EASE Scores
An introduction to ease scores
As per our SSRN paper (found here), our Executive Actions for Self-Enrichment (EASE) scores are calculated quarterly and strive to identify the most recent actions taken by companies in the Russell 3000 index, grading them on a scale from zero to 100. Companies that focus on actions designed toward long-term business goals will score close to 100, while companies that see executives hollowing out the business in the pursuit of short-term profit will score closer to zero. In layman’s terms, scores close to 100 are for companies that are working to grow their businesses for the long haul, while scores close to zero are run by avaricious types who don’t mind ruining their company and their rank-and-file employees if it means they can further line their pockets with unearned capital. We’ll be providing these scores on a quarterly basis right here; no subscription, no fees, just knowledge.
There are two variations of the EASE score that will be provided that each give a different perspective: Initial EASE (iEASE) and Final EASE (fEASE).
The Initial EASE score will be calculated for quarter q as soon as we enter quarter q+1. For instance, Initial EASE for Q3 2020 was calculated in early October after the end of Q3. This Initial EASE score isn’t wholly similar to past quarters, because it features pricing and SEC Form 4 data from the most-recent quarter paired with financials data from the quarter before that. This is due to a lag in reporting on quarterly financials: Q3 2020 financials weren’t reported until Q4 2020, so iEASE paired Q3 2020 pricing and SEC Form 4 data with Q2 2020 financials. Initial EASE isn’t useful in the long-term, but is very useful in quarter q+1, with an annualized returns above 30% for the top decile of Initial EASE companies from 2014-Q2 2020.
Final EASE is calculated similarly to Initial EASE, only it pairs the pricing, SEC Form 4, and financials data all from the same quarter together. Because of this, we cannot calculate Final EASE scores until quarter q+2 (i.e. Q3 2020 Final EASE scores weren’t calculated until Q1 2021). While this lag makes fEASE impossible to use in the short term, Final EASE scores are much more applicable to performance over time due to financials, pricing, and SEC Form 4 data being aligned properly.
Finally, we require a form to be filled out to receive the most-recent version of our EASE scores. This is done for mutual benefit: we obtain an understanding of how many people are looking at EASE, and you get an email when subsequent quarterly EASE scores are posted. Older quarters can be found below the form, as well as the notes for each iteration of the scores.
Notes on Q2 2022 Initial EASE and Q1 2022 Final EASE scores
Update: No change to our financials data source this quarter, so results should be stable. That being said, we’re exploring an open source data platform in the coming weeks that could lead to a shift next quarter. Stay tuned!
Consistency is mostly the name of the game for Final EASE score for Q1 2022: eight of the top ten iEASE scores for this quarter carried over to fEASE, and one of the two new companies was #11 in iEASE (Veritiv Corp, VRTV). Netflix (NFLX) saw a dip down to the mid-98s to fall out of the top ten, while PGT Inc saw an absolute cratering down to 17.29. What ended up taking its place? Quotient Technology Inc (QUOT), which saw its score rise from an iEASE of 11.59 to the top fEASE of 99.96. This comes off the back of very good quarterly financials as far as the EASE model is concerned: a drop in price coupled with most of QUOT’s financials led to it falling into the most-favorable mispricing decile and the least-favorable financials quantiles, a perfect storm of pricing upside off the back of an expected bounceback in financials performance going forward a la Netflix’s iEASE score. Unsurprisingly there is little executive stock movement in Q1 given how turbulent that quartere was in terms of stock performance. Silverbow Resources (SBOW) was the only company in the top teen to see any executive stock transactions, a total of $652k from their CEO. The lack of executive stock transactions and the minimal flux in scoring between iEASE and fEASE coupled with quarterly financials causing a minority of massive swings in scores could all be related: with a dearth of transactions, a much larger emphasis on pricing and financials is required to generate EASE scores. This will serve as a very interesting in situ test of EASE’s analogous fund strategy NRCH (Near-term Returns on Corporate Heuristics): does a reduction in the signal from executive stock transactions lead to a diminished NRCH performance? A combined Q1-Q2 NRCH performance of 13.4% compared to -15.8% in the S&P 500 and -15.4% in the Russell 3000 provides a strong initial “no” to that hypothesis. This is because the feckless end of the iEASE spectrum is still rife with executives selling off shares. The bottom 10 in fEASE combined for $1.54B in direct sales and $1.55B in overall sales, with all of that coming via CEOs. The bottom 10 remains unchanged from before, with such ignominious companies as Restoration Hardware (RH), Nvidia (NVDA), Motorola Solutions (MSI), and Nexstar Broadcasting (NXST) staying in the dredges. The sheer quantity of stock sales happening here at the bottom show that the reduction of transactions is heteroskedastic, or unevenly distributed across the entirety of EASE scores. We might be seeing top-end EASE scores relying more-heavily on pricing and financials information for their placements, but transactions are still alive and well at the other end.
