 10 Year Treasury yield actually went down yet the 30 year rose normalizing the yield curve.  Undoubtedly the Fed will do something about that next month when they thump their chest on November 2nd declaring their inflation-fighting credentials raising rates another 3/4% in their bloodletting of the inflation dragon.

All bear markets in the last 20 years have ended with a crescendo of insider buying.  As you can see from the cadence of these reports and the lack of notable buying, we are nowhere near such a cathartic moment. One thing for certain, it’s not insider buying that’s making the market go up.  

 

 

Finviz Chart

Name: John C. Bumgarner, Jr.
Position: Director
Transaction Date: 2022-10-13 Shares Bought: 3,288 Average Price Paid: $49.50 Cost: $162,756.00
Company: Enviva Inc. (EVA)
Enviva is a global energy company that focuses on wood bioenergy that is environmentally beneficial. We’re the largest producer of sustainable wood pellets in the world, a renewable alternative to coal that’s part of an all-in renewables plan to reduce carbon emissions, reduce reliance on fossil fuels, and combat climate change. Enviva employs over 1,000 people worldwide, owns and operates nine wood pellet manufacturing plants strategically located throughout the Southeast, and ships the wood pellets to customers all over the world from five deep sea export terminals. Their facilities are strategically located in areas with a well-managed and growing forest inventory, a strong infrastructure, and knowledgeable local employees. In the United States, the United Kingdom, Germany, and Japan, we have offices.

Since April 2015, Mr. Bumgarner has served on the Board of Directors. Mr. Bumgarner has worked for a family-owned, multi-faceted real estate corporation since November 2002, and he is currently working in private investment. Mr. Bumgarner was Co-Chief Operating Officer and President of Strategic Investments for Williams Communications Group, Inc., a high-tech company, from May 2001 to November 2002. In 1977, Mr. Bumgarner joined The Williams Companies, Inc. Prior to joining Williams Communications Group, Inc., he served as Senior Vice President of Corporate Development and Planning, President of Williams International Company, and President of Williams Real Estate Company. Energy Partners, Ltd., an oil and natural gas exploration and production company, has him as a director.

Opinion: Short sellers got smacked around a bit on Friday and EVA moved up 7%. One more insider added his vote of confidence with his dollars buying Enviva’s stock. It wasn’t a big buy and it doesn’t convince me that burning wood chips is a much better business than burning cash.

 

Finviz Chart

Name: Philip A Schlom
Position: CFO
Transaction Date: 2022-10-14 Shares Bought: 3,000 Average Price Paid: $34.99 Cost: $104,970.00
Company: AZZ INC. (AZZ)

Name: Kurt L. Russell
Position: COO
Transaction Date: 2022-10-14 Shares Bought: 3,000 Average Price Paid: $34.89 Cost: $104,670.00
Company: AZZ INC. (AZZ)
The power generation, transmission, distribution, refining, and industrial industries in the US and abroad are served by AZZ Inc.’s galvanizing and metal coating solutions, welding solutions, specialty electrical equipment, and engineering services. The business is divided into the Infrastructure Solutions and Metal Coatings sectors. The Metal Coatings division provides steel fabrication and other industries with metal finishing solutions for corrosion protection, such as hot-dip galvanizing, spin galvanizing, powder coating, anodizing, and plating. It benefits original equipment manufacturers as well as fabricators or manufacturers that offer services to the electrical and telecommunications, bridge and highway, petrochemical, and general industrial industries. Products and services are offered by the Infrastructure Solutions category to serve electrical and industrial applications.

Philip A. Schlom now serves as Vice President, Chief Financial & Accounting Officer at AZZ, Inc. Mr. Schlom has held positions such as vice president of finance, audit, and controls at Exterran Corporation, vice president of global compliance and internal audit at Parker Drilling Company, finance director of engineered products for the Americas at Flowserve Corporation, manager of audit and assurance at PricewaterhouseCoopers LLP, and vice president and controller of Shared Technologies, Inc. (Texas). He graduated from California State University, Dominguez Hills, with a bachelor’s degree.

As Vice President of Manufacturing, Kurt Russell joined Precoat Metals in 2010 and is in charge of providing strategic direction for all sites. In 2016, he received a promotion to President. Kurt was the Director of US Manufacturing for Black & Decker’s Industrial Products Group before he joined Precoat. He graduated from Tennessee Tech University with a mechanical engineering bachelor’s degree.

Opinion: I looked pretty closely at AZZ as there was a flurry of small buys. I didn’t see anything to get me too excited. Sure the electric grid is going to need some major work. The infrastructure business looks like it might have a good run but there is a lot of run of the mill cyclical businesses here.  After all these are small buys so we passed. AZZ is up 4.6% since these purchases.

