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Is anyone an expert on form 4 disclosures? I’m hoping to build on my basic understanding. Some specific questions:

- what is the best source for seeing which companies have buying or selling activity?

- how does one differentiate option exercises from outright purchases? I’m trying to understand when leaders put their own capital at risk at market price. 
- with respect to the prior bullet it can be tricky since options can be exercised cashless or on a cash basis. 
 

thanks so much! 

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Hey ray,

 

Insider purchases as a lead-generating tool for potential investments is something I have used for decades.  If you look at insider purchases every day, over time you will quickly be able to see the meaningful ones.  Sometimes there are clusters of someone buying every day for a while, filing every three days (like Dustin Moskovitz buying Asana.  Or Chatham Asset management adding to FST after Tilman Fertitta sweetened the deal, etc..  - These are not recommendations, I don't own those stocks)

 

I like setups like this recent bank de-mutualualization at William Penn Bankshares, WMPN.  You get the de-mutual setup, which is very often combined with a discount to book value setup and the insider purchase setup.  http://openinsider.com/search?q=wmpn   

 

Other stuff you will see every day and it won't mean much.  Horizon Kinetics buys TPL every single day for instance.  There are also fixed income traders that buy closed end fixed income funds regularly but you don't know the rest of their portfolio.  Nick Swenson buys AIRT often, but he wants to maintain control so there might be more than just economic motives.

 

Sometimes you get a nice fat pitch like Jamie Dimon buying a huge block of JPM and making it obvious for everyone.

 

And Biglari.  You will see Biglari using other people's money to buy BH and BH.A shares that he controls...

 

Insider sales don't have the same utility.  Unless its just egregious and obvious.  At SAM, Jim Koch and his wife couldn't dump the shares fast enough.  Also - there was one sale reported that did mark a bottom:  Charlie Munger transferred a huge block of Berkshire shares to his children in exchange for a promissory note at basically the exact bottom of the '08 crash.  Estate planning at its finest.

 

Find a site you like the format of and start looking every day.  You will soon see what stands out and what is just noise.

 

edit: I forgot to mention, since you asked how to differentiate between option exercise, grants, etc, vs actual honest to goodness open market purchases - its helpful to look immediately at the price per share paid.  If its a weird number like 13.47 and the filing shows that to be the average of a bunch of trades, you've probably got a real purchase.  If it's 10 different insiders all buying exactly at $15.00, it probably isn't.  And if the price is way different than the current market price it is either 1.) a typo, 2.) a delayed filing that is way overdue, or 3.) not a real open market purchase.

Edited by gfp
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  • 2 weeks later...
  • 2 weeks later...

Here is another one that might be interesting - this is a company that has gone down a fair bit recently and has insider buying at the current price.  Digital Turbine, ticker: APPS.  

 

So far, this is 3 directors buying shares in the open market in a cluster.  Not huge numbers, between $72,750 and $152,730 in value - at prices ranging from 48.50-50.91 / share.

 

I saw this company written up in a fund letter and had never heard of them.  I still can't understand exactly what they do or how they make their money, but they are profitable and growing quickly.  They just completed 2 large acquisitions that should increase revenue considerably while only diluting share count by 15% or so.  

 

Directors have bought in the past at much lower prices and done very well on those purchases.  Maybe this company isn't on my AT&T iPhone and that's why I can't figure out what it does / how it makes money.  Who knows...  But it's a standard setup on a volatile tech stock with a small cluster of open market purchases with directors' own money:

 

http://openinsider.com/search?q=APPS

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  • 1 month later...

Following up here, this insider signal in APPS ended up being a good one, up 72% since the August 19th filing, which was also the closing low.  KW, in the post above, is also outperforming the market and pennies from new highs.

 

We should probably add ATCO to the insider buying list since the largest shareholder purchased over $38 million worth of additional stock in the open market from 8/26-9/21.

https://www.sec.gov/Archives/edgar/data/1206860/000119312521279436/d183300dsc13da.htm

 

edit: I guess Fairfax is actually the largest shareholder of Atlas.  This was Washington family entities.

 

Here is another recent insider buy in a company covered on this board, Hamilton Thorne:

https://www.canadianinsider.com/node/7?menu_tickersearch=HTL+|+Hamilton+Thorne

 

153,700 shares at $1.65.  Trade date October 6th, filing date October 8th.

 

 

Edited by gfp
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