by Connorvo
We have been looking at unusual insider compensation activity (executive purchases, sales, grants) for a while now and will start posting the previous week’s findings here.
It is still a fairly new effort and we need a bunch more time/data to verify the long-term results, but the early findings have been promising. We found $SLRX and $YTEN within 10 days of announcements that jumped their stock 25% and 40% respectively (and the stocks below beat the market by 50% since we wrote about them throughout the last week).
1) Dynex Capital Inc ($DX) – Insider Purchases
Dynex Form 4 -> www.sec.gov/cgi-bin/own-disp?action=getissuer&CIK=826675&type=&dateb=&owner=include&start=0
From Yahoo Finance:
Dynex Capital, Inc., a mortgage real estate investment trust, invests in mortgage-backed securities (MBS) on a leveraged basis in the United States.
Dynamix was seeing some nice growth at the beginning of the year, but have fallen 41% to a price of $11.84 since reaching their high of $20.17 on February 20th.
Their Form 4 activity shows a whole bunch of executives and directors purchasing stock over the last few days.
Digging deeper into the purchases we can see that there are some sizable purchases in both dollar amounts and percentage sizes. We also see that some of the purchases were preferred stock purchases.
| Date | Executive Name | Title | Type | Stock Type | Avg Price | Total Purchased | # of Shares | Total Shares | Share Increase |
|---|---|---|---|---|---|---|---|---|---|
| 2020-03-18 | Stephen Benedetti | CFO and COO | P-Purchase | Common | $8.51 | $72.3K | 8.5K | 119.4K | 8% |
| 2020-03-18 | Byron Boston | CEO and co-CIO | P-Purchase | Common | $7.94 | $103.2K | 13.0K | 261.8K | 5% |
| 2020-03-18 | Jeffrey Childress | VP and Controller | P-Purchase | Common | $8.15 | $16.3K | 2.0K | 10.6K | 23% |
| 2020-03-18 | Jeffrey Childress | VP and Controller | P-Purchase | Series B Preferred | $11.19 | $1.9K | 0.2K | 0.2K | 100% |
| 2020-03-17 | Jeffrey Childress | VP and Controller | P-Purchase | Series C Preferred | $16.93 | $27.9K | 1.7K | 1.7K | 100% |
| 2020-03-18 | Smriti Popenoe | EVP and co-CIO | P-Purchase | Common | $10.15 | $77.1K | 7.6K | 68.3K | 13% |
| 2020-03-18 | Robert Salcetti | Director | P-Purchase | Series B Preferred | $12.80 | $35.1K | 2.7K | 2.7K | 100% |
| 2020-03-17 | Barry Igdaloff | Director | P-Purchase | Common | $11.45 | $1.2M | 100.8K | 211.4K | 91% |
| 2020-03-17 | Barry Igdaloff | Director | P-Purchase | Series C Preferred | $17.64 | $20.0K | 1.1K | 1.1K | 100% |
| 2020-03-16 | Michael Hughes | Director | P-Purchase | Series C Preferred | $17.40 | $47.0K | 2.7K | 2.7K | 100% |
| 2020-03-16 | David Stevens | Director | P-Purchase | Common | $11.91 | $4.9K | 0.4K | 4.5K | 10% |
Checking the actual Form 4 forms, we verify that there is no explanation or pre-arranged plan for these purchases.
Dynex does have ownership requirements that require directors to hold 3x their retainer fee in stock, the CEO to hold 5x their salary in stock, and the other specified executives to hold 3x their salary in stock.
Before the market crashed, all of the directors and executives were well above their ownership guidelines. The market crash pushed the CEO and EVP below their threshold, but their purchases did not put them back over the threshold (they have until December 31, 2020, to reach the threshold).
| Date | Executive Name | Title | $ Amt Owned | $ Amt Required | Delta |
|---|---|---|---|---|---|
| 2020-03-18 | Stephen Benedetti | CFO and COO | $2.6M | $1.3M | $1.3M |
| 2020-03-18 | Byron Boston | CEO and co-CIO | $3.0M | $3.5M | -$479.3K |
| 2020-03-18 | Smriti Popenoe | EVP and co-CIO | $788.3K | $1.3M | -$516.7K |
| 2020-03-17 | Barry Igdaloff | Director | $2.4M | $255.0K | $2.2M |
| 2020-03-18 | Robert Salcetti | Director | $1.1M | $195.0K | $935.4K |
| 2020-03-16 | Michael Hughes | Director | $1.4M | $255.0K | $1.1M |
2) SITE Centers Corp ($SITC) – Insider Purchases
SITE Form 4 Activity -> www.sec.gov/cgi-bin/own-disp?action=getissuer&CIK=894315&type=&dateb=&owner=include&start=0
From Yahoo Finance:
SITE Centers is an owner and manager of open-air shopping centers that provide a highly-compelling shopping experience and merchandise mix for retail partners and consumers
The start of 2020 has been rough for SITE. They entered 2020 with a stock price near $12.75 and then saw it fall 55% to its closing price of $5.67 on March 20th.