The top 10 Initial EASE scores for Q2 2022 have presented an interesting result that I don’t believe we’ve seen up to this point in EASE’s history: no CEO direct sales and a net purchase of stocks. A total of $193.6M of stock purchases were carried out by the top 10 companies, with $160M of purchases coming from Carvana’s (CVNA) CEO. This mostly carried over to all executives with $442.5M of purchases, but that belies a wide swath of transactional totals across all ten companies: while Carvana saw executives purchase $658.6M of stock while PBF Energy (PBF) saw $247.1M of stock sales by executives. Interestingly enough, there are very little direct transactions this quarter in the top 10; perhaps the public purchase of large amounts of company stock by executives is an attempt at signalling to shareholders and interested buyers that those in charge still believe in the company’s fundamentals? Time will tell if this ends up helping Carvana, B. Riley Financial (RILY), Starbucks (SBUX), and Tricida (TCDA) over PBF Energy and Targa Resources (TRGP). On the flip side, we’re seeing Restoration Hardwaree once again in the bottom 10, along with some new faces in Live Nation Entertainment (LYV) and Conocophilips (COP) as well as some of the old stalwarts returning. Salesforce.com (CRM) returns on the back of $130.2M CEO direct stock sales and $135.5M executive direct stock sales, while Oracle (ORCL) is back on $340.0M of CEO direct sales and $388.9M executive direct sales. However, every single company pales in comparison to Tesla (TSLA), with Elon Musk selling a gobsmacking $8.39B amount of stock, albeit on the public market (other executives sold “only” $62.7M in direct sales). Musk’s “will he-won’t he” circling around whether he’ll buy Twitter or not is likely the impetus around this sum, though the question becomes whether he truly wants to buy the social media platform or was just using it as a smokescreen to offload Tesla stock before the bottom fell out (I have my own unfounded opinions on the subject that I will not bring up here). Either way, this dumping of stock has absolutely butchered Tesla’s standing in EASE: a falling price coupled with a massive CEO selloff and unfavorable financials has served as a trident to pin the company at the absolute bottom of this quarter’s scores. Unless there’s a massive turnaround in TSLA’s fortune in Q3 financials, I have to imagine that the electric car company will be hanging in the basement for Q2 2022 fEASE scores and beyond.
Fill out the fields below to download the Q2 2022 iteration of our Executive Actions for Self-Enrichment (EASE) scores
The information you provide above will only be used to alert you to quarterly releases of EASE scores
EASE SCORE ARCHIVE
Past EASE Scores will be stored down here. Files will be listed first, followed by the quarterly notes.
PAST EASE SCORES
EASE Scores Q1 2022
EASE Scores Q4 2021
EASE Scores Q3 2021
EASE Scores Q2 2021
EASE Scores Q1 2021
EASE Scores Q4 2020
EASE Scores Q3 2020
Notes on Q1 2022 Initial EASE and Q4 2021 Final EASE scores
Update Note: Not much to add here; things went smoothy this time around. We will be exploring switching out our financials data source ahead of next quarter’s results, so there may be more to add to this preface in three months…
We ended up seeing an interesting shake-up between Initial and Final EASE scores for Q4 2021. We have some carryover, with SM Energy (SM), Silverbow Resources (SBOW), Donnelley & Sons (RRD), Veritiv (VRTV), Whiting Petroleum (WLL), Avis Budget Group (CAR), and LSB Industries (LXU) all staying up in the top 10 between iEASE and fEASE. Most of these companies had net purchases of stock or saw no transactions, with the exception of SM Energy ($3.0M indirect by executives) and Avis ($5.0M indirect by the CEO, $50.5M indirect overall). No, the strangeness comes from the companies that moved into the top 10: PGT Inc (PGTI), Oasis Petroleum (OAS), and…Netflix (NFLX). Netflix is the big shocker here; while PGT and Oasis saw $48k in indirect executive sales and $136k in indirect executive purchases, respectively, Netflix made it to the number two spot despite having direct CEO sales of $43.6M and direct executive sales of $78.4M. These values would normally exclude Netflix from the top rungs of EASE scores, so what gives? It’s the financials: most of the financials for Netflix are in the bottom quantile, but EASE believes that the drop in performance is too drastic to be anything but a short-term one. So yes, there were a lot of stocks sold this quarter, but not nearly enough to counteract an expected bump back up. This seems to be playing out in the bottom 10 as well: the usual stalwarts have mostly moved out between iEASE and fEASE, with only Nvidia Corp (NVDA) sticking around thanks to its $143.5M of CEO direct sales and $148.9M in direct sales overall. It seems as though a lot of the stalwarts finally saw the financials downturn that EASE kept insisting was on the way, causing them to move ever-so-slightly out of the bottom 10. That gave space for others to race for the bottom, such as Baker Hughes (BKR, $1.18B in executive direct sales) and Nexstar Broadcasting (NXST), which saw CEO Perry Sook be the sole executive selling off shares in direct sales ($64.7M). Am I reveling in some minor schadenfreude that a former employer* and all-around nincompoop when it comes to digital business is showing up in the bottom 10? Not really, since said feckless individual made off with $64.7M on top of the rest of his haul as he refuses to move into the 21st century.
