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Insider Weekends: Sell/Buy Ratio Spikes Well Over 100

  • February 27, 2021

Welcome to edition 557 of Insider Weekends. In a tumultuous week that saw the S&P 500 pull back 2.45% and the Nasdaq drop 4.92%, insiders chose to hold their horses and not buy on the open market. Insider buying decreased significantly last week with insiders purchasing $32.72 million of stock purchased compared to $144.14 million in the week prior. Selling on the other hand increased significantly with insiders selling $4.82 billion of stock last week compared to $2.99 billion in the week prior.

What is remarkable about the action last week is that this happened at a time when most insiders were not constrained from buying due to earnings related “quiet periods”. Markets were clearly spooked by the rise in U.S. treasury yields despite favorable language from Jay Powell that we are a long way from the Federal Reserve’s employment and inflation targets. The last bastion fortifying extreme valuations started unraveling last week with this rise in both U.S. treasury and mortgage rates. Oddly enough we saw a lot of insider buying in two groups, including  regional banks and REITs. While one group will benefit from rising rates, the other would be hurt by them.

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 went up to 147.22. In other words, insiders sold more than 147 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 20.75.

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.

Notable Insider Buys:

1. American Assets Trust, Inc. (AAT): $31.08

Chairman, CEO & President Ernest S. Rady acquired 117,998 shares of this diversified REIT, paying $29.50 per share for a total amount of $3.48 million. These shares were purchased indirectly by American Assets, Inc.

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