The recent Form 4 activity shows their CEO, CFO, and a Director making purchases on the open market. The CEO made a sizable $568,000 worth of purchases while the Director and CFO increased their positions by 11% and 23% respectively.
| Date | Executive Name | Title | Type | Stock Type | Avg Price | Total Purchased | # of Shares | Total Shares | Share Increase |
|---|---|---|---|---|---|---|---|---|---|
| 2020-03-19 | David Lukes | CEO | P-Purchase | Common Shares | $5.20 | $520.0K | 100.0K | 368.2K | 37% |
| 2020-03-19 | David Lukes | CEO | P-Purchase | Preferred Class A | $12.00 | $24.0K | 2.0K | 2.0K | 100% |
| 2020-03-19 | David Lukes | CEO | P-Purchase | Preferred Class K | $12.00 | $24.0K | 2.0K | 2.0K | 100% |
| 2020-03-19 | Conor Fennerty | CFO | P-Purchase | Common Shares | $4.58 | $50.4K | 11.0K | 59.7K | 23% |
| 2020-03-19 | Terrance Ahern | Director | P-Purchase | Common Shares | $3.96 | $106.9K | 27.0K | 263.2K | 11% |
The individual Form 4 forms show that there was no explanation given for the purchases, so we can assume these were not part of some pre-arranged plan.
SITE has ownership requirements requiring the CEO to own 5x their salary in stocks, the COO and CFO to hold 3x their salaries, and the Directors to own 5x their cash retainers.
Before the market crash, all of the executives were above the stock ownership thresholds (except for the CFO who recently became CFO and has until March 31, 2025, to meet the requirement). The market crash put the CEO well below his ownership requirement and his purchases did not put him back over the requirement.
\ Mr. Fennerty’s salary was not present in the most recent Proxy Statement because he just recently became CFO, so we just used the old CFO’s salary for this table**
| Date | Executive Name | Title | $ Amt Owned | $ Amt Required | Delta |
|---|---|---|---|---|---|
| 2020-03-19 | David Lukes | CEO | $2.1M | $4.3M | -$2114.2K |
| 2020-03-19 | Conor Fennerty | CFO | $338.2K | $1.5M | -$1161.8K |
| 2020-03-19 | Terrance Ahern | Director | $1.5M | $250.0K | $1.2M |
SITE has 4 executives that must file their trades publicly, and we only see the CEO and CFO making open market purchases. This is obviously less compelling than if all 4 executives were to have made purchases, but the CEO paying over $500,000 to increase his holding by over 40% is still noteworthy.
3) Chimera Investment Corp ($CIM) – Insider Purchases
CIM Form 4s -> www.sec.gov/cgi-bin/own-disp?action=getissuer&CIK=1409493&type=&dateb=&owner=include&start=0
We wrote about Chimera last week, but they recently amended their Form 4s to clarify that what they previously said were stock grants were actually purchases by the executives and directors.
From Yahoo Finance:
Chimera Investment Corporation operates as a real estate investment trust in the United States. The company, through its subsidiaries, invests in a portfolio of mortgage assets, including residential mortgage loans, agency and non-agency residential mortgage-backed securities, agency mortgage-backed securities secured by pools of commercial mortgage loans, commercial mortgage loans, and other real estate related securities
Chimera was on a slight upward trajectory during the beginning of the year before falling 58% from their high of $22.98 to their closing price on March 20th of $9.55.
Their Form 4 activity shows that all of their executives (and one director) made purchases (with 4 of the 5 executives making sizable six-figure purchases) on March 18th.
| Date | Executive Name | Title | Type | Share Type | Avg Price | $ Amount Received | # of Shares | Total Shares | Share Increase |
|---|---|---|---|---|---|---|---|---|---|
| 2020-03-18 | Gerard Creagh | Director | P-Purchase | Common | $8.44 | $303.8K | 36.0K | 153.6K | 31% |
| 2020-03-18 | Matthew Lambiase | CEO | P-Purchase | Common | $8.51 | $425.5K | 50.0K | 993.9K | 5% |
| 2020-03-18 | Robert Colligan | CFO | P-Purchase | Common | $9.31 | $139.7K | 15.0K | 237.0K | 7% |
| 2020-03-18 | Mohit Marria | CIO | P-Purchase | Common | $7.75 | $116.3K | 15.0K | 390.9K | 4% |
| 2020-03-18 | Choudhary Yarlagadda | COO | P-Purchase | Common | $7.50 | $304.5K | 40.6K | 366.3K | 12% |
| 2020-03-18 | Phillip Kardis | Chief Legal | P-Purchase | Common | $8.11 | $24.3K | 3.0K | 186.5K | 2% |
Looking at the CEO’s individual Form 4, we see that these were in fact open market purchases and not stock grants as was originally reported. The Form 4 also does not mention that these purchases are part of any pre-arranged plans.