Since this strangeness in Q4 2021 fEASE scores was driven primarily by financials and not price or stock transactions, it stands to reason that the Initial EASE scores for Q1 2022 would have a decent overlap with last quarter’s final positions. Sure enough, that’s pretty much what we are seeing: PGT Inc continues to lead the top 10, with Silverbow Resources making another appearance and a fair number of last quarter’s top 10 coming in just outside of it this time around. Netflix is at position #14, off the back of an even-lower stock price and $20.0M in indirect stock purchases by CEO Reed Hastings. The top 10 this time around sees only a total of $1.5M in stock sales, all indirect, and all from the CEOs of the New York Times Company (NYT, $858k) and Silverbow Resources ($652k). Outside of Netflix and a couple of totals that are an order of magnitude smaller, the top page of the CSV is pretty much barren regarding transactions. That could be interesting when paired with upcoming financials; is a completely bare stock transaction slate going to be more or less affected by a significant shift in the financials we track? Much like the top 10, the bottom 10 is seeing a lot of familiarity bridging over due to financials released in Q1. In fact, it’s mostly just a rearrangement of last quarter’s fEASE bottom-of-the-barrel, with Nvidia, Restoration Hardware, and Nexstar coming back for another round. The order this quarter for iEASE seems to be driven by the amount of direct stock sales the CEOs of these companies carried out. Restoration Hardware grabbed the top spot with its CEO selling off $569.1M in shares, Roku (ROKU) earned the tenth spot with their CEO selling $69.4M in shares directly, and the other eight falling in order based on CEO direct sales amount. These ten companies saw their CEOs sell off $1.54B in shares in direct transactions, with only an additional ~$10M coming via indirect transactions. This $1.54B accounts for the entirety of all executive direct stock transactions, indicating a wildly unbalanced compensation structure at these companies. It will be very interesting to see how Q2 financials will play into future stock price, amongst other things.
* Nexstar acquired a thriving startup I was working at a few years back and pretty much ran the entire thing into the ground in less than two years. This was a regular habit of theirs: acquire up-and-coming digital ad agencies/tech/etc. and attempt to squeeze them into a dying format/industry. Ping me for some of the more salacious details!
Notes on Q4 2021 Initial EASE and Q3 2021 Final EASE scores
Update Note: A relatively short update this quarter, but not necessarily less important. For whatever reason, our Q3 final prices were off pretty much across the board. The error in pricing averaged out to around 2% across all stocks, with only a small handful exceeding 4% and none exceeding 5%. This error ended up shifting last month’s Near-term Response to Corporate Heuristics (NRCH) fund up by about 1%; a welcome adjustment, but nothing worthy of a cigar and fancy bottle of scotch. The incorrect pricings at the end of Q3 had a similar, minimal effect on EASE scores for Q3: a comparison between this period’s Initial EASE for Q3 and last quarter’s file will show some small shifts, but nothing out of the usual historical adjustment over time for these scores. Apologies for the mistake (which was masked by an even bigger issue, see last quarter’s update note for the deets), even a one-man, zero-revenue operation should not let things such as this fall by the wayside.