 

Finviz Chart

Name: Tony Wehner
Position: SVP Chief Procurement Ofc
Transaction Date: 2022-10-14 Shares Bought: 14,823 Average Price Paid: $33.86 Cost: $501,913.00
Company: Dave & Buster’s Entertainment Inc. (PLAY)
Dave & Buster’s Entertainment, Inc. owns and operates entertainment and dining venues for adults and families in North America. Its venues offer a menu of entrées and appetizers, as well as a selection of non-alcoholic and alcoholic beverages and an assortment of entertainment attractions centered on playing games and watching live sports and other televised events. The company operates its venues under Dave & Buster’s name. As of January 31, 2021, it owned and operated 140 stores located in 40 states, Puerto Rico, and one Canadian Province. The company was founded in 1982 and is headquartered in Dallas, Texas. At Dave & Buster’s, you can play hundreds of the hottest new arcade games in our Million Dollar Midway and win tickets for epic prizes.

Since August 2022, Mr. Tony Wehner has served as senior vice president and chief operating officer. Prior to this, he worked at Main Event Entertainment as its chief operating officer from January 2021 until July 2022. Prior to that, from January 2020 to January 2021, he held the positions of Chief Executive Officer at BigShots Golf, Chief Operations Officer at Bar Louie from June 2017 to January 2020, and Senior Vice President of Operations at Logan’s Roadhouse from February 2016 to 2017.

Opinion: Chief Procurement Officer Lehner bought $398J last week. I pretty much let my biases guide my investment and ignored this purchase. Add a $9.86 MM buy from a hedge fund, Hill Path Capital, and another $500k purchase this week from the Chief Operating Officer , Wehner, and we have something up here.  Add to this a regulatory filing, Dave & Buster’s disclosed that CEO Christopher Morris acquired 33,400 shares of Dave & Buster’s stock on July 13 at an aggregate price of $30.54 per share.

Play was up 7.89% on the week as well.  So what’s the enthusiasm for buying Dave and Buster when there is so little buying anywhere else. For starters its certainly a post pandemic play. Frustrated parents and children were shut out of the Dave and Buster playground during the Pandemic.  Perhaps there is enthusiasm from international expansion. Just a few months after announcing its international expansion plans, Dave & Buster inked its first multi country, multi unit deal in Saudi Arabia, United Arab Emirates, and Egypt.

Play is probably just a value play, not heavily leveraged and trading at multiples below pre Pandemic prices but is that enough?

 

Finviz ChartName: Wes Cummins
Position: Director
Transaction Date: 2022-10-13 Shares Bought: 84,300 Average Price Paid: $3.90 Cost: $328,854.00
Transaction Date: 2022-10-13 Shares Bought: 150,000 Average Price Paid: $3.26 Cost: $488,303.00
Company: CalAmp Corp. (CAMP)

Currently, CalAmp is generating data for a global customer portfolio across an installed base of approximately 10 million devices reporting to the cloud-based platform. The magnitude and diversity of this data generation have played an instrumental role in the development of a flexible and scalable cloud platform, the CalAmp Telematics Cloud (“CTC”). CTC’s ability to ingest vast amounts and types of data is critical to the company’s long-term strategy of providing differentiated insights to customers with a wide variety of needs and use cases. The platform also serves as the backbone for CalAmp’s software applications, which offer user-friendly interfaces to interact with the data and insights produced at the edge and in the cloud. Finally, to better address customer needs and enable a focused investment strategy, CalAmp is focused on enabling partnerships with third-party organizations, integrating devices, services, and application features into consolidated solutions.

CalAmp’s ability to provide a full stack solution to end-users across the globe uniquely positions the company to capitalize on a $62 billion total addressable market (“TAM”) that is growing at a 5-year compounded annual growth rate of approximately 20%.1 The market in which we compete is highly fragmented, with the majority of competitors serving a range of subsets of CalAmp’s addressable market. We believe that this fragmentation will allow CalAmp to offer unparalleled value through a consolidated solution set. The company is focusing on transforming toward this vision by building out data-driven solutions, a robust portfolio of partners, and a world-class team of people.

Mr. Wesley C. Cummins is an Independent Director at Sequans Communications SA, an Independent Director at Vishay Precision Group, Inc., a Chairman & Chief Executive Officer at Applied Science Products, Inc. and a Founder & Chief Investment Officer at 272 Capital LP. He is on the Board of Directors at Sequans Communications SA and Vishay Precision Group, Inc. Mr. Cummins was previously employed as an Independent Director by TeleNav, Inc., a Research Analyst by Nokomis Capital LLC, an Analyst by Harvey Partners LLC, a Research Director & Head-Capital Markets by B. Riley & Co. LLC, a President by Riley Investment Management LLC, an Analyst by Needham & Co., Inc., and an Analyst by Kennedy Capital Management, Inc.

Opinion: This sounds like it should be a great business but there is yet to be any evidence of that in CAMP’s execution of it. The Company has had no revenue growth in the last five years. Something doesn’t add up when there is the is giant TAM growing at 20% per year according to the Company’s 10k excerpt above. Until we see some evidence of the change, no matter how slight it might be, we’re on the sidelines.  Mr. Cummins is undoubtedly a smart and sophisticated investor but we don’t know what he is thinking.

 


 

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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.

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.

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 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, 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