With earnings season upon us, we are starting to see an uptick in insider transactions and I expect the pace of activity to accelerate in the next five weeks. Paying attention to what insiders do late in a quarter before earnings related quiet periods kick in can be profitable. We saw this with contract research organization Medpace Holdings (MEDP), which was our spotlight idea in the August 2022 Special Situations Newsletter. The company reported excellent Q3 2022 results and the stock is up more than 40% during the last week.
Looking at the latest crop of insider transactions, it was interesting to see a lot of insider buying among regional banks. The interest rate environment is favorable for regional banks and likely to offset the drop in origination fee revenue from loans banks don’t retain on their balance sheets. Three out of the top five insider purchases this week were in regional banks.
It was also interesting to see that insiders of the social media company Snap (SNAP), including the CEO and CTO, continued selling despite the huge drop in the stock in recent days following disappointing results. Their sales were based on established 10b5-1 plans but I would have expected them to discontinue or pause those plans, considering the 80% decline in the stock over the last year.
Snap, Meta Platforms (META) and Alphabet (GOOG) all reported weak results and were impacted by declines in advertising revenue. It was surprising to see that Alphabet’s YouTube also posted a year-over-year decline in revenue. Snap saw its stock price drop by 28%, Meta saw its stock decline by 26% and Alphabet posted a drop of nearly 7% the day following the release of quarterly results. The only social media company to buck this trend was Pinterest (PINS), which was up more than 11% after reporting an 8% increase in revenue that beat estimates. I started a small position in Meta the day following results and will likely add to that position across three or four trades during the next few months.
Welcome to edition 643 of Insider Weekends. Insider buying increased significantly last week with insiders purchasing $90.63 million of stock compared to $9.04 million in the week prior. Selling also increased to $381.11 million compared to $210.91 million in the week prior.