With the start of the holiday season and end-of-year celebrations, insider activity as a whole has also started to slow down. The SEC was closed on both Christmas Eve and Christmas Day, so no insider transactions came in those days and total insider buying for the week dropped to just $63.96 million of stock while aggregate insider selling also dropped significantly to $616.06 million.
Given that this will be our last Insider Weekends article in 2024, we decided to do something a little different. We typically choose one stock from our list of top five insider purchases or sales to feature, but in this article, we wanted to take a look at insider performance over the last year. We compiled performance data of every single company we wrote about in our Insider Weekends articles during 2024, and decided to analyze the results.
Considering we publish every weekend, we usually have less than a couple of days to analyze a specific transaction and hence our general tone is neutral. Every once in a while we get excited by an unusual transaction but more often than not, we build our watchlist to see if there is a company we could elaborate on for one of our monthly spotlight ideas. The insider weekends ideas we classified as “longs” in most cases implied a slightly bullish outlook and the ones we classified as “shorts” in most cases implied a slightly bearish outlook. This was not the year to be short anything and the results reflect that reality.
The average long returned 11.73% while the average short returned -30.62%. The average performance across all insider transactions including both longs and shorts was 6.08%. Keep in mind that the time frame for many of these companies is quite short – none of them have had a full year to play out, so on an annualized basis, our average long returned 19.04%, and our average short returned a very dismal -71.77%.
Another interesting insight that we gained was something that we’ve always intuitively known to be true – insiders, like many value investors, are often early. Performance was always best a few months after the insider purchase, as the thesis takes time to play out, except in outlier cases like Marvell Technology (MRVL), which returned 38.85% just two months after we wrote about the company in October of this year. It appears that it is best to wait anywhere from one to three months after an insider purchase to buy the stock.