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Welcome to edition 373 of Insider Weekends. We are very excited to announce the addition of another event driven strategy to InsiderArbitrage called Spinoffs. This new strategy will track both upcoming spinoffs as well as recently completed spinoffs. For completed spinoffs, you will be able to track the performance of both the spinoff as well as the parent company. A well known and successful spinoff was the spinoff of Chipotle (CMG) from McDonalds (MCD) through an IPO priced at $22/share more than a decade ago. We wrote the following in April 2017 about a recent spinoff with insider buying,
I am currently rereading Joel Greenblatt’s You Can Be a Stock Market Genius and in the book he makes a case for tracking spin-offs and especially paying attention to insiders of spin-offs. Yum China was spun off from Yum! Brands (YUM) last October and has significantly outperformed its parent with a gain of over 28% when compared to a nearly flat stock for Yum! Brands. Investors also bid up the stock more than 5% following this purchase in a down market.
We have been tracking insider transactions and mergers for over 7 years but are relatively new to spinoffs. So if you have any suggestions or thoughts about this new strategy, we are all ears.
Getting back to insider transactions, insider buying increased with insiders purchasing $85.56 million of stock compared to $29.30 million in the week prior. Selling also doubled with insiders selling $3.27 billion of stock last week compared to $1.55 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 dropped to 38.16. In other words, insiders sold more than 38 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 52.91.