Bulletin
Investor Alert

London Markets Open in:

March 4, 2020, 9:37 a.m. EST

Executives are buying their own companies’ beaten-down stocks — here are nine with large purchases

When company insiders make big moves, it’s often a sign that stocks are a good value

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Starbucks Corp. (SBUX)
  • X
    Apple Inc. (AAPL)
  • X
    Dow Jones Industrial Average (DJIA)

or Cancel Already have a watchlist? Log In

By Michael Brush, MarketWatch


Getty Images
A rollercoaster ride at Six Flags Magic Mountain in Valencia, Calif.

Here come the insiders.

Because they see their own businesses daily, company executives are suggesting through their actions that fears about the hit to economic growth because of COVID-19 are overdone. They’ve stepped up buying their own companies’ shares, and in all the right sectors.

Of course, company insiders are not virologists. So we can’t interpret their buying as a statement that COVID-19 is less risky than many people fear.

But insiders know their businesses well, and they get live updates every day. Based on what they see compared to how far their stocks have fallen, they clearly think investors are over-exaggerating the economic impact of the virus.

We get confirmation of this from major companies with large operations in China. Both Starbucks /zigman2/quotes/207508890/composite SBUX -0.70% and Apple /zigman2/quotes/202934861/composite AAPL -0.10% have resumed operations in China. There’s no insider buying at those companies that’s been reported, but that’s a statement on the COVID-19 threat trendline.

And benchmark indexes jumped Monday, with a big push late in the day, suggesting a sentiment shift that was initially telegraphed by these insiders if you looked closely. The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.07%  surged 5.1%, and the S%P 500 Index /zigman2/quotes/210599714/realtime SPX +0.48%  rose 4.5%.

Powerful combination

Meanwhile, sentiment has turned dark. Many of the sentiment indicators I regularly track for my stock letter, Brush Up on Stocks , have now turned bullish.

This means they are so negative, they’re positive, in the contrarian sense. The VIX /zigman2/quotes/210598281/delayed VIX -3.78% , aka the fear gauge, recently pierced 40, which is often a buy signal. Various put-call ratios have risen to levels showing panic and extreme alarm, also a positive signal in the contrarian sense.

This isn’t the absolutely most favorable sentiment read I have ever seen in steep selloffs. Nevertheless, this level of negativity among investors, combined with this amount of insider buying, is often a good buy signal. And that seems to be the case, now that the benchmark S&P 500 Index /zigman2/quotes/210599714/realtime SPX +0.48%  has fallen more than 10% on coronavirus fears.

Insiders

Targeted buying

It’s particularly interesting that much of the insider buying is happening in sectors getting hit the hardest on coronavirus fears: Travel, amusement parks, and “reflation trade” areas such as energy, materials and industrials.

Those are travel-related and economically sensitive sectors, so they get hurt more on worries about the virus and an economic slowdown. But, likewise, they’ll rebound more than the market as economic worries ease. Insiders are now clearly betting that this will be the next dynamic to play out in the markets.

Here are many examples, from names I’ve suggested in my stock letter over the past months and years as medium-term holds, meaning two to three years or more.

/zigman2/quotes/207508890/composite
US : U.S.: Nasdaq
$ 77.99
-0.55 -0.70%
Volume: 10.11M
May 29, 2020 4:00p
P/E Ratio
27.78
Dividend Yield
2.10%
Market Cap
$91.10 billion
Rev. per Employee
$86,863
loading...
/zigman2/quotes/202934861/composite
US : U.S.: Nasdaq
$ 317.94
-0.31 -0.10%
Volume: 38.40M
May 29, 2020 4:00p
P/E Ratio
24.92
Dividend Yield
1.03%
Market Cap
$1378.06 billion
Rev. per Employee
$1.98M
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
25,383.11
-17.53 -0.07%
Volume: 545.14M
May 29, 2020 5:14p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,044.31
+14.58 +0.48%
Volume: 4.38B
May 29, 2020 5:14p
loading...
/zigman2/quotes/210598281/delayed
US : Cboe Indices
27.51
-1.08 -3.78%
Volume: 0.00
May 29, 2020 3:14p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,044.31
+14.58 +0.48%
Volume: 4.38B
May 29, 2020 5:14p
loading...
1 2
This Story has 0 Comments
Be the first to comment
More News In
Investing

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.