In a bit of a surprise, we are not seeing much of a difference between top 10 Initial and Final EASE scores in Q3 2021. SM Energy (SM) and GameStop (GME) remain our top two scorers, while the top 10 continues to be filled with energy and gas companies. Sun Communities (SUI) drove $45.6M and $43.4M in purchases (100% in public markets) at the CEO and Executive level, respectively. Peabody Energy Corp (BTU) saw the most sales, with $29.9M direct and $30.6M overall for executives. The Final EASE top 10 doesn’t have as many petroleum companies as Initial EASE, as Consol and Altus Midstream fell down the list between iEASE and fEASE. Despite a slight rearrangement, we’re still seeing net overall purchases for total CEO ($45.4M) and Executive ($24.1M) categories. How did the top 10 fare over Q4? The two companies with net purchases averaged a 6.73% return for the quarter, while the six companies that saw net sales saw an average return of -17.12% the other two companies averaged -9.69%). Buybacks and executive stock sales make a real difference folks, hence our push to get NRCH off the ground. On the other end, we’re also not seeing much change in the bottom 10 as well: Facebook, Apple, Salesforce, Nvidia, Roku, and Regeneron all remain at the bottom. CEOs sold off $2.90B of stocks directly ($3.14B overall), while executives overall sold off $4.38B directly ($4.73B overall). Given the literal order of magnitude of difference in stock sales between top 10 and bottom 10, does this indicate that the bottom 10 underperformed that -17.12% return mark by the net sales companies in the top 10? Not at all: the average return in the bottom 10 was “only” -4.68%. What gives? Well, the top 10 and bottom 10 aren’t really opposites per se: it’s more that most of the EASE score scale resembles the top 10 (high amounts of buybacks and executive stock sales lead to lower future returns), while the lower end of EASE scores are a roulette wheel (high amounts of buybacks and executive stock sales are not as indicative of future returns). Again, we account for this and other things in NRCH with some additional factors that focus more on return performance instead of corporate governance (or the lack thereof).
Much like in Q4 2020, we’re not seeing much volume in stock sales or purchases in the top 10 Initial EASE scores for Q4 2021. Two companies saw CEO transactions: the CEO of Guardian Health (GH) purchased $20.1M and the CEO of Six Flags Entertainment Corp purchased $10.0M, both entirely on the public markets. Executives net purchased $78.3M with only $1.51M directly sold…and that’s it. Ten transactional points of data out of a possible forty in the top 10. It does seem as though Q4 is the lightest quarter for executive sales and purchases, possibly due to executives receiving stock compensation packages at the end of the year. If this is the case, executives would probably hold off on sales or purchases until the beginning of Q1, making this quarter’s transactions slow to a trickle especially at the top end. I mention this because the bottom 10 does not adhere to this “Q4 is the slow quarter for executive stock transactions” mantra. CEOs in the bottom 10 sold $7.29B of stock directly ($18.6B overall), while all executives sold $7.89B of stock directly ($19.6B overall). There are some recurring bottom-dwellers here: Facebook, Microsoft, Salesforce, Nvidia, and Roku all make reappearances. However, the main driver of transactions this quarter was Tesla CEO Elon Musk selling $16.4B of stock, $5.98B which was sold directly. Musk made a big show of his selling of stock in the Court of Public Opinion to make up for his lack of paying taxes recently, but EASE sides heavily on the side of “action” versus “words”. Musk is very much a showman in the vein of P.T. Barnum (amongst other similarities…), and a lot of his attention-calling actions tend to belie other moves that are best done without attention being paid to them. Did Musk sell off this stock to caterwaul about the absolute tragedy of having to pay taxes like a normal person, or was it his way to couch his offloading of a fair portion of Tesla stock behind manufactured outrage? A wave of good-to-amazing EVs (reviews here, here, here, here, here, here, here, and here courtesy of Doug DeMuro) have been released over the past year that will really threaten Tesla’s share of the EV market and stock price. Is Musk really selling because of tax whinging, or is he offloading shares at what he believes will be close to the apogee of Tesla’s market share? Time will tell, but EASE isn’t bullish on Musk’s bullshit.
