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Welcome to edition 339 of Insider Weekends. Insider buying decreased last week with insiders buying $64.58 million of stock compared to $138.18 million in the week prior. Selling on the other hand increased with insiders selling $1.68 billion of stock last week compared to $1.22 billion in the week prior.
After a 3% rally in the prior week, the S&P 500 ended up essentially flat last week and insider buying was also muted as we approach the end of the quarter. It has been challenging to find good investing ideas on the long side in this market. Since the presidential election, the spreads on mergers have also narrowed considerably, making my fall back strategy of merger arbitrage also less appealing. Hopefully there are still opportunities out there and the insiders just might point us to where they are lurking. Until that happens, I am taking a more conservative approach to my portfolio.
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 25.99. In other words, insiders sold almost 26 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 8.85. 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.