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The Insiders Are Buying

by | Mar 16, 2023

Executives who sell their stock could do so for any reason. 

Perhaps a CFO needs to send a child to college. Or they own a jumbo mortgage payment. Or maybe they believe that their cyclical business is facing strain. There are a large number of reasons why executives sell.

But as Peter Lynch once noted, there is only one reason why executives buy their own stock: They believe it’s heading much higher. 

Since the crisis emerged at SVB Financial (SIVB), the market has been in a rather pronounced freefall. As investors, we trade momentum – which went negative on March 7 – and add hedges to protect our investments. 

But something significant is happening right now – a bullish indicator. 

And it could surprise anyone shorting, if they aren’t careful.


The Insiders Are Buying

It’s said to buy on the sound of cannons and sell on the sound of trumpets. Or perhaps buy when others are fearful, and sell when others are greedy. It all means the same. 

One indicator to decide when to buy – and appropriate levels to consider – center around the buying of executives at the companies they control. 

If we look at data from SECForm4.com, the amount of insider buying filings compared to selling filings has just increased to the fastest pace since the April 2020 financial crisis. Executives are buying this dip.


Insiders are buying

And we know that insider buying is quite bullish for stocks. 

Look at the last few times that insiders purchased stocks. Those periods have accompanied short-term rallies dating back to last year.

What Are Insiders Buying?

Executives at companies have been bullish and purchased stocks largely at financial companies (banks) and energy production companies (oil extraction). 

The ongoing liquidity crunch is weighing on both industries at the momentum. 

As I mentioned yesterday, we’ve seen a significant amount of cluster buying (purchases by multiple executives) at Charles Schwab (SCHW), PacWest (PACW), and Customers Bancorp (CUBI). All three of these carry a lot of risk. 

PacWest is a firm that has extensive exposure to the venture capital space, while Customers has exposure to the crypto space. But digging into their operations, there’s an interesting balance of risk and reward. 

More important, I’m looking at the energy space. 

We saw ample insider buying at Occidental (OXY) by Warren Buffett’s investment firm, Berkshire Hathaway (BRK.A). In addition, we saw multiple executives step in at Devon Energy (DVN)

Over the last 10 days, Berkshire Hathaway has bought close to $822 million in Occidental stock. 

In all cases, we’re looking at solid companies with executives finding 25% to 50% downturns in their stocks and saying “Enough is Enough.”

Remember, when it comes to SEC Form 4 documents, executives are using their own money… they’re buying their own stock with cash. 

In this case, the purchases were sizable. 

When insiders buy, you too can win. This becomes a key level for you to find support and trade around these names. We’ll discuss more in the coming days.

To your wealth,

Garrett signature
Garrett Baldwin

Market Momentum is Red

We’re coming back from oversold conditions. Treasury Secretary Janet Yellen is pushing for a private sector bailout of First Republic (FRC), and insiders are buying. We could see a positive momentum turn soon, especially if the U.S. government has to inject trillions of fun bucks to shore up the financial system. We never learn, do we? If momentum goes positive, we’ll benefit over at Tactical Wealth Investor. Our portfolio is positioned for a sharp run due to the exposure to financials and energy. Join us right here.

WRITTEN BY<br>Garrett Baldwin

Garrett Baldwin

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