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Insider Weekends: John Rood Purchases Shares of Fidelity National Financial

  • January 3, 2021

Happy New Year and welcome to edition 549 of Insider Weekends. Insider buying decreased last week with insiders purchasing $92.47 million of stock compared to $111.67 million in the week prior. Selling also decreased with insiders selling $1.22 billion of stock last week compared to $1.69 billion in the week prior. I continue to remain surprised by this level of insider buying at a time when the market is near all time highs and insiders at most companies are entering their earnings related quiet periods. I wrote the following in our January Special Situations newsletter for premium subscribers last night:

The year that we just left behind defied all expectations in myriad ways. Western economies were not expecting nor were prepared for a global pandemic that came back even stronger in a second wave this Fall and Winter. Nor were we expecting the rapid pace of stimulus that left U.S. consumers with more than $1 trillion of disposable personal income as outlined in the NY Times article titled Why Markets Boomed in a Year of Human Misery. This stimulus combined with a rapidly expanding Fed balance sheet that jumped from $4.2 trillion to $7.4 trillion in a single year supercharged returns across asset classes with the S&P 500 returning 16.3% this year and the Nasdaq generating gains of 44%.

To say I am seeing signs of a bubble would be an understatement. The shoeshine boy examples are piling up but we have to be cognizant that this bubble can continue to inflate for some time to come, especially with the passage of the latest $900 billion stimulus package and a very accommodative Federal Reserve.

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 13.17. In other words, insiders sold more than 13 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 15.09.

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.

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