Company insiders are ditching their own stock more than usual. An exception is oil and gas executives, some of whom are buying while their shares are depressed.
To gauge insider sentiment, look at the ratio of buys to sells by top executives and large shareholders. According to Gurufocus.com, about 34% of insiders’ transactions normally are buys. In February the figure was only 24%.
During the early stages of the pandemic in 2020, when stock prices dived, insiders stepped up to the plate and bought shares at an above-normal clip five months in a row. Insiders also bought a lot of stock in the late stages of the Great Recession in 2008.
Sells normally exceed buys because top executives get some stock (often in the form of stock options) as part of their compensation. Lately, we’ve seen ten months in a row of below-normal buying.
According to a screen I did on Gurufocus.com, chief executive officers at 197 companies have sold stock worth $1 million or more from February 1 through March 5.
CEO Sales
At Palo Alto Networks Inc. (PANW), CEO Nikesh Arora sold more than $275 million of stock in February and March. Since June 2022, his share holding has fallen from about 2.9 million shares to about 1.1 million shares. His sales were under a plan that provides for selling at predetermined intervals or prices.
At J.P Morgan Chase & Co. (JPM), chairman Jamie Dimon was a buyer in 2007, 2009, 2012, and 2016. Since last year he’s been a seller. In February he sold $233 million of stock, or more than 11% of his holding. His remaining shares are worth about $1.6 billion.
At Tempus AI Inc. (TEM), which went public less than a year ago, CEO Eric Lefkofsky cashed in more than $119 million in shares in February. That was about 8% of his holding.
Bahram Akradi, the founder and CEO of Life Time Group Holdings Inc. (LTH), sold 31% of his shares in late February, for proceeds of about $150 million. The company operates a chain of fitness centers. Akradi himself is a triathlete.
Jeffrey Tangney, CEO of Doximity Inc. (DOCS), sold about $75 million of his company’s stock in February. He has about $135 million of Doximity shares left. The company operates a digital platform for medical professionals.
When CEOs sell shares, it doesn’t necessarily mean that they are bearish on the stock market or on their own companies’ prospects. There are many reasons to sell, simple diversification being one.
Still, when I see the number of CEOs who have sold recently, and the volume of their sales, it gives me an uneasy feeling.
Energy Buys
In the oil and gas industry I see more hopeful signs.
At Noble Corp., for example, CEO Robert Eifler spent about $350,000 to add a bit to his holdings, which amount to about $31 million at current prices. Richard Barker, the chief financial officer, bought about $223,000 of Noble shares in February and has about $7 million in the stock.
At Dorchester Minerals LP (DMLP), which collects royalties on oil-and-gas properties in 28 states, CEO Bradley Ehrman spent about $100,000 on his partnership’s shares in early March. He has about $4 million in it.
And at Matador Resources Co. (MTDR), where I’ve noted insider buying previously, CEO Joseph Foran made four purchases totaling about $632,000. That brings his holding to about $245 million.
Oil and gas stocks are out of favor today, and I think they are oversold. I believe these three CEOs will be happy about their purchases a year hence.
The Record
This is the 73rd column I’ve written about insider purchases and sales. I can tabulate results for 63 columns – all those written from 1999 through a year ago.
Stocks that I said to avoid, even though insiders were buying, have under-performed the Standard & Poor’s 500 Total Return Index by 24.3 percentage points.
Stocks where I noted insider selling have done 2.3 percentage points worse than the index.
Stocks I recommended based on insider buying have returned 9.1% — not too bad, but 1.3 percentage points below the benchmark’s average.
Finally, there were some stocks where I noted insider buys, but made no comment or an ambiguous comment. These have beaten the S&P by 16.2 percentage points.
Bear in mind that my column results are hypothetical and shouldn’t be confused with results I obtain for clients. Also, past performance doesn’t predict the future.
Disclosure: I own J.P. Morgan shares personally and for most of my clients.
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