Today’s newsletter is sponsored by M1 Finance.
Thank you to the +6,000 new subscribers who joined Alpha Letter this past week. You have joined a community over over 23,500 investors who are looking to gain an edge in the stock market.
For the new subscribers I thought I would give a quick background on myself so you can get some color who will be writing to you. But first, a word from this letter’s sponsor….
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Invest In Stocks Like the Great Nancy Pelosi
As a background of myself, I am a former hedge fund guy. I worked on the buyside for over five years trying to find the best investments with the highest “alpha” for my partners.
I have looked at thousands of different investments. Met with hundreds of management teams. And have toured countless facilities.
My specialty is investing in the most illiquid, inefficient and hated companies on Wall Street. I love buying companies at multi-decade lows. I love no growth “melting ice cube” value investments. And I love to buy stock alongside company insiders.
Buying stock alongside company insiders? Is that like insider trading? Like what Nancy Pelosi is doing?
Not really, but it can be just as profitable.
Here’s the thing. Whenever an executive of a company buys or sells stock, it has to be reported with the SEC through a Form 4.
From 4’s are public filings and astute investors can see, almost in real time, when an insider is buying or selling stock.
Tracking these insider trades is one of my favorite ways to make money in the public markets. It’s like getting free deep insider knowledge.
When an insider sells a stock it could be for a variety of reasons: medical bills, new house, discretionary expense, etc.
But when an insider buys a stock it only means one thing: they expect the share price to go higher.
Given my distressed investing style, I love buying stocks at multi-decade lows that insiders are also buying. I did this earlier this year with a small little clothing retailer that is now up over 2,000% in less than a year.
The stock got hammered to under $0.20/share due to COVID-19 and from getting booted out of the NASDAQ. The management team was implying in recent 8-Ks that the outlook was starting to look better and I didn’t think there was a chance of insolvency.
So I started buying the stock.
I thought buying the stock at a multi-decade low when management was implying things were going to get better was almost a sure thing. Like taking candy from a baby. Then a Form 4 was filed.
When I saw that first Form 4 I got ecstatic. Insiders were purchasing their own stock at multi-decade lows, while trying to convey to the market that things were getting better. That is when I bought hand over fist. That stock is now close to $7.00/share in less than one year.
Buying a stock when company insiders are also buying a stock has worked out well for me. It’s about as close as you can get to trading on “legal” insider information. The Pelosi Playbook.
Insiders know their company better than anyone else. So anytime you see insiders buying their own stock it is time to take a hard look at the story.
The stock is trading at a multi-decade low.
The S&P Small-Cap 600 just booted the stock out of its index resulting in forced selling from non-fundamental investors.
The management team is executing a turnaround in the business. Results should incrementally improve resulting in significant operating leverage.
Insiders continue to buy stock hand over fist while executing a corporate turnaround strategy.
The stock is trading way below tangible book value.
In the past the company has generated significant free cash flow. Should the turnaround strategy work there could be meaningful upside at the current valuation.
I have allocated around $17,000 of my “All In” portfolio to this turnaround opportunity that insiders are buying.
For new subscribers I have started a weekly portion of the newsletter called the “All In” portfolio.
The “All In” portfolio will be invested in my highest conviction ideas that I think has asymmetric upside to downside.
The goal is to grow this portfolio as quickly as possible by only investing in my top ideas. So far the portfolio is up over 100% and counting.
Alpha Letter Pro is only $10 per month or $100 per year. Joining Alpha Letter Pro will get you access to all of my highest conviction stock picks and allow YOU to join a community of over 700 investors.
Finally, for investors who missed it. I recently doubled down on a new top idea that I wrote up two weeks ago. Last week the stock got hammered due to a retail selloff that effected almost all retailers. I have written up this company twice (here and here) and successfully exited the position once back in early 2021. I think the stock has meaningful upside over the next 12-18 months and have made it a major part of my portfolio.
Disclosure: Nothing I write is investment advice. I am not a financial advisor. I own stock in almost every company I talk about. I will buy or sell my shares anytime. My newsletter is not proofread. There could be errors or mistakes in my research. Do you own due diligence and make your own independent decision.