During a highly volatile week for markets, we saw insiders step up and purchase shares, although in aggregate it looked like both insider buying and selling declined compared to the prior week. The dip had to do with large purchases of Carvana (CVNA) in a secondary offering the prior week and large sales of Tesla (TSLA) by Elon Musk to fund the purchase of Twitter (TWTR) as discussed last week.
Once you adjust for both those unusual transactions, insider buying went up last week while insider selling edged up a little. I am not a fan of “adjusted EBITDA” numbers reported by most companies these days but sometimes you do have to adjust the numbers for extreme outlier events like the Tesla sales. Otherwise you end up drawing wrong conclusions like this opinion piece by Mark Hulbert. With earnings season waning and a market decline that has seen some companies drop 80% or 90% from their peaks, I would not be surprised to see insider buying pick up pace in the coming days. Some market participants are seeing the action last week as signs of capitulation but if this is anything like the bear market after the dot com bubble burst, we have a ways to go before the market stabilizes.
It behooves us to remember that insiders are usually early and that their time horizons may not match ours. I discussed this in one of two Twitter threads that discusses signals and noise as it relates to insider transactions last week.
B. Riley (RILY) topped our list once again after a cluster of six insiders purchased shares. We have written about B. Riley several times over the years and it remains a top 3 position for me in my personal portfolio despite the recent pull back in the stock. A drop in its cyclical businesses like investment banking and its exposure to a portfolio of public securities hurt the company but it also has operating businesses and counter-cyclical businesses like a restructuring division that should help the company during this challenging environment.