Cluster Sale By Insiders of JPMorgan Chase – Insider Weekends

Key Insights:

• Aggregate insider buying and selling data paints a bleak picture with insiders selling more than 39 times as much stock as they purchased last week.
• The 13 week moving average Insider Sell/Buy ratio eclipsed the level we last saw in Q4 2021, which preceded a nearly 25% drop in the S&P 500 and a more than 35% drop in the Nasdaq.
• We are seeing CEOs of companies like Medpace and JPMorgan who have been excellent at timing their opportunistic purchases in the past, sell stock now.
• This is the first time Jamie Dimon has sold common stock of JPMorgan since we started tracking this data more than 13 years ago. Three other insiders including the General Counsel of the company also joined him in selling the stock.
• We are seeing signs of extreme caution when looking at other indicators beyond the Insider Sell/Buy ratio.

We look at insider transactions every week both as a source of new ideas as well as to keep an eye on signals generated by aggregate insider buying or selling. Sometimes these signals are related to significant insider buying across the board as we saw in March 2020 and other times they are related to an individual industry as we saw with energy in Q2 2020 and with regional banks in Q1 and Q2 2023.

Looking at things in the rear view mirror and drawing conclusion is far easier than figuring out what is going on at the present moment. In each of these cases, we called out the unusual activity as it was happening and that is one of the reasons we added both Continental Resources and Diamondback Energy (FANG) to our model portfolio and started a position in First Citizens (FCNCA) last year. These ideas were discussed here, here and here. It is not surprising that these ideas generated gains of anywhere from 52% (FCNCA) to 330% (CLR). Insiders were buying when there was literally blood on the streets for those industries and high quality companies were trading at a significant discount.

Instead of discussing a specific company this week, I wanted to focus on overall insider activity and the signals it is sending us at the moment. In early January there was a lot of chatter around the massive spike in the Insider Sell/Buy ratio, which I discussed in this article on January 7th. I wrote the following in that article:

We have been collecting weekly aggregate insider buying and selling data and calculating the Sell/Buy ratio for twelve years. During that time, there have been a few times when we have noticed some strong signals from aggregate insider buying including in March 2020 when insiders for the first time in a decade purchased more stock than they sold for two weeks in a row.

I used our data to calculate a 13 week moving average and generated the following chart. The reason I used a 13 week average is that it smoothes out volatility in the data, especially since insider activity tends to spike in the middle of each quarter. You are likely to see more activity in February, May, August and November than the other eight months of the year as the fiscal year for most companies tends to align with the calendar year.

There are several interesting things in this chart including how the insider Sell/Buy ratio spiked sharply in February 2020 right before the bottom fell out of the market. The ratio also spiked to a high around the start of Q4 2021 before we saw the big decline in tech stocks and the overall market in 2022.

On the flip side, the Sell/Buy ratio hitting single digits in March 2020 was a powerful buy signal. The dip in late 2022 was also a good signal. Unfortunately it is not just about how many signals a specific indicator gets right but also how many false positives it generates. The Sell/Buy ratio hit a low multiple times in 2022 and the first two instances could have prematurely indicated a bullish signal. The other issue with using a 13 week moving average is that it introduces a significant delay in the signal. A few ways to avoid that would be to look at the weekly data for buy and sells independently, use a four week average or look at the trend/slope of the chart.

I have a section in my upcoming book about the Sell/Buy ratio and when the book comes out in May, I will also publicly release our data for the last twelve years so that investors can use the data to analyze the data in various ways and draw their own conclusions. If you would like access to this data sooner, feel free to reach out to me and I’ll send you the Excel file.

We have seen elevated levels of insider selling during the last few weeks and it is not just related to Jeff Bezos selling $8.52 billion worth of Amazon stock in the last three weeks. We are also seeing heightened selling by insiders at other companies including but not limited to Meta (META) and Walmart (WMT).

