Welcome to edition 531 of Insider Weekends. Insider buying decreased last week with insiders purchasing $78.79 million of stock compared to $129.31 million in the week prior. This level of insider buying stands out for three reasons:
Selling increased significantly with insiders selling $3.07 billion of stock last week compared to $2.09 billion in the week prior. Quite clearly insiders appear to be less enthusiastic about stocks now than they were in mid-March when during a two week period they purchased $1.22 billion worth of stock on the open market. Given the huge rally in the market, it is not surprising to see insiders grow skittish about buying at these levels. I tweeted earlier this week that we are now in “magic money” territory after a big rally in several SaaS stocks and have partially scaled back some positions in the sector including Twilio (TWLO), Zoom (ZM) and Workday (WDAY). With bond yields at historical lows and cash yielding next to nothing, this rally is being driven as much by TINA (There Is No Alternative) as it is by liquidity from the Feb or stimulus programs by various governments.
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 more than doubled to 38.91. In other words, insiders sold almost 39 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 16.18.
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.