In a market that is rightfully concerned about the continued rise in interest rates, it is fascinating to see the insiders of certain cyclical companies continue to buy stock. They truly hold a variant perception and are looking beyond the near-term pain we are likely to experience or suffer from the usual biases of anchoring and tunnel vision that insiders often do. We once again saw insider purchases at the middle-market investment bank B. Riley (RILY), the diversified REIT American Assets Trust (AAT) and mortgage lender Rocket Companies (RKT). B.Riley has diversified into countercyclical businesses through acquisitions where they can participate in the restructuring of businesses during recessions and CEO Jay Farner of Rocket Companies would have us believe that they have diversified away from just mortgage lending and now provide a full suite of lending products.
The company that however caught my eye this week was Westrock Coffee (WEST), a company that recently went public through a merger with a SPAC. Westrock is a vertically integrated coffee and tea company that provides white labeled beverages to restaurants and other retailers. Think of them as the Sysco (SYY) or U.S. Foods (USFD) of coffee. Unlike most deSPAC companies that drop like a rock after the merger is complete, this one has managed to stay above $10 and even went up right after the merger. A quick glance at the caliber of the management team and the fact that they are profitable (at least on an “adjusted” EBITDA basis) helps explain the strength in the stock. We rarely see insider buying immediately after a SPAC business combination.
SPAC arbitrageurs who are interested in getting hold of warrants for free, tend to redeem their shares to get their $10 per share back. The merger of Westrock Coffee with the SPAC Riverview Acquisition was no different with 73.5% of SPAC holders choosing to redeem shares. The warrants that are currently trading with the symbol WESTW are the ones that interest me the most. Warrants often expire in a year or two but in this case, these warrants expire in August 2027. I would recommend monitoring these warrants closely to pick them up on market weakness or a pullback in the stock. I’ll look into expanding on this opportunity in our next mid-month update.
Welcome to edition 635 of Insider Weekends. Insider buying declined significantly last week with insiders purchasing $37.62 million of stock compared to $161.93 million in the week prior. Selling also decreased to $582.18 million compared to $841.55 billion in the week prior.
Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week went up to 15.47. In other words, insiders sold more than 15 times as much stock as they purchased. The Sell/Buy ratio this week was unfavorable compared to the prior week when the ratio stood at 5.19.