Welcome to edition 515 of Insider Weekends. Investors that tuned in to the Berkshire Hathaway annual shareholders meeting this weekend were probably not encouraged by what they heard. Not only was Warren Buffett selling all his airline stocks during this crisis, he has increased his overall cash position. The buyer of last resort has not stepped in. Some of that is related to the quick actions of the Federal Reserve and Jerome Powell’s broad based buying.
The news that Gilead Sciences (GILD) antiviral medication Remdesivir showed promising results and was granted emergency authorization by the FDA is a big positive but the market was still weak towards the end of last week. This weakness is probably because of the long-term impact of this crisis on unemployment, small businesses and a services oriented economy. The second order effects the market appeared to ignore for a few weeks appear to be manifesting themselves. States and countries that are opening up are not seeing a surge in business as was initially expected and customers are choosing not to visit certain businesses like restaurants. The airlines and other companies in the travel industry are likely to remain in a downtrend and any bottom fishing in this pool might be futile. However one insider appears to disagree as discussed in the Delta Air Lines portion of this post.
We wrote the following last week and my opinion that the risks outweigh rewards right now has not changed. That does not mean I have not been nibbling on the long side and started a new position last week that I plan to add to in the coming months as discussed in our first special situations newsletter we published for premium subscribers.
It is possible that the market is more focused on the positive impact of all these stimulus programs, the fact that several countries in Europe are planning on opening their economies in stages and perceiving these job losses as short-term. The S&P 500 is dominated by a few large companies like Amazon that have done well through this downturn and does not truly represent the damage that has been done. The Russell 2000 index of small companies also held up well last week and it will be interesting to see how it behaves in the near future. I continue to feel the risk remains to the downside.
Insider buying decreased last week with insiders purchasing $14.96 million of stock compared to $23.82 million in the week prior. Selling increased with insiders selling $1.39 billion of stock last week compared to $1.02 million in the week prior. Insider transactions are generally muted during earnings season and I am not surprised the insiders are not buying much. The spike in insider selling could be perceived as mildly bearish as that usually declines along with the insider buying during earnings related quiet periods.