Notes on Q3 2021 Initial EASE and Q2 2021 Final EASE scores
Update Note: Our Q3 2021 EASE scores are out a little bit later than usual, but we have a very good excuse for this delay! Our initial source of SEC Form 4 data is no longer reachable by way of our go-to R webscraping package. We spent weeks looking into this, attempting to access the site via multiple computers/OS, replacing the expired DST Root CA X3 trust certificate in an effort for the site to recognize the replacement certificate, and just straight up brute force access via Selenium. Are we expecting you to understand any of that? Not really, we just wanted to emphasize how damn difficult it’s been to get the data! Finally, we ended up throwing up our hands and found an alternative site to obtain the data. The format is a little less-detailed than the original source, but we’ve made some adjustments in the workup and feel that the new data is translatable on to our current historical set. Sorry about the delay, but we wanted to have the utmost confidence that we were presenting the most accurate reflection of corporate malfeasance via buybacks/executive stock transactions as possible.
The latest report presents the Final EASE scores for Q2 2021 and once again we’re seeing GME at the top of the heap. As posited in the previous update, we did end up seeing a shake-up between Initial and Final top 10s, as the lagging financials led to a rearrangement that put CEO and executive sales levels much closer to what we’d expect at the pointy end. There was only a mere $4.72M CEO of stock sales ($1.52M direct), while the executives as-a-whole sold a total of $148.0M ($19.2M direct). That’s a bit higher than we normally see, but $128.9M (and only $616K direct) comes from one company, Intellia Therapeutics (NTLA). NTLA saw a spike in price in late Q2 after announcing positive interim data from an ongoing Phase 1 clinical study in partnership with Regeneron. Selling on the public markets after a jump in valuation due to company success isn’t in the same vein as secret selling off shares before bad news comes to light, so we’re pleased that the EASE model holds true to the spirit of our aim and hasn’t penalized NTLA for this. On the flip side, we’re seeing a tech company bonanza in the bottom 10. Usual suspects Amazon, Facebook, Salesforce, Square, and Roku are joined by Dell and MongoDB, with non-tech firms Corning, Guardant Health, and Hess rounding out the squad. CEOs sold $8.94B ($7.14B directly), led in front by ”My Name” Jeff Bezos and Mike “No Space Rocket Yet” Dell directly selling off $6.63B and $2.99B, respectively. Executives overall sold off $10.9B, with $8.83B coming via direct sales. That venture into double-digit billions of sales marks the highest single sell-off since Q2 of last year, and is a portent of future market uncertainty given that a sharp rise out of a flash recession isn’t buoying sales like it was this time last year. Couple that with the increasing disillusionment with mega tech companies and their practices, and this sell-off is perhaps a signal that tech executives aren’t too bullish on the future direction of their industry’s valuation in the public markets.
How are Initial EASE scores for Q3 2021 faring? Well, hold on to your headwear of choice, because GME is no longer in the top spot! Ok, it’s only fallen to second place on the list, but SM Energy (SM) is our new #1! In our top 10, we’re actually seeing $45.4M in purchases, all due to Sun Communities (SUI), and only $241K in direct sales at the CEO level. For executives overall, we’re seeing $25.8M in purchases, once again led by SUI. There are $31.3M in direct sales by executives, with pretty much all of it coming through Peabody Energy (BTU) and their total sales of $29.9M in the direct market ($30.6M overall). Furthermore, there are a bunch of energy-based companies in the top 10, particularly in petroleum: SM, Peabody, Callon Petroleum, Laredo Petroleum, Consol Energy, and Altus Midstream all fall into this category. This could all be off the back of a rise in oil and gas prices, so I wouldn’t be surprised if we see most or all of these companies start a sell-off once oil and gas prices appear to peak (Not quite as altruistic as I’d hoped…). On the other side, bottom 10 stalwarts Facebook, Salesforce, Dell, and Roku all appear, as well as some other tech companies in Apple and Nvidia. CEOs “only” sold off $3.03B ($3.33B overall) in the quarter, while executives as a whole sold off $4.57B directly ($5.02B overall). Outside of tech, the interesting appearance in the bottom 10 is Regeneron Pharmaceuticals; despite the CEO selling only $143M (all publicly) and executives selling $246M (only $27.0M directly), it’s making an appearance down here in the basement. This is especially noteworthy, given that its drug trial partner Intellia just launched itself into last quarter’s top 10 Final EASE scores with its announcement of promising initial data from the study. What gives? Well, it seems that the sell-off is on across both companies: Intellia saw its CEO sell off $27.1M (all direct) and executives sell off $54.9M (all direct) and has an Initial EASE score of 2.44, well below last quarter’s mark. The delta between the two companies most likely boils down to financials, with the less-known Intellia requiring a more-pristine book in order to attract funding and interest from moneyed institutions. Despite any differences, this large sell-off in both companies after the announcement of preliminary, Phase 1 results seems a bit premature…unless subsequent findings aren’t good and the previous announcement represents a high-water mark for the project. But…wouldn’t that mean that executives at both companies are selling off of private information? I guess we’ll find out…well after any advantageous market positioning can be made by public investors.
