Welcome to edition 570 of Insider Weekends. This Memorial Day weekend, as we remember those that served and lost their lives, we are still at war with an invisible enemy that has devastated several lives, livelihoods and families. While the U.S. and many other countries have turned a corner, there are several other countries like Japan, India, Malaysia and Brazil that are still in the throes of battle. When I wrote the following on February 9, 2020, little did I imagine that this virus would still be with us.
With the novel coronavirus risk continuing to unfold, I am surprised insider were not selling even more. Beyond the direct impact to the second largest economy in the world, we are now starting to see second order effects due to the impact on the global supply-chain. It was not surprising to hear that a large number of car manufacturers had extended factory closures in China but the second order effects became evident when Hyundai suspended car production in South Korea due to a shortage of parts.
For those that were invested during the SARS pandemic and the Ebola epidemic, it may seem like we will get through this one relative unscathed just like we did the last ones but it is probably a good idea to take risk down a notch or buy some protection in case the infection continues to spread across the globe.
Insider selling ticked up a little that month but did not provide a strong sell signal. Insider buying however provided a strong buy signal in March 2020 very close to the market bottom as we discussed here and a week later in an article titled Insider Buying Once Again Surpasses Insider Selling. Buying protection early last year and then switching to the long side to avoid fighting the Fed made a huge difference last year. I have been buying protection again the last several weeks due to heightened insider selling and more importantly lackluster insider buying as Jesse Felder detailed in his article Insiders Are Sending A Pretty Clear Signal About The Stock Market (And The Economy) last month.
Insider buying increased last week with insiders purchasing $78.75 million of stock purchased compared to $42.36 million in the week prior. Selling decreased to $1.63 billion compared to $1.65 billion in the week prior.