One of my favorite stock market indicators is insider buying.
As legendary investor Peter Lynch once said: “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.”
And those insiders know more about their business, its recent operational trends, and its long-term prospects than anyone else in the world. So, if they think their stock price is going to rise, that is super-bullish for the stock.
Well… guess what insiders are doing right now? They’re buying the dip in their stocks amid this stock market volatility.
Insider buying volume for publicly traded companies has surged to its highest levels since March 2021, which itself marked peak insider-buying volume since the depths of the Covid-19 pandemic in April 2020.
In other words, insiders are buying stock more now than at any point over the past two years with two exceptions: March 2021 and April 2020. Six months after both of those insider buying surges, the S&P 500 rose 30% and 9%, respectively – both excellent returns for six-month stretches.
The implication? Insiders are telling us that the next six months could be really good for the stock market.
But let’s dig a bit deeper… which stocks exactly are insiders buying right now?
Per our analysis, recent insider buying in the month of December has been heavily concentrated in one of the sectors that has been crushed most in 2021: hypergrowth tech stocks.
It’s no secret that, thanks to rising inflation and rate hike fears, high-flying tech stocks have been pummeled this year. Oftentimes, however, a new year brings new fortune for certain stocks – and clearly, insiders are betting that 2022 will bring new and much improved fortunes for hypergrowth tech stocks.
Look no further than some of these huge insider purchases in hypergrowth tech stocks over the past three weeks alone.
Workplace software provider Asana (ASAN) has seen its share price crash about 50% over the past few weeks. On the heels of the sell-off, the company’s CEO – Dustin Moskovitz, who is perhaps more famous as a Facebook co-founder – has bought a whopping $195 million worth of Asana stock.
That’s a huge vote of confidence from a seasoned tech veteran!
Meanwhile, self-driving startup Luminar (LAZR) has announced a series of impressive innovations, product launches, and partnerships in 2021. Yet, the stock has dropped 53%. So, the company announced just last week that its executive team and certain board members are going to buy $250 million worth of Luminar stock. Many of those executives have already rattled off multi-million-dollar purchases.
Similarly, the CEO and Chairman at electric car maker Joby Aviation (JOBY) have capitalized on their company’s recent share price decline by buying over $2 million worth of stock over a two day stretch on Dec. 15 and 16.
Full story on InvestorPlace.com
Leave a Comment