C-Suite Buy of the Week: Executive Moves from Biotech to Banking

It is all true.

The market is priced at ridiculous levels.

The current multiples of earnings, cash flow, assets, and dividends of the S&P 500 SPY imply that we live in a perfect world and perfection will continue to grow at a double-digit rate.

We do not live in a perfect world.

The bond market, usually the far brighter and less emotional market, has been showing great concern and a smudge of outright fear in recent weeks. It has reentered a downtrend even as stocks went higher.

Should we just sell and hide under a rock on top of a mountain somewhere until the headlines improve?

Probably not.

If we have learned nothing else, it is that markets can remain irrational, unrealistic, and overpriced for a very long time.

What we can do is become cautious.

Avoid companies where insiders are selling as the price declines.

Avoid stocks that are being sold by smart money investors with outstanding track records.

Flipping that over, if you are looking to put money to work, look for companies where insiders are making large open-market purchases of shares of the companies they manage.

Look for companies where investors with great track records are stepping up and establishing new company positions.

I recently sat down to review institutional buying and selling activity, and a couple of purchases caught my eye.

One such smart money buy was a biotech company.

Let me be upfront and say that I know nothing about biotechnology.

I am not a doctor, I have never played a doctor on television, and I generally avoid small-cap biotech stocks because that is where money goes to die.

There have been a handful of exceptions over the years, and they were all the result of noticing that a very smart, very successful investor had bought a lot of stock.

I noticed that Harris Kupperman of Praetorian Capital had purchased a 5.5% stake in Immune Bio INMB.

Kupperman, or JKuppy as he prefers to be called apparently, is not everyone’s cup of tea.

He can come across as brash, opinionated, and a tad arrogant.

He runs part of his fund in deep-value stocks and the other half in special situations.

It is almost like looking in a personality mirror.

He is also very good at what he does.

Kupperman runs his fund to do okay in what he calls standard years and to really push the edge when he feels he has uncovered opportunities in deeply undervalued markets and sectors.

It is working.

Since 2019, his fund is up a little over 700%.

Immune Bio is working on developing drugs using its core research that could help treat depression and Alzheimer’s.

Both are massive markets that could lead to substantial partnership opportunities or licensing deals for a company that progresses in developing a successful drug.

The folks at Praetorian are not the only ones excited about the stock. Raymond James analyst Gary Nachman recently wrote a favorable report with an $18 price target for shares of Immune Bio.

That is almost three times the current stock price.

The true test of another intelligence is how much they agree with me, and a closer peek into Praetorian’s portfolio at the end of the third quarter shows that he bought shares of one of my favorite Japanese firms, Nomura NMR.

Nomura has had one of those years that just naturally attracts my attention.

One staffer tried to manipulate the bond market, and the firm had to pay a fine and temporarily lost its status as a primary dealer.

Then, a Nomura staffer was arrested for attempting to murder an elderly client.

These are not the kind of headlines that attract enthusiastic buyers of your stock.

None of this impacts a firm of Nomura’s size, but it creates a cloud around the stock that creates buying opportunities.

The scandals have partially masked that business at Nomura is pretty good. Revenues are rising, and profits more than doubled, as the company reported its largest profits in four years.

The company is buying back stock and paying a cash dividend of 4.3%, rewarding shareholders with its excess cash.

The company is increasing its presence outside of Asia, focusing on wealthy markets like the Americas, India and the Middle East. Early results are promising, with solid gains in the number of customers for both wealth management and investment banking in these markets.

In spite of the strong results and positive outlook, the stock is trading at just 82% of tangible book value and less than ten times earnings.

These are uncertain times in financial markets.

There are as many possible outcomes as there are questions about what lies ahead in 2025.

Avoiding stocks where insiders and the smart money are selling and accumulating the ones they are buying can help us navigate turbulent waters profitably.