Welcome to edition 513 of Insider Weekends. This must be the most hated market rally in recent history. Most market participants I talk to or follow don’t see this as a sustained move up and find it hard to believe the bear market is over. Large cap stocks represented by the S&P 500 have recovered significantly faster than their smaller brethren that live in the Russell 2000 index. The Nasdaq is down less than 4% for the year. Although if you look beyond companies like Amazon.com that have a large impact on indexes like the Nasdaq, most companies are still down significantly from their peaks earlier this year.
The overall news related to COVID-19 does appear to be positive with Switzerland, which had the second largest number of cases per capita, planning on starting to reopen its economy in phases on April 27th. The curve in California also points to a flattening much earlier than expected as you can see from this Twitter thread by the Chair of the UCSF Department of Medicine. The key risks we continue to face is reopening the economy too soon or the virus hitting us in a second wave later this year. There was also some positive news about Gilead’s antiviral drug Remdesevir showing encouraging early results in a trial at the University of Chicago.
Some folks find it hard to believe this bear market is behind us because the stimulus program for small businesses appears to be oversubscribed and many businesses applying for it are not getting the loans, another 5.2 million Americans filed for unemployment benefits last week pushing the unemployment rate to around 17% and the long-term negative impact on service or retail oriented businesses until a cure or vaccine is found. I still feel the risk remains to the downside but if you take a long view, there are businesses out there that look very attractive if they can weather the storm. As I wrote four weeks ago, I started unwinding some of the hedges I put in place in early February and started nibbling slowly on the long side by starting both new positions as well as adding to a select few existing positions.
Insider buying decreased last week with insiders purchasing $48.84 million of stock compared to $65.49 million in the week prior. Selling increased with insiders selling $541.19 million of stock last week compared to $442.63 million 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 total insider purchases that week. The adjusted ratio for last week went up to 11.08. In other words, insiders sold more than 11 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 6.76.