Notes on Q2 2021 Initial EASE and Q1 2021 Final EASE scores
Update Note: Much like a tinkerer, master chef, or other never-satisfied perfectionists, we continue to apply minor tweaks and updates to the EASE calculations. This iteration saw us shift the date we’re applying in which SEC Form 4 transactions: instead of applying the date of the transaction, we are switching over to the date of reporting. We have made this correction due to the nature of the SEC Form 4 data into the calculations: public knowledge and the market’s adoption of it is the impetus of much more than the date in which the transactions occur (which are typically private and therefore do not make a ripple in the public markets). While this mostly didn’t affect EASE scores, we did some significant shifts due to some transactions being reported later than the 48-hour window that the SEC requires. In the future, we may take a deeper look into a whether the lag between transaction date and reporting date produces a significant enough signal to add into EASE.
Our Final EASE scores for Q1 2021 are ready to go, and it looks as though nothing could knock GME off of the top rung between the initial EASE calculations and the final iteration. Even outside the meme king of stocks, we’re seeing a weird top 10: Gamestop is joined by a smattering of somewhat random companies such as Tupperware and Party City that have no real coalescence around cap size, industry, or any associative throughline between them. The one big unifier is the lack of CEO transactions: the top 10 saw a net of $499k in CEO stock purchases, though all executives combined sold $75.6M in stock, though only $15.3M of that was via direct sales. On the flip side, much like GME not budging between Initial and Final EASE we saw little change in the bottom 10 compared to the first pass. Facebook holds the ignominious lantern rouge of this quarter’s Final EASE tally, with a staggering $815M in stock sales by Normal Human Mark Zuckerberg and $822M across all executives. Oracle, Roku, Square, Estee Lauder, Texas Instruments (!), and Docusign join FB in the bottom 10, with $2.63B in CEO sales and $4.52B in all executive stock sales. A particular shout-out to Oracle CEO Safra Catz for selling $483M of her stock (or approx. $53.7M per life…because her last na—you know what? you got it, I got it, let’s move past this.) all through direct sales. Very cool and not a sign of attempting to keep the jettisoning of stocks off of the public radar for as long as possible.
As we shift over to the Initial EASE scores for Q2 2021, we can warm the cockles of our hearts with our pride because Gamestop is once again the top of the heap. GME is joined by a whole new set of top 10 companies, though the throughline is once again muddled if it even exists at all. I’m beginning to wonder if the retail bonanza around GME has placed a weighted thumb on the EASE model, causing some distortion in the model that’s leading to the recent weirdness and lack of cohesion in the top 10. That could also account for the higher-than-usual executive sales totals for the top 10: while CEO sales total only $20.3M (with $5.75M directly) all thanks to Bill.com CEO René Lacerte, executives-as-a-whole sold $260M in stock for the period with $256M of that being sold directly. There will most-likely be a shakeup in the top 10 after Q2 financials are released, as some of these sales should lead to some quick valuation deflations. On the bottom, Facebook and Oracle are back along with common bottom-feeders like Amazon, Keurig Dr Pepper, and Dell coming back. These bottom 10 CEOs sold $8.44B in stock (with $7.06B sold directly), with Bezos leading the charge at $6.64B (with $6.63B sold directly). Not to be outdone, the executives of these bottom 10 companies sold $12.7B (with $11.1B sold directly). Interestingly, one of the bottom 10 is Tyme Technologies, one of the top 10 in Final EASE scoring for Q1 2021. In fact, Tyme saw no CEO stock transactions and only a total of $1.09M in stock sales for the period. What led to such a dramatic cratering? Well, the creation of 99M shares of equity and the company’s cash & equivalents rising from $15.8M to $110M set off a couple of alarm bells within the model, as it could be getting ready for a massive buyback of stock to compensate the executives for essentially finding a dump truck filled with around $94M down in the couch cushions.