While one can make the case for both Bezos and Zuckerberg selling stock to fund their respective Blue Origin or Chan Zuckerberg initiatives, or Sam Walton’s heirs selling Walmart stock for diversification, I am starting to see increased selling by the CEOs of companies like Medpace Holdings (MEDP) and more importantly JPMorgan Chase (JPM).

What is unique about the CEOs of Medpace and JPMorgan is that their purchases and sales have been opportunistic and from what I can see from the form 4 filings, the sales last week were not related to options or RSU exercises or based on an established 10b5-1 plan.

We discussed Medpace and insider buying by the CEO in this Insider Weekends article in mid-2022. Jamie Dimon made a rare insider purchase of JP Morgan stock in February 2016 and this is the first time we have ever seen him sell common stock since we started tracking insider data more than 13 years ago. He did sell some preferred shares in 2012 to buy more common shares.

Beyond the top 5 insider sales, what does aggregate inside transactions data tell us about how insiders are currently perceiving the market? I updated the 13 week moving average chart and as you can see below, it has eclipsed the peak we saw in Q4 2021, which preceded a nearly 25% drop in the S&P 500 and a more than 35% drop in the Nasdaq.

Looking at data from the last week, the only reason the insider sell/buy ratio isn’t even higher than the 39.25 level discussed below is because of insider buying related to the IPO of Maplebear (CART), the parent of Instacart, and buying in a secondary offering by insiders of Iovanace (IOVA), a company that recently received FDA approval for its drug that we discussed last September here.

I don’t like to rely on a single indicator because they can and do generate false positives (May 2013 in the above chart is a false positive) but what I am seeing across other indicators leaves me extremely cautious.

Welcome to edition 722 of Insider Weekends. Insider buying decreased with insiders purchasing $147.76 million of stock compared to $168.82 million in the week prior. Selling also decreased to $5.79 billion compared to $6.03 billion in the week prior.

Sell/Buy Ratio: The Insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by the total insider purchases that week. The adjusted ratio increased to 39.25. In other words, insiders sold more than 39 times as much stock as they purchased. This week, the Sell/Buy ratio was unfavorable, compared to the prior week when the ratio stood at 35.69.

Notable Insider Buys:

1. First Citizens Bancshares, Inc (FCNCA): $1,534.6

Shares of this regional bank were acquired by 3 insiders:

• Vice Chairwoman Hope Holding Bryant acquired 766 shares, paying $1,314.97 per share for a total amount of $1.01 million. These shares were acquired indirectly through a trust.
• Chairman and CEO Frank B. Holding acquired 622 shares, paying $1,315.00 per share for a total amount of $817,930.
• 10% owner Olivia B. Holding acquired 622 shares, paying $1,315.00 per share for a total amount of $817,930. These shares were acquired indirectly through a trust.

You can view the list of recent insider transactions for First Citizens Bancshares, Inc (NC) – Class A here.

2. Agree Realty Corp. (ADC): $57.51

Shares of this retail REIT were acquired by 2 insiders:

• Director John Rakolta Jr. acquired 40,532 shares, paying $56.88 per share for a total amount of $2.31 million. Mr. Rakolta increased his stake by 10.89% to 412,651 shares with this purchase.
• President & CEO Joey Agree acquired 3,500 shares, paying $56.92 per share for a total amount of $199,220. Mr. Agree increased his stake by 0.63% to 561,403 shares with this purchase.

You can view the list of recent insider transactions for Agree Realty Corp. here.

3. Opko Health Inc (OPK): $0.95

CEO & Chairman Phillip Frost M.D. acquired 1,000,000 shares of this healthcare company, paying $0.99 per share for a total amount of $991,700. These shares were purchased indirectly by Frost Gamma Investments Trust.

You can view the list of recent insider transactions for Opko Health Inc here.

4. Hudson Pacific Properties Inc (HPP): $6.53

Director Barry A. Sholem acquired 80,000 shares of this office REIT, paying $6.69 per share for a total amount of $535,200. Mr. Sholem increased his stake by 265.11% to 110,176 shares with this purchase.

You can view the list of recent insider transactions for Hudson Pacific Properties Inc here.

