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Insider Weekends: Daniel Springer Buys More DocuSign

  • January 16, 2022

For years we saw the notable insider sales group dominated by tech companies each week but the tables have turned recently. After the recent pullback in growth stocks and specifically software-as-a-service (SaaS) companies, many of these companies are down 60% or more from their peaks and insiders have started buying. The top 3 stocks on the notable insider purchases list this week are SaaS companies. Like value investors, insiders are often early in buying their company’s stock and it is not unusual to see a stock decline further after the initial excitement around the insider purchase dies down. This is especially true for companies that have experienced a recent sharp decline in their stock price. One could argue that this provides long-term investors enough time to build a position.

An initial purchase grabs my interest and I often like to see if there are follow up purchases and if other insiders are also buying. The hardest part is determining if the insider has unique insights about the future or if there are other factors driving their purchase. Beyond attempting to signal the market, insiders are so close to their companies and so in tune with the stock price that sometimes the purchases are driven by anchoring bias and they fail to see the broader changes that might be occurring in their sector or the economy.

In my special situations mid-month update published yesterday, I discussed “broken growth” stocks like the ones on the notable insider buys list and a strategy related to SPACs. I think it might be too early to start buying growth stocks but some of them are starting to look attractive and I plan to start nibbling on the long side in the coming weeks if the downward momentum continues.

We wrote the following about an insider purchase by the CEO of DocuSign (DOCU) last month,

The huge 42% single day drop in DocuSign (DOCU) we discussed last week triggered an insider purchase at the company with the CEO purchasing 34,751 shares worth $4.99 million on the open market. This is the first insider purchase at the company since it went public in April 2018 at $29 per share. The tides have certainly changed as we are now seeing insiders of high-growth companies starting to buy shares after years of mostly selling them.

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