Huge Insider Buys

Good morning everyone. Today we will be going over recent insider transactions. A CEO of a major food distribution company increased his position size by 50% after his stock price got halved by the market. Two commercial real estate companies saw insider buying. A company whose largest tenant is the failing First Republic Bank (trading at 0.25x book value) had their CEO buy stock in the open market. And a biotech company trading under their net cash saw three different insider transactions.

There is a lot to digest and a good amount of information here to keep us busy for the week.

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Insider Transactions

• The CEO of Conifer Holdings (CNFR) purchased 200,000 shares for a total transaction value of $302,000. Over the past five years the share price of Conifer is down 73%. Conifer sells property and casualty insurance products. It is a business I have never really spent much time on as the accounting is a bit confusing. The market cap here is only $20 million and it might be a good one to dig into. I’d be aware how the sharp move in interest rates effects the bond portfolio this company holds.

• I’ve highlighted this name before so a follow up insider buy is compelling. The COO of Ammo, Inc. (POWW) bought 55,000 shares for a total transaction volume of $88k. The stock has continued to decline since I highlighted the name. If the management team can turn around the business and start churning cash flow it could do well here.

• The Chief of Owned Retail at Purple Innovation (PRPL) purchased 23k shares for a total purchase price of $63k. The COO of Purple followed up with a $381k investment. The stock price of mattress manufacturing companies has crashed over the past few years. The entire space has never been able to make any money. If something has changed with the unit economics it might be a good space to get caught up on.

• A few members in the Telegram group have been talking about broken biotech companies recently. A lot of these names trade for less than the cash on their balance sheet. Here is an interesting one with a few insiders buys. Meet Praxis Precision Medicines (PRAX) a company with a $42 million market cap and $100 million of net cash. The CEO purchased $60k worth of stock, a director bought $41k and the CFO bought $7k. Like most bio techs, this thing is burning cash like crazy. That negative enterprise value is not static!

• The CEO of United Natural Foods (UNFI) bought $1 million worth of stock in the open market. The stock has recently fallen from $41 per share to only $24 today. This was a pretty significant buy and took his ownership up 50%. United Foods was recently downgraded by a UBS analyst citing that they would face profitability headwinds in the second half of 2023 as they cycle past significant procurement gains. The company seems significantly undervalued. Their trailing P/E ratio is only 7.0x and they own 13.3 million owned square feet of distribution space and 1.2 million square feet of owned grocery stores. The business margin runs on razors so it would be good to understand the puts and takes with costs and how everything works.

• I think we will start to see more insider transactions from REITs over the coming days as the space has gotten hit hard from higher interest rates. As an example, the CEO of Saul Centers (BFS) purchased $363k worth of his own stock in the open market. The equity has sold off and is trading with a yield of 6.32%. The company manages and owns shopping centers and has a significant amount of net net. Anyone interested in this company should check the debt schedule and see how much debt needs to be refinanced and when. If it is over the near-term they will need to refinance at a much higher rate, reducing cash flows for equity holders.

• The CEO of Paramount Group (PGRE) purchased 217k shares in the open market. The stock has gotten hammered over the past year and has a dividend yield of 7.38%. The company owns Class A office space in New York City and San Francisco and is trading at a book value of only 0.25x. Their top tenant is First Republic Bank (FRC) which represents 6.2% of their rent roll. The stock is probably too low but I don’t know the entire story, their asset base or near-term maturities. This one is definitely worth a look for anyone who likes beaten down companies in out of favor sectors.

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