Welcome to edition 506 of Insider Weekends. With fears of the COVID-19 virus spreading worldwide, the markets took a large hit last week with the S&P 500 down nearly 9% in a single week. We wrote the following three weeks ago on February 9th,
“With the novel coronavirus risk continuing to unfold, I am surprised insider were not selling even more. Beyond the direct impact to the second largest economy in the world, we are now starting to see second order effects due to the impact on the global supply-chain. It was not surprising to hear that a large number of car manufacturers had extended factory closures in China but the second order effects became evident when Hyundai suspended car production in South Korea due to a shortage of parts.
For those that were invested during the SARS pandemic and the Ebola epidemic, it may seem like we will get through this one relative unscathed just like we did the last ones but it is probably a good idea to take risk down a notch or buy some protection in case the infection continues to spread across the globe.”
With community spread in the U.S., we have now gone past the risk of second order effects and are now going to experience first order impact, whether perceived or real. I expect to see further market declines and if that does transpire, there would be some interesting opportunities in the weeks ahead. I started positioning my portfolio for these events a couple of weeks ago and will elaborate more in a premium post this week.
At risk of missing some opportunities on the long side, I would prefer to stay patient and wait for the situation to unfold. Insiders on the other hand have stepped up their buying as they usually do in downturns. They are probably early this time but their buying will bring some interesting opportunities to light. The top insider buys this week are mostly repeat purchases by insider who had already been buying before this downturn and the buying is concentrated in the energy sector.