Daily Press (Sunday)

Executives bought shares at Forward Air and Fox

- John Dorfman

It seems only logical that trades by a company’s executives would provide a clue to that company’s outlook.

But if you need academic studies to prove it, there are plenty. The seminal work was done 23 years ago by Nejat Seyhun, a professor of finance at the University of Michigan. His conclusion — that insiders beat the market averages when they trade — has been confirmed my numerous studies since then.

That’s why, four times a year, I devote this column to insider buys and sells that look significan­t to me. Here are two companies with recent insider buys, and one with a sell.

Forward Air

At Forward Air Corp. (FWRD), a slew of insiders purchased shares in August. One of them was Thomas Schmitt, the chief executive officer. Schmitt bought 16,050 shares in mid-August, spending just over $1 million. He now owns about $5 million worth of the shares in all.

In addition to Schmitt, nine directors and three other executives bought shares.

The insider buys followed a 25% drop in the stock on Aug. 11, when Wall Street analysts took a dim view of the company’s acquisitio­n of Omni Logistics.

The price was $3.2 billion, and Forward Air’s revenue in 2022 was just under $2 billion.

Since the demonstrat­ion of faith by insiders, the stock has recovered modestly. It is trading at just under $70 a share, compared to more than $100 a share for most of this year preceding the hefty acquisitio­n.

Forward Air, based in Greenevill­e, Tennessee, is a logistics company that strives to be “asset light.” That means that it doesn’t own most of the planes and trucks it uses for deliveries, but rather leases them or uses subcontrac­tors.

The company has been profitable in each of the past 15 years, with the profit level varying from just OK to extremely good. Return on stockholde­rs’ equity has been in my preferred zone — above 15% — in nine of those 15 years.

The stock sells for 12 times earnings, which I consider an alluring valuation.


At Fox Corp. (FOX), famous as the bastion of conservati­ve and Republican causes, CEO Lachlan Murdoch paid $4.7 million to buy 141,367 shares of Fox stock, which he sold the same day to the Murdoch family trust.

The family trust owns 39.6% of Fox Corp. It also owns most of News Corp., and in turn the Wall

Street Journal, New York Post and the Sun in Britain. Analysts peg the trust’s value at about $17 billion.

Media czar Rupert Murdoch is the family patriarch and owns 40% of the trust. Lachlan is Rupert’s son, one of six children from three marriages. He owns 10% of the family trust and directly owns about $27 million of Fox stock.

Although I disagree with Fox’s ideology, I like the stock’s valuations —14 times earnings, 1.1 times revenue and 1.5 times book value (corporate net worth per share).


Datadog Inc. (DDOG), based in New York City, describes itself as “a cloud-native company that focuses on analyzing machine data.” Obviously, that’s a sexy niche.

Insiders frequently sell shares here. Presumably, their cups are refilled by options grants. What caught my eye is that selling volume in August was the highest since November 2021.

Nine insiders sold shares on Sept. 5, and all of them retained far more shares than they sold. The executives lightening up included Amit Agarwal, president, Adam Blitzer, chief operating officer, and Alexis Le-Quoc, chief technology officer.

The stock, by my lights, is expensive. It trades at 60 times earnings, 16 times revenue and 19 times book value.

Performanc­e record

This is the 67th column I’ve written about trades by corporate executives in their own companies’ stock. I’m able to tabulate 12-month performanc­e for 57 of them — all through from February 1999 through a year ago.

Stocks with insider buys that I recommende­d have beaten the Standard & Poor’s 500 Total Return Index by 1.23 percentage points in 12 months, on average. Stocks with insider buys that I said to avoid have underperfo­rmed the index by 24.88 percentage points.

Stocks where I noted buying but made no comment, or an ambiguous comment, have beaten the index by 12.22 percentage points.

Stocks where I noted executives’ selling have underperfo­rmed by 1.37 percent points.

A year ago, I recommende­d Intel, which advanced 24.5%, and Fox Corp., which declined 9.06%.

Bear in mind that my column results are hypothetic­al and shouldn’t be confused with results I obtain for clients. Also, past performanc­e doesn’t predict the future.

Disclosure: I own Intel shares personally and for some of my clients. I own Intel call options in a hedge fund I manage.

John Dorfman is chairman of Dorfman Value Investment­s LLC in Boston. He or his clients may own or trade securities discussed in this column. He can be reached at jdorfman@dorfmanval­ue.com.

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