Good morning. We are in the heat of earning season with more news coming up everyday. Be on the lookout for initial updates in the Telegram group for stocks I have covered. If the earnings are notable enough and have enough demand from members I will given a more formal update here.
If you missed it, I recently published a new article on a company that is trading under liquidation value and has one of the most aggressive share repurchase plans I have ever seen. I’m guessing the company is bought out over the next 24 months.
Today I will be highlighting the notable insider buys that looked interesting and could be worth digging into some more. But before we get into the insider buys of this week, first a word from today’s sponsor…
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If you don’t care about ESG rules check out Ammo, Inc. (POWW). The company sells ammo for guns and also runs the website gunbroker.com, a website they tried to spinoff recently. The original owner of the gunbroker.com, also a director, went activist on the company and prevented them from spinning the website off into a standalone. To make matters worse, there is an oversupply of ammo in the market as manufacturers ramped up production during COVID-19 and now they are all taking price cuts. The stock is down 60% over the past year and based on comments I am seeing in public forums it looks like people are at max pessimism. Good news is the new President and COO, as of January 6, 2023, purchased 50,000 shares at $2.03 on February 22, 2023. At the current price we have a market cap of $213 million and an enterprise value of $201 million. I don’t have a firm view here but $201 million seems like a cheap price.
Another interesting name that came up on the insider buying screener is Blackboxstocks Inc. (BLBX). The company reminds me of Quote Media (QMCI) as they offer a trading platform for stocks and options. The monthly cost is $99.97 per month and the yearly cost is $959. The company is a nanocap with a market cap of $7 million and $5 million in cash and marketable securities on the balance sheet. There is around $1 million in debt and a weird preferred and warrant overhang. The President and CEO recently purchased 1.1 million shares for $3 bucks a pop (way over the ask which I don’t totally understand), the stock jumped up on the news. The company generates revenue but not enough to cover operating costs. There is a share repurchase program in place — something I would get rid of if I was running the company as they are burning cash flow. The company is so small it could be one to keep an eye on. If they can cut costs and get the unit economics right it could be a decent little company.
The CEO of OneWater Marine (ONEW) purchased 10,000 shares for $297k. OneWater Marine is a boat and luxury yacht dealer that has gotten crushed over the past year from what appears to be a history of poorly timed acquisitions, and the share count tripling over the past five years. In addition, the boating industry has taken a hit as investors believe if we enter into a recession boats will be one of the first items consumers pull back on. Despite this, the stock looks pretty cheap on a trailing basis. They have a P/E of 4.00x and EV/EBITDA of only 5.98x. I’d be hesitant to start a position unless you can underwrite the company generating consistent cash flows during a large economic downturn. If you are interested in the name see if the debt on the balance sheet is dealer level inventory over corporate debt. That could limit the downside in a total wipeout.
Here is a really interesting one with insiders putting up significant capital (one director buying $7.5 million, another buying $99k and another buying $299k). The company is a community bank called Linkbankcorp (LNKB) and went public via IPO in just September of 2022. What is interesting is the company announced an all-in-stock merger for $167.8 million on February 22, 2023 with Partners (PTRS). The deal is expected to close in the third quarter of 2023 with pro forma EPS accretion of 50% in 2024. It is a weird structure where the boards of each company will combine resulting in 22 directors. There is probably an arbitrage opportunity here for someone willing to do the work. Both stocks are illiquid and worth the punt.
Pcb Bancorp (PCB) is another small bank with a market cap of $266 million and tangible book value right around there too. The P/E ratio is only 7x and a director recently bought $18,300 worth of stock through a family trust and an additional $274k a few days later. The company has a 10b5-1 plan and recently announced the intent to take out 5% of the share base through a repurchase program. They also recently increased their dividend with a forward yield around 3.3%.
Those were the stocks that stood out to me this week. If you want a full list of the insider transactions for the week reply to this email and I will send you a copy of the list I used to source these. There are close to 100 names so I am sure I missed some good ones.
Have a great Tuesday!
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