One of our favorite insider buying angles is the Change of Heart. Think of it along the lines of the old Sesame Street skit “One of these Things”. They’d show three pieces of fruit and a bicycle. The bike standing out as the one that was unlike the others.
With the Change of Heart, we are looking for a habitual seller that suddenly becomes a buyer, very much not like the other trades or a first-time buyer. As the famed investor Peter Lynch said, “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.”
Rarely do we see a collective change of heart or when just about every insider/director is making their maiden buy or switching from a habitual seller to a buyer. The folks at Forward Air Corporation (FWRD) took it to a whole-nother level.
Forward Air is a leading asset-light provider of transportation services across the United States, Canada, and Mexico. They provide expedited less-than-truckload (“LTL”) services, including local pick-up and delivery, shipment consolidation/deconsolidation, warehousing, and customs brokerage by utilizing a comprehensive national network of terminals.
In addition, FWRD offers final mile services, including delivery of heavy-bulky freight, truckload brokerage services, including dedicated fleet services; and intermodal, first-and last-mile, high-value drayage services, both to and from seaports and railheads, dedicated contract and Container Freight Station warehouse and handling services.
Ten insiders from the Integrated Freight and Logistics company went to the market and bought Forward Air stock last week. (2) To put into a little perspective, they combined to buy $2,020,853 in stock compared to just $1.7 million in buys in the previous 20 years versus more than $243.5 million in sales.
Prior to last week’s buys…
- Director George Lynch sold 11 times for more than $1.6 million (3)
- Director Craig Carlock made his maiden buy (4)
- Director Robert Campbell bought it for the first time after six previous sales. (5)
- Chief People Officer (what is that?) Kyle Mitchen acquired stock following a pair of prior sells (6)
- Director Allen Ronald is another first-time buyer (7)
- As is Director Chitra Nayak (8)
- Add President and Chief Executive Officer (CEO) Thomas Schmitt to the first-time list too (9)
- CLO and Secretary Michael Hance had nine prior sales, taking home more than $4 million before last week’s purchase.
- Both Directors Laurie Ann Tucker and George Mayes were the only ones who stayed on the same side of the trade as bulls. (11,12)
They all jumped in after FWRD went into reverse after announcing plans to team up with privately owned Omni Logistics which “is an asset-light logistics and supply chain management company that facilitates domestic and international deliveries for customers.” (13)
On August 10, 2023, Forward announced the merger with the stock closing at $103.65. The next day, FWRD closed at $77.37. It seems, the 10 insiders disagree with Wall Street’s reaction and the dramatic price drop led to a mass change of heart and maiden buys.
In a press release, CEO Schmitt said, “The integration of Omni will drive high-margin freight to Forward’s LTL network and provide Forward with direct access to more than 7,000 customers in high-growth, high-value end industries and an increased domestic footprint.”
He added, the “transaction is expected to be 5% dilutive to cash EPS in 2024 (the first full year after closing), it is expected to be highly accretive in 2025, delivering accretion of 9% based on projected realized synergies.” (14)
OVERALL: Forward Air Corporation (FWRD) could sputter in the near term as management works its way through the merger with Omni. Earnings could take a small hit in 2024 but rebound sharply in 2025. In the meantime, the company pays an annual dividend of $0.96 per share (1.49 percent).
With a beta of 1.13, Forward is slightly more volatile than the S&P 500, the last few weeks notwithstanding, and is appropriate for investors with slightly above-average risk tolerance and time horizon well into 2025.
1 – https://blog.tornado.com/insider-buying-pay-attention-6d3ee3a7a08b
2 – https://www.secform4.com/insider-trading/912728.htm
3 – https://www.secform4.com/insider-trading/1217429.htm
4 – https://www.secform4.com/insider-trading/1494271.htm
5 – https://www.secform4.com/insider-trading/1307261.htm
6 – https://www.secform4.com/insider-trading/1707150.htm
7 – https://www.secform4.com/insider-trading/1196048-2.htm
8 – https://www.secform4.com/insider-trading/1752463.htm
9 – https://www.secform4.com/insider-trading/1751373.htm
10 – https://www.secform4.com/insider-trading/1608473.htm
11 – https://www.secform4.com/insider-trading/1391264.htm
12 – https://www.secform4.com/insider-trading/1361098.htm
13 – https://www.fool.com/investing/2023/08/17/why-forward-air-stock-was-stuck-in-reverse-this-we/
14 – https://ir.forwardaircorp.com/news-events/press-releases/detail/351/forward-air-reiterates-value-creation-potential-of