Notes on Q1 2021 Initial EASE and Q4 2020 Final EASE scores
An additional note about EASE Scores: The current methodology of calculating EASE Scores involves the use of models that take into account the entirety of the historical dataset. Because of this, Initial and Final EASE Scores will see some minor flux in their values as time goes on. An iEASE or fEASE score may see a shift of up to 5%; nothing drastic, but potentially significant for a handful of companies in regard to quantile placements. This flux will diminish over time, as the historical dataset fills out and provides a broad enough sample set to cover >99% of expected values for each of the factors we take into account.
The Final EASE scores for Q4 2020 have been calculated, and once again we’re seeing a top 10 consisting mostly of health/pharma/therapeutics companies, continuing the trend seen in Q3. Cardlytics makes another appearance in the top 10, the second quarter running for CDLX. Only four of the top 10 see any CEO transactions, leading to a $1.93M amount of sales for the period. However, all executives did see a slight rise in overall sales for the period, with all 10 companies seeing transactions totaling $74.5M. On the other side, we continue to see some familiar names in the bottom 10: Amazon, Keurig Dr Pepper, Broadcom, Facebook, Netflix, Estee Lauder, Salesforce, and General Motors all found their EASE scores at 0.12 or below. CEO sales approached a staggering $4.63B, driven heavily by Jeff Bezos’ selling of $3.07B of AMZN stock over the period. All executive sales are even greater, with $7.64B across the bottom 10, driven by Amazon at $3.08B and Keurig Dr Pepper at $2.26B (interestingly, Keurig Dr Pepper had no CEO sales during the quarter). We touched on this last quarter (and will continue to do so until the landscape changes), but the inclusion of two of the top 5 largest companies in the S&P 500 should be concerning for investors. Yes, the inclusion of AMZN and FB here doesn’t mean that there will be a reversion the following quarter…but the longer these companies that make up a sizable portion of the S&P 500 continue to score this low in fEASE just increases the inevitability of a correction occurring.
Moving on to Initial EASE scores for Q1 2021 and oh ho ho, what’s at the top of our list? Why, it’s meme investing darling GME! What are you doing here, you little rapscallion? EASE scoring clearly doesn’t have a “WallStreetBets” or “stonks” factor, so the “retail-led” pump of GME to punish exposed short-sellers isn’t factoring in here directly (see our posts here and here and here for why retail investors were driving the narrative, but not the trading, on GME). So what gives? Well, the eventual settling-out of GME pricing at ~$191 as of the end of Q1 resulted in very strong quarter-over-quarter and year-over-year financials and price movement, two sections that are quite important in regard to EASE scoring. In addition, for a stock that saw a lot of transactional volume over the quarter, the CEO had a grand total of zero transactions and the executives sold a (relatively) small $20.1M. In fact, Q1 was extremely sparse for CEO sales in the top 10: only $774K in sales were carried out. However, executives as-a-whole increased their sales, totaling $93.7M over the three-month period. On the flip side, we once again have some well-knowns and/or regulars down in the bottom 10: Facebook, Oracle, Estee Lauder, Square, Mastercard, and General Motors. $2.41B in CEO sales and $4.59B in executive sales across the bottom 10 will do that, though we could see some shifts in the fEASE follow-up depending on what the financials say in the coming quarter. Surprisingly, Amazon has rocketed up to a 9.66! Proud of you Jeffy-boy!
Notes on Q4 2020 Initial EASE and Q3 2020 Final EASE scores
An additional note about EASE Scores as we get ready to present the second iteration of our public-facing offering. The current methodology of calculating EASE Scores involves the use of models that take into account the entirety of the historical dataset. Because of this, Initial and Final EASE Scores will see some minor flux in their values as time goes on. An iEASE or fEASE score may see a shift of up to 5%; nothing drastic, but potentially significant for a handful of companies in regard to quantile placements. This flux will diminish over time, as the historical dataset fills out and provides a broad enough sample set to cover >99% of expected values for each of the factors we take into account.
The Final EASE scores for Q3 2020 have been calculated, and the top 10 contain therapeutics and pharma, as well as Cardlytics and Whirpool. Cormedix sees a boost from its iEASE score both due to an improvement in financials in Q4, and because of the CEO purchasing $20k of stock over the quarter as well as a total of $541k of stock purchased amongst their executive team. Out of the top 10, only three companies saw any CEO buyback movement for a total of $3.85M and only half had any executive buyback movement for a total of $69.9M. On the other end of the scale, the bottom 10 have a flurry of familiar names: Apple, Salesforce, Keurig Dr Pepper, and Amazon in the ignominious position of having the lowest Final EASE score of the quarter. Given the heavy weighting of both Amazon and Apple in the current S&P 500, any pullback in growth in these two companies could have a major impact on future returns in the US market. However, we also stated on last quarter’s EASE note that we’d see a slowdown in Q4; we did see low returns in the first month of Q4, but the “Biden bump” led to the final half of the quarter taking off on the back of a perceived return to normalcy.
