Alpha Buying: Uncertainty Reigns but Select Insiders Are Buying the Dip

Insiders have not really responded to the madness of the past few weeks.

There has not been a surge of buying to take advantage of the opportunities created by falling prices.

No Magnificent Seven executives or board members have decided that prices have fallen to the point they need to buy to take advantage of the massive long-term profit potential.

So far, we have not seen activists pounce on undervalued companies to try and force shareholder value down the throats of reluctant boards and management.

In spite of what we all suspect happened on the days surrounding the various tariff announcements, there are no signs of congressional skullduggery in any of the recent filings or disclosures by our duly elected, highly exalted representatives.

Of course, the filings are not due until 45 days after the transaction date, so we have some time for the worm to turn on this one.

The same holds true for members of the executive offices and the high-ranking unelected government officials.

I would like to suggest that all of this means that no one is panicking, and everyone is making intelligent decisions.

The truth is that from the swankiest corporate digs and gilded Wall Street palaces to the bank headquarters buildings consistently located between Chuck E. Cheese and Sunshine Dry Cleaners, confusion reigns.

No one on Capitol Hill, from the cushiest office down to the broom closets in the executive office buildings down the street that house the lowliest members, has a clue what might happen next.

It is extremely difficult to confidently step up and write a check for shares of your company when it is impossible to execute even the most basic plans.

It makes no sense to delay a sale or to raise cash if there is a reasonable chance that a random tweet or policy change can send prices down another 30% or more.

In times of great volatility, a lack of unusual activity is unusual.

At times like these, seemingly normal purchases stand out.

Calavo Growers CVGW is a stock that would seem to be a poster child for tariff-related disaster.

Although the company is based in California, most of the avocado products it sells are grown in Mexico.

While the initial 25% tariff has been delayed, there is always a chance it comes back sometime later this year.

Calavo has been around since 1924, and I get the sense that this is just one more annoyance for an agricultural concern that has thrived in the face of everything from drought to negotiations with the cartels while nurturing and feeding Americans’ love of all things avocado.

Creating a shortage or massive price increase for avocado toast and guacamole is probably not a good idea going into the mid-term elections, so they may be one of the lucky few that escape the surcharge.

CFO James Snyder and Executive VP Michael Browne certainly think the company will deal with any challenges, as they both stepped up and were buying shares as markets plunged last week.

In mid-March, with tariffs looming on the horizon, the board showed a great deal of confidence in the future of the company as well. It announced a new $25 million stock buyback plan.

Lee Cole, President and CEO of Calavo, told investors, “Together with our strong balance sheet, expected cash flow generation, and robust liquidity position, this repurchase program demonstrates our commitment to our shareholders while maintaining our flexibility to invest in strategic growth initiatives and operational improvements.”

MSC Industrial MSM describes itself as a leading North American distributor of metalworking and maintenance, repair, and operations products and services.

For those of us without corporate-speak degrees, this company sells stuff made of metal, including everything from hand tools to HVAC parts and systems and almost everything in between.

MSC has 43 warehouses, 9 regional inventory centers, 5 distribution centers, and 5 manufacturing locations and sells more than 2 million different items.

Industrial distribution is a fragmented business, and MSM Industrial’s ability to handle such an enormous number of items gives it a huge competitive advantage.

Management is decidedly shareholder-friendly, as the stock yields 4.5% and management is actively buying back stock.

The company has some exposure to tariffs as a small percentage of the goods it sells come from Canada, China, and Mexico, but management does not expect it to be a significant challenge.

With all its distribution and manufacturing facilities within the United States, MSC Industrial probably has an additional edge over competitors with international facilities in the current environment.

The former CEO and current Director Mitchell Jacobson already owns almost 2 million shares of stock but last week decided he needed to increase that. He purchased another $11 million worth of stock as markets plunged.

These two insider buys stand out as purchases made by level-headed insiders looking for massive returns from buying into misplaced weakness in good companies.