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Principal Investment Strategy

With literally hundreds of thousands of insider transactions being reported each year, how do we separate the meaningful transactions from the not so meaningful?

While all insiders are well-qualified to evaluate a company’s future prospects, some are much better than others at identifying and taking advantage of situations where they believe the market has temporarily undervalued their company’s shares. For more than a decade The Opus Group Equity Strategy Team has analyzed insider buying behavior to uncover actionable investment ideas.

While all insiders are well-qualified to evaluate a company’s future prospects, some are much better than others at identifying and taking advantage of situations where they believe the market has temporarily undervalued their company’s shares. For more than a decade The Opus Group Equity Strategy Team has analyzed insider buying behavior to uncover actionable investment ideas.

See examples below.
Enter the name for this tabbed section: Digital Generation Inc. (DGIT)
On February 19, 2013, DGIT stock fell over 20% to $6.45 a share on a significant 4th quarter earnings miss. However on the conference call the executives felt confident that business was improving and it would be reflected in the coming quarters. Seven days later, the chairman of the company, along with the CEO and EVP of Global Sales purchased over $2 million worth of stock at an average price of $7.61, a significant cluster purchase!

The Chairman, Scott Ginsburg, had a perfect track record when buying DGIT in the open market with an average return on his previous purchases of 160%. His February purchase was his largest ever in the open market.

By August, the stock hit $14.07, up 85%, on significantly improved 1st quarter financial results and the announced sale of the company’s TV business unit for close to $500 million.

Disclaimer
The material above is intended to provide information regarding an investment strategy, and does not constitute a solicitation of an offer to buy or sell any security and is not intended to be a complete summary or statement of all available data. While the example provided above is based on data that we believe is accurate, no representations are made as to the accuracy of such data. The performance reflected in this example is not a guarantee of future performance. The security mentioned is highly speculative and involves a high degree of risk. Securities prices fluctuate and investors may receive back less than originally invested and are not guaranteed.
Enter the name for this tabbed section: Invacare Corp. (IVC)
In April 2013 we identified the same type of buying behavior in medical equipment company Invacare. On April 25th, the company announced 1st quarter results that significantly missed estimates. The management team stated on the earnings call that earnings were dramatically impacted by the company’s consent decree with the FDA which limited their ability to manufacture higher margin products at their main facility in Ohio.

While the Wall Street community left the company for dead, the insiders running the company stepped in. Between April 29th and May 6th, 8 insiders including the Chairman, CEO and 2 SVP’s purchased $768,000 worth of the stock at $12.48. Once again, a significant cluster purchase!

The Chairman, Aaron Malachi III, had a perfect track record when buying Invacare stock in the open market with an average one year return on his previous purchases of 53%. His April purchases were his largest ever - by far!

The stock hit a high of $22.44 on Nov. 5th, up 80% from the insider purchases just 6 months earlier.

Disclaimer
The material above is intended to provide information regarding an investment strategy, and does not constitute a solicitation of an offer to buy or sell any security and is not intended to be a complete summary or statement of all available data. While the example provided above is based on data that we believe is accurate, no representations are made as to the accuracy of such data. The performance reflected in this example is not a guarantee of future performance. The security mentioned is highly speculative and involves a high degree of risk. Securities prices fluctuate and investors may receive back less than originally invested and are not guaranteed.
Enter the name for this tabbed section: Synta Pharmaceuticals (SNTA)
In June 2013 we identified Synta Pharmaceuticals as an actionable idea. On June 3rd, the stock dropped 35% to $4.87 from $7.38 after its experimental lung cancer drug showed less benefit than anticipated in a study. Between June 4th and June 28th, 4 insiders including the CEO, Chief Medical Officer and two Directors purchased $14.5 million worth of the stock at $4.58. Once again, a significant cluster purchase after a significant price drop.

By July 30th, a month later, the stock hit $7.85, up 71% on preliminary results from a trial evaluating its breast cancer treatment.

Disclaimer
The material above is intended to provide information regarding an investment strategy, and does not constitute a solicitation of an offer to buy or sell any security and is not intended to be a complete summary or statement of all available data. While the example provided above is based on data that we believe is accurate, no representations are made as to the accuracy of such data. The performance reflected in this example is not a guarantee of future performance. The security mentioned is highly speculative and involves a high degree of risk. Securities prices fluctuate and investors may receive back less than originally invested and are not guaranteed.

Conclusion

The true beauty of The Opus Group's “Signal to Buy” due diligence process, and what makes it so valuable to our clientele, is that we don't just blindly mimic the buys of a company's Chairman; we do a much deeper dive by attempting to separate the truly powerful insider buying behaviors of the most successful corporate insiders in America from the daily transactional "noise". We believe that this gives our clients the ability to invest with a much higher level of intelligence.

Contact The Opus Group today to find out if investing along side corporate insiders is a strategy that fits your portfolio.

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