The Proxy Statement verifies that Chimera does have ownership guidelines for the executives and directors that require the CEO to own 5x their annual salary in stock, the other named executives to own 3x their salary, and the directors to own 5x their annual cash retainer.
Even with the almost 60% stock decline, all of the executives and the director that purchased stock are well above their required holding threshold (except the Chief Legal Officer).
| Date | Executive Name | Title | $ Amt Owned | $ Amt Required | Delta |
|---|---|---|---|---|---|
| 2020-03-18 | Gerard Creagh | Director | $1.5M | $600.0K | $867.2K |
| 2020-03-18 | Matthew Lambiase | CEO | $9.5M | $4.3M | $5.2M |
| 2020-03-18 | Robert Colligan | CFO | $2.3M | $1.5M | $763.1K |
| 2020-03-18 | Mohit Marria | CIO | $3.7M | $2.4M | $1.3M |
| 2020-03-18 | Choudhary Yarlagadda | COO | $3.5M | $2.3M | $1.2M |
| 2020-03-18 | Phillip Kardis | Chief Legal | $1.8M | $2.3M | -$468.8K |
Any time you have all of the executives making purchases in the open market when the stock price is at its low point, it is worth paying attention to.
4) Carpenter Technology Corporation ($CRS) – Insider Purchasing
CRS Form 4s -> www.sec.gov/cgi-bin/browse-edgar?CIK=17843&owner=exclude&action=getcompany&Find=Search
From Yahoo Finance:
Carpenter Technology Corporation manufactures, fabricates, and distributes specialty metals worldwide. It operates through two segments, Specialty Alloys Operations and Performance Engineered Products. The company offers specialty alloys, including titanium alloys, powder metals, stainless steels, alloy steels, and tool steels, as well as drilling tools, and metal powders and parts.
Carpenter Tech has been having a rough start to the year before ultimately crashing a whopping 70% to their low of $14.87 at close on March 20th.
The Form 4 activity shows some purchasing activity by 3 of their executives and 1 of their Directors. Not the most compelling purchasing activity as only 3 of the 5 executives made purchases and most of the purchases weren’t huge, but the General Counsel did purchase $220,000 worth of stock increasing his shares by 49%.
| Date | Executive Name | Title | Type | Stock Type | Avg Price | Total Purchased | # of Shares | Total Shares | Share Increase |
|---|---|---|---|---|---|---|---|---|---|
| 2020-03-18 | James Dee | General Counsel | P-Purchase | Common | $22.00 | $220.0K | 10.0K | 30.5K | 49% |
| 2020-03-18 | Tony Thene | CEO | P-Purchase | Common | $17.72 | $97.5K | 5.5K | 164.1K | 3% |
| 2020-03-18 | Brian Malloy | Chief Commercial Officer | P-Purchase | Common | $17.63 | $52.9K | 3.0K | 30.5K | 11% |
| 2020-03-10 | Robert McMaster | Director | P-Purchase | Common | $28.05 | $42.1K | 1.5K | 5.1K | 42% |
The individual Form 4 forms do not give any explanation for these purchases, so it is safe to assume these purchases are not for any pre-arranged plans.
The Proxy Statement tells us that Carpenter Tech has stock ownership guidelines that require the CEO to own 5x their base salary in stock, the SVPs to own 3x their base salaries, and the VPs to own 2x their base salaries.
Before the market crash, all of the executives were well above their required ownership amount, but the crash put everyone well below their requirements and none of their purchasing activity has pushed them over the requirement.
| Date | Executive Name | Title | $ Amt Owned | $ Amt Required | Delta |
|---|---|---|---|---|---|
| 2020-03-18 | James Dee | General Counsel | $455.6K | $846.0K | -$390.4K |
| 2020-03-18 | Tony Thene | CEO | $2.4M | $4.5M | -$2007.8K |
| 2020-03-18 | Brian Malloy | Chief Commercial Officer | $455.7K | $849.2K | -$393.5K |
| 2020-03-10 | Robert McMaster | Director | $75.5K | $330.0K | -$254.5K |