5. Herbalife Ltd (HLF): $8.67

Chairman & CEO Michael Johnson acquired 61,725 shares of this health and wellness products company, paying $8.07 per share for a total amount of $498,300. Mr. Johnson increased his stake by 11.39% to 603,707 shares with this purchase.

You can view the list of recent insider transactions for Herbalife Ltd here.

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Walmart Inc (WMT): $175.56

Shares of Walmart were sold by 3 insiders:

• Director Robson S. Walton sold 8,823,856 shares for $175.18, generating $1.55 billion from the sale. These shares were sold indirectly by a trust.
• President and CEO Douglas C. McMillon sold 9,708 shares for $173.80, generating $1.69 million from the sale.
• Senior Vice President David Chojnowski sold 3,650 shares for $175.00, generating $638,750 from the sale.

You can view the list of recent insider transactions for Walmart Inc here.

2. Amazon.com Inc. (AMZN): $174.99

Shares of Amazon were sold by 7 insiders:

• Executive Chair Jeff Bezos sold 14,006,906 shares for $168.95, generating $2.37 billion from the sale.
• President and CEO Andrew R. Jassy sold 72,048 shares for $168.69, generating $12.15 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• Senior Vice President and CFO Brian T. Olsavsky sold 16,800 shares for $168.97, generating $2.84 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• CEO Amazon Web Services Adam Selipsky sold 15,360 shares for $169.38, generating $2.60 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• CEO Worldwide Amazon Stores Douglas J. Herrington sold 13,352 shares for $169.43, generating $2.26 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• Senior Vice President David Zapolsky sold 10,920 shares for $169.21, generating $1.85 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• Vice President Shelley Reynolds sold 3,100 shares for $168.97, generating $523,807 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.

You can view the list of recent insider transactions for Amazon.com Inc. here.

3. Meta Platforms (META): $484.03

Shares of Meta Platforms were sold by 6 insiders:

• COB and CEO Mark Zuckerberg sold 388,372 shares for $473.13, generating $183.75 million from the sale. These shares were sold indirectly by various entities.
• Chief Financial Officer Susan J. Li sold 30,194 shares for $475.43, generating $14.36 million from the sale. These shares were sold as a result of exercising options or RSUs immediately prior to the sale.
• Chief Technology Officer Andrew Bosworth sold 22,379 shares for $474.78, generating $10.63 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• President, Global Affairs Nicholas Clegg sold 9,407 shares for $476.36, generating $4.48 million from the sale. These shares were sold as a result of exercising options or RSUs immediately prior to the sale.
• Chief Operating Officer Javier Olivan sold 8,290 shares for $473.63, generating $3.93 million from the sale. These shares were sold as a result of exercising options or RSUs immediately prior to the sale.
• Chief Legal Officer Jennifer Newstead sold 1,170 shares for $473.54, generating $554,048 from the sale. 585 of these shares were sold as a result of exercising options or RSUs immediately prior to the sale.

You can view the list of recent insider transactions for Meta Platforms here.

4. JPMorgan Chase & Co. (JPM): $183.99

Shares of JP Morgan were sold by 4 insiders:

• Chairman & CEO James Dimon sold 821,778 shares for $182.73, generating $150.17 million from the sale.
• Co-CEO Commercial & Investment Bank Troy L. Rohrbaugh sold 75,000 shares for $182.74, generating $13.71 million from the sale.
• General Counsel Stacey Friedman sold 6,030 shares for $182.73, generating $1.10 million from the sale.
• Chief Information Officer Lori A. Beer sold 3,920 shares for $182.74, generating $716,356 from the sale.

You can view the list of recent insider transactions for JPMorgan Chase & Co. here.

5. Medpace Holdings Inc (MEDP): $401.67

CEO August J. Troendle sold 200,000 shares of this clinical research-based drug and medical device development services provider for $391.99, generating $78.40 million from the sale. These shares were sold indirectly by Medpace Investors.

You can view the list of recent insider transactions for Medpace Holdings Inc here.

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.