Postcards: The CEO of the Month Goes To... (And Republic Risk)

Love a stock? You should love it more when the CEO or CFO is buying the stock with their own cash. Time to buy the stock we highlighted over the weekend. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ Forwarded this email? [Subscribe here]() for more You are a free subscriber to Postcards from the Florida Republic. To upgrade to paid and receive the daily Republic Risk Letter, [subscribe here](. --------------------------------------------------------------- [Postcards: The CEO of the Month Goes To... (And Republic Risk)]( Love a stock? You should love it more when the CEO or CFO is buying the stock with their own cash. Time to buy the stock we highlighted over the weekend. [Garrett {NAME}](floridarepublic) Aug 28 floridarepublic   [READ IN APP](   [Republic Risk subscribers can click this link for Wednesday’s issue… here.]( --------------------------------------------------------------- Market Update: This might surprise you, but we lost technology yesterday on the ADX negative crossover, and the rate of change for the MACD slowed down. This is all in preparation for the NVIDIA (NVDA) earnings report. Many justifiable “profit takings” are taking place ahead of today’s event. The sector’s holding up on weekly charts. Selling pressure is relatively low on the S&P 500, with energy largely fueling the drop. Buying has come on the cyclical side, with cruise stocks (the wildest momentum stocks post-COVID) leading the charge on Tuesday. --------------------------------------------------------------- Dear Fellow Expat: And there she goes… off in a tiny plaid dress to Day One of the First Grade. I won’t bore you with the lessons of time and fatherhood. I’m proud that my wife is at least chaperoning her to first grade. Back in my day… I sat on a rock on Merryman’s Mill Road in Phoenix, Maryland - a bustling street for some odd reason, waiting for the bus as hungover drivers buzzed by on the way to work. I remember that day because I was the first stop on the bus route. It almost felt like a prank when I got on that yellow tube… and every seat was open. Today, Amelia will pick up where she left off in math, science, history, and writing. And the “first day of school” concept got me thinking… If I were to design a curriculum for investors and traders - who are looking to buy equities… what would be my first lesson of the day? The answer is easy: Insider buying. Executives Buy For One Reason Peter Lynch once said: "Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise." Consider this… look up at the chalkboard… Why do CEOs and CFOs buy stock with their own cash? Why do they go out of their way to file an SEC Form 4 document and set a plan to purchase the shares that they’ll hold for at least six months? It’s right there on the chalkboard… They think the stock will move higher… It's as simple as that. My interest in insiders started when I studied at Indiana University’s business school under Dr. Ken Carow. He extensively studied [insider activity around mutual-to-stock conversions]( and gave me every book I could find on the subject. Then, in 2018, my father-in-law, Tim Melvin, sent me a very important study from the University of Michigan. This study, “Do Insiders Exploit Anomalies (2018),” explores many different market anomalies and their associated performance. These include momentum, value, insider buying, and the Santa Claus Rally. The authors' findings are incredible… It turns out that between the time that insiders buy a stock… and the time that it’s reported to the public (usually within 48 hours), they generate more alpha than any other anomaly. Yet, we’ve seen these insiders call a bottom, helping to fuel a greater rebound in the stock that traditional investors can exploit. There are multiple ways to trade and invest in executives' conviction buys, from selling puts at similar entry levels to buying and setting narrow stops in the hopes that the stock catches momentum. Then, an even more exciting study altered my enthusiasm for insider activity. Researchers Yifan Zhang and Xuefeng (Shane) Liu called this 2023 study: “International Sales Exposure and Corporate Insider Trading.” This study investigated international sales exposures at companies influencing corporate insiders' trading decisions. The authors conclude that insiders at companies with much higher international sales will outperform U.S. executives without foreign sales exposure. The conclusion is that this global business exposure could provide more valuable information about future performance. Better insight into future performance leads to better-timed investments. And we’ll dig deeper into that study and the types of trades and sizes in the future. Our Focus Here We focus heavily on CEO and CFO insider buying at Republic Research. The reason is simple: No one knows the company's future better than the CEO, and no one knows the company's balance sheet better than the CFO. We’re looking for purchases that extend above the statistically significant level of $100,000. But there’s one other influential insider who captures our attention. That’s passive buyers who own significant stakes in the company—typically 10% or more. Typically, we start with the CEO and CFO buy to gain a better perspective of whether the company is a solid long-term buy or something we’d want to exploit with a trade. As we’ve noted at Republic Insider, Energy Transfer (ET) Chairman Kelcy Warren's long-term buying pattern has been highly bullish for the stock. He’s bought hundreds of millions of dollars in ET stock in the last few years. We’ve witnessed even more buying from Warren —in what is among the largest insider buying campaigns in a decade. ET is a terrific company that will continue to exploit sizable U.S. petro-carbon production. But sometimes, we go the opposite way. In the case of Enterprise Product Partners (EPD), we started our investigation into the company on the expectation of a groundswell of oil-and-gas production in the Permian thanks to greater efficiencies due to new drilling technologies. All of that oil and gas needs to go somewhere, and [EPD has a vast network and various other competitive advantages that I outlined in this free report last week](. Now, new insider buying offers greater conviction of this idea. Last night, I received an email from the beta testing of CEO and CFO insider buying valued over $100,000. At the top, I received the note showing A.J. Teague, co-Chief Executive Officer of Enterprise Product Partners (EPD), purchased 4,180 shares at $29.35 each. This was his second buy in nine months, with the last purchase averaging $26.17.  This provides even greater conviction for a purchase. If you haven’t read the report, make it a priority. Wall Street remains bullish with an average price target of around $33.50, but we can see an upside toward $36.00. In addition, we anticipate that the dividend will continue to expand into the future. If you want more insight into insider buying… [check it out here.]( And stay tuned for updates, as we’re looking to expand on that service in the future. Stay positive, Garrett {NAME} Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. Under company rules, editors and writers cannot recommend their positions. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.   [Like]( [Comment]( [Restack](   © 2024 Garrett {NAME} 548 Market Street PMB 72296, San Francisco, CA 94104 [Unsubscribe]() [Get the app]( writing]()