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Investors closely monitor insider buys, as they can give hints surrounding the long-term picture.
An insider is an officer, director, 10% stockholder, or anyone who possesses internal information because of their relationship with the company. It’s critical to note that insiders have a longer holding period than most, and many strict rules apply to their transactions.
Several companies – lululemon (LULU - Free Report) , Dollar Tree (DLTR - Free Report) , and Caterpillar (CAT - Free Report) – have all seen recent insider activity. Let’s take a closer look at the transactions for those interested in trading like the insiders.
LULU CEO Invests $1 Million
Lululemon shares have been hit hard in 2024, down nearly 50% and unable to find any meaningful traction. Post-earnings reactions haven’t been great despite exceeding quarterly expectations, as shown below.
Image Source: Zacks Investment Research
The CEO must’ve seen some value, recently scooping up 4k shares at an overall transaction of roughly $1 million. The transaction was relatively large, bringing his total stake to nearly 90k shares overall.
Still, the company’s earnings outlook has been lowered across the board, not boding well for near-term share performance. The insider transaction appears to be more reflective of a longer-term outlook, and investors seeking short-term gains would likely be better off staying on the sidelines until positive earnings estimate revisions hit the tape.
Image Source: Zacks Investment Research
The valuation picture has become more reasonable amid the poor performance, with the current 18.2X forward 12-month earnings multiple sitting well beneath the steep 35.2X five-year median. The stock traded at a premium for years thanks to its explosive growth.
The current PEG works out to 1.4X, near the low end of the five-year range.
Image Source: Zacks Investment Research
Margins have also continued to recover nicely on a trailing twelve-month basis, as shown below. The company’s gross margin improved 80-basis points year-over-year throughout its latest quarter.
Image Source: Zacks Investment Research
Other Recent Insider Buys
LULU hasn’t been the only stock seeing insider activity as of late, as construction heavyweight Caterpillar (CAT - Free Report) and retail player Dollar Tree (DLTR - Free Report) have also seen buyers step up.
A director of Caterpillar recently made a small splash, acquiring 100 CAT shares at a total transaction value of just under $35k. Caterpillar shares have modestly outperformed the S&P 500 in 2024, gaining nearly 20%.
Image Source: Zacks Investment Research
A director of Dollar Tree made a purchase in early September, scooping up 2.2k DLTR shares at a total transaction value of $150k. The stock’s outlook has been slashed across the board, landing it into an unfavorable Zacks Rank #5 (Strong Sell).
While the insider transaction is overall positive, the current outlook suggests near-term underperformance.
Image Source: Zacks Investment Research
Bottom Line
Many investors closely monitor insider buys, looking to receive insights into the longer-term picture. The transactions shouldn’t be relied on for near-term performance, as insiders’ holding periods are longer than most and many strict rules apply.
Rather, investors can see insider buys as an overall net positive concerning the longer-term outlook.
Image: Bigstock
CEO Makes Huge Purchase of this Beaten Down Stock
Investors closely monitor insider buys, as they can give hints surrounding the long-term picture.
An insider is an officer, director, 10% stockholder, or anyone who possesses internal information because of their relationship with the company. It’s critical to note that insiders have a longer holding period than most, and many strict rules apply to their transactions.
Several companies – lululemon (LULU - Free Report) , Dollar Tree (DLTR - Free Report) , and Caterpillar (CAT - Free Report) – have all seen recent insider activity. Let’s take a closer look at the transactions for those interested in trading like the insiders.
LULU CEO Invests $1 Million
Lululemon shares have been hit hard in 2024, down nearly 50% and unable to find any meaningful traction. Post-earnings reactions haven’t been great despite exceeding quarterly expectations, as shown below.
Image Source: Zacks Investment Research
The CEO must’ve seen some value, recently scooping up 4k shares at an overall transaction of roughly $1 million. The transaction was relatively large, bringing his total stake to nearly 90k shares overall.
Still, the company’s earnings outlook has been lowered across the board, not boding well for near-term share performance. The insider transaction appears to be more reflective of a longer-term outlook, and investors seeking short-term gains would likely be better off staying on the sidelines until positive earnings estimate revisions hit the tape.
Image Source: Zacks Investment Research
The valuation picture has become more reasonable amid the poor performance, with the current 18.2X forward 12-month earnings multiple sitting well beneath the steep 35.2X five-year median. The stock traded at a premium for years thanks to its explosive growth.
The current PEG works out to 1.4X, near the low end of the five-year range.
Image Source: Zacks Investment Research
Margins have also continued to recover nicely on a trailing twelve-month basis, as shown below. The company’s gross margin improved 80-basis points year-over-year throughout its latest quarter.
Image Source: Zacks Investment Research
Other Recent Insider Buys
LULU hasn’t been the only stock seeing insider activity as of late, as construction heavyweight Caterpillar (CAT - Free Report) and retail player Dollar Tree (DLTR - Free Report) have also seen buyers step up.
A director of Caterpillar recently made a small splash, acquiring 100 CAT shares at a total transaction value of just under $35k. Caterpillar shares have modestly outperformed the S&P 500 in 2024, gaining nearly 20%.
Image Source: Zacks Investment Research
A director of Dollar Tree made a purchase in early September, scooping up 2.2k DLTR shares at a total transaction value of $150k. The stock’s outlook has been slashed across the board, landing it into an unfavorable Zacks Rank #5 (Strong Sell).
While the insider transaction is overall positive, the current outlook suggests near-term underperformance.
Image Source: Zacks Investment Research
Bottom Line
Many investors closely monitor insider buys, looking to receive insights into the longer-term picture. The transactions shouldn’t be relied on for near-term performance, as insiders’ holding periods are longer than most and many strict rules apply.
Rather, investors can see insider buys as an overall net positive concerning the longer-term outlook.
All stocks above – lululemon (LULU - Free Report) , Dollar Tree (DLTR - Free Report) , and Caterpillar (CAT - Free Report) – have seen recent insider activity.