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Happy Holidays and welcome to edition 444 of Insider Weekends. If a Santa Claus rally was supposed to materialize this year, it has yet to happen and the S&P 500 once again declined for the third week in a row. The pace of selling accelerated with a 7% drop last week. There could be various reasons for this market correction ranging from the fed raising interest rates, fears of default from leveraged companies, trade wars, the partial government shutdown, a big drop in oil hurting energy companies, tax loss harvesting and forced liquidation of some hedge funds. An investor I know mentioned that the current market situation has presented opportunities that makes it feel like “shooting fish in a barrel”. The aftermath of the 2008-2009 bear market certainly felt that way but I don’t think we are there yet right now. I do see some interesting opportunities and started nibbling on two new positions last week.
Insiders often step up their buying during market corrections and they could provide signals about companies worth exploring during this downturn. Since we are in the quiet period before the end of the quarter and earnings season, the overall buying has not been as aggressive as I would have expected but insider buying was significantly higher last week compared to the same period last year. Insider buying increased last week with insiders purchasing $209.15 million million of stock compared to $205.39 million in the week prior. Selling on the other hand declined sharply with insiders selling $513.22 million of stock last week compared to $809.7 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 dropped to 2.45. In other words, insiders sold more than 2 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 3.94. This is the lowest Sell/Buy ratio we have seen in nearly 20 months.
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. The Medicines Company (MDCO): $17.26
Shares of this pharmaceutical company were acquired by 3 insiders: