Menu
Welcome to edition 328 of Insider Weekends. Insider buying plunged last week with insiders buying $21.22 million of stock compared to $69.44 million in the week prior. Selling on the other hand increased significantly with insiders selling $1.53 billion of stock last week compared to $787.01 million in the week prior. Over a third of this selling was related to Bain Capital exiting its stake in Trinseo (TSE).
Considering we were at the end of the third quarter and hence a “quiet period” for most companies, we were expecting very few insider transactions both on the buy side and the sell side. We are a little surprised by the increase on the sell side even after taking out the TSE transaction. With the S&P 500 up more than 3% last quarter and close to all time highs, the increase in inside selling probably shouldn’t be that big a surprise.
On a related note, I got a chance to dig deeper into a company that saw insider buying last month and you can read my thoughts about it in an article titled Norwegian Cruise Line: Time To Take A Luxury Cruise?.
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 71.95. In other words, insiders sold almost 72 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 11.33. 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.
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.