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Welcome to edition 305 of Insider Weekends. Insider buying decreased last week with insiders buying $8.03 million of stock compared to $8.36 million in the week prior. Selling increased with insiders selling $596.17 million of stock last week compared to $362.04 million 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 74.28. In other words, insiders sold more than 74 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 43.36. We are calculating an adjusted ratio by removing transactions by funds and companies and trying as best as possible only to retain information about insiders and 10% owners who are not funds or companies.
With both the S&P 500 and the Dow within a stone’s throw of their all-time highs, this big jump in the insider sell/buy ratio could have been a concern if we were not in the thick of the first quarter earnings season. If the ratio remains elevated or insider buying remains muted as we exit the earnings season then the old adage “Sell in May and go away” might be relevant this year. Looking back over the last five years, that rule of thumb worked very well in 2011 and 2015 but not so much from 2012 through 2014, showing how timing the market over the short-term or long-term remains challenging if not nearly impossible.
Note: As mentioned in the first post in this series, certain industries have their preferred metrics such as same store sales for retailers, funds from operations (FFO) for REITs and revenue per available room (RevPAR) for hotels that provide a better basis for comparison than simple valuation metrics. However metrics like Price/Earnings, Price/Sales and Enterprise Value/EBITDA included below should provide a good starting point for analyzing the majority of stocks.
Notable Insider Buys:
1. United Continental Holdings, Inc. (UAL): $50.74
President and CEO Oscar Munoz acquired 19,800 shares of this airline, paying $50.53 per share for a total amount of $1 million. Mr. Munoz increased his stake by 13.76% to 163,675 shares with this purchase.