Happy Labor Day weekend from sweltering California and welcome to edition 532 of Insider Weekends. Insider buying increased last week with insiders purchasing $111.24 million of stock compared to $78.79 million in the week prior. Selling decreased with insiders selling $2.46 billion of stock last week compared to $3.07 billion in the week prior.
The huge increase in insider selling in the week prior combined with a decline in insider buying stood out to us and we wrote the following about it last week,
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.
It turns out that the insiders were prescient in their lack of enthusiasm for stocks with the S&P 500 index dropping 2.3% last week and the Nasdaq dropping 3.3% after being down as much as 7% at one point. It appears that some of the parabolic moves in certain technology stocks were driven in part by Softbank buying both technology stocks and call options on them. Since momentum begets more momentum, the multi-billion dollar purchases by Softbank were probably the match that kicked off a wildfire in the sector.
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 22.1. In other words, insiders sold more than 22 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 38.91.