Initial EASE scores for Q4 2020 has a couple of interesting cases. Zillow and CBL & Associates Properties both made it into the top 10, indicating that there may be a pick up in real estate in 2021 as the vaccine rollout picks up steam. Oasis Petroleum also makes the list, possibly indicating some bounce back for oil in 2021 after its wild journey in 2021. Only one company saw CEO stock sales in the top 10 (Novavax, $4.7M) while the top 10 combined for only $6.2M in overall executive stock sales. Meanwhile, we’re absolutely chockablock with well-known names in the bottom 10: Amazon, Facebook, Keurig Dr Pepper, Netflix, Broadcom, Estee Lauder, and Square all make the list. Jeff Bezos led the way this quarter with an unimaginable $3.16B of stock sales, pushing the bottom 10 to a total of $4.67B in stock sales from their CEOs and $8.20B of total stock sales from all executives. The jettisoning of stock by two of the companies that excelled during the pandemic could be an indicator of an expected slowdown in growth for both AMZN and FB. Will this be caused by a move back toward in-person office work as the vaccine gets distributed across the US, increased scrutiny on tech companies regarding anti-trust cases, or just a pattern of unsustainable growth inevitably getting exhausted? This selloff could be the canary in the coal mine, as the growth seen over the past couple of months seems untenable going forward.
Notes on Q3 2020 Initial EASE and Q2 2020 Final EASE scores
EASE scores have gone through a slight readjustment since the launching of our SSRN paper on the subject in an effort to provide scores that better encompass both the quarter they’re in as well as their position in the entire history we’ve compiled so far. An Initial or Final EASE of, say, 90 is based on performance from Q1 2014 onward, not just the quarter it represents. This does mean that iEASE and fEASE scores aren’t fully representative of deciles within a quarter (i.e. that score of 90 could be in the ninth or tenth decile depending on the distribution of scores within said quarter), but a simple quantile assignment to the scores should easily clear that up. This new calculation doesn’t shift scores all that much; the average movement of scores is around 2 points in either direction. We’ll update the SSRN paper with this newer version of the EASE calculations within the next couple of weeks.
This iteration of scores sees the inclusion of Final EASE scores for Q2 2020, which is seeing a domination of pharma companies in the top 10. Our top scorer, Enzo Biochem, also saw a massive shift between iEASE and fEASE, jumping from 19.08 to 99.99 with the shift from Q1 2020 financials to Q2 2020. Tesla is hovering just on the outside of the top 10, which has strong enough financials data to outweigh the direct sale of $15.7M in stock by executives in Q2. This stands in sharp contrast to the top 10, which saw a total $70M of stock purchased over Q2, mostly driven by Mersana Therapeutics and Immunomedics. On the flip side, the bottom 10 is a bit more diverse but contains more household names such as Netflix, Salesforce, Oracle, Blackrock, and Broadcom. Unlike the top 10, the bottom 10 had a staggering $27.5B in stock sales, with $15.1B of that sold directly. Large influxes of direct sales tends to be a portent for future stock price, so we’re confident in a high probability of these companies seeing a slide in their market price over the next few quarters.
For Initial EASE scores in Q3 2020, we’re seeing some consistency with fEASE Q2 2020 companies: Live Oak, Immunomedics, Hawaiian Holdings, and Mersana Therapeutics all reappear. iEASE scores tend to provide a look at short-term performance, so these companies are all poised for strong performance over Q4 2020. There’s more sales than purchases of stock here than in fEASE Q2 2020: $38.6M in stock sales overall with $42.1M in direct sales. On the flip side, the bottom 10 once again contain some pretty well-known names, with Amazon taking the low spot and Keurig Dr Pepper, Broadcom, Salesforce, Apple, and Mastercard all making appearances. The sale of $9.7B of stock ($7.4B in direct sales) goes a long way in lowering their overalls, but the general apprehension around the US market with the lack of additional stimulus may be putting a damper on the sharp bounce-back of tech-based companies since the pandemic-induced low point in the market. The iEASE model seems bullish on a couple of the biggest names in the S&P 500, which could signal a rough go in Q4.