Happy Holidays and welcome to edition 548 of Insider Weekends. Insider buying decreased in a holiday shortened week with insiders purchasing $111.67 million of stock compared to $182.84 million in the week prior. Considering the short week and the fact that we are getting to the end of the quarter earnings-related quiet period, I am surprised by this level of insider buying. Selling also decreased with insiders selling $1.69 billion of stock last week compared to $3.42 billion in the week prior.
Market participants who stayed the course this year, did much better than those that were impacted by this horrendous pandemic both in terms of loss of lives and loss of livelihoods. I certainly hope 2021 turns out much better for those that suffered through the many challenges this year. Insiders as a group provided a strong buy signal this March but their buying has moderated significantly in recent weeks with notable weakness in late November and early December when I would normally expect strong buying.
There were some outstanding buying opportunities this year but at this stage of the market cycle, I am finding it increasingly difficult to find interesting new ideas outside of one narrow sector (housing) to which I already have exposure in multiple ways (a flooring company, a home builder, a mortgage lender, etc.). Hopefully insider buying in the coming weeks will help us discover companies that are worth exploring further.
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 dropped to 15.09. In other words, insiders sold more than 15 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 18.71.
Note: As mentioned in the first post in this series, certain industries have their preferred metrics such as same store sales for retailers, funds from operations (FFO) for REITs and revenue per available room (RevPAR) for hotels that provide a better basis for comparison than simple valuation metrics. However metrics like Price/Earnings, Price/Sales and Enterprise Value/EBITDA included below should provide a good starting point for analyzing the majority of stocks.