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Welcome to Episode #419 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds, and ETFs and how it impacts your life.
This week, Tracey is joined by entrepreneur and author Asif Suria to discuss his new book, The Event-Driven Edge in Investing. It covers six events that provide investors with opportunities including SPACs, management changes, spinoffs, merger arbitrage, stock buybacks and insider trading.
Tracey has been the editor of Zacks Insider Trader newsletter and portfolio for 13 years. She has seen a lot of insider trades over those years. Asif has a lot of experience as well, as he’s been tracking the insider trades for 14 years.
Answering the Pressing Questions
· Who is an “insider” and how does an insider trade work with the SEC?
· What are the strong signals you should be looking for with insider buying?
· What are the false signals traders should ignore?
There are dozens of insider trades going on every week. How can you distinguish between the top trades and the others?
At Zacks, Tracey uses a combination of the Zacks Rank, other strong company fundamentals, as well as her own experience with insider stock trades to narrow it down for the Insider Trader portfolio.
Here are 5 insider stock buys that stood out to Tracey and Asif over the years.
5 Top Insider Buy Stock Trades: What Made Them Stand Out
In Nov 2020, an independent director at Vertex Pharmaceuticals bought $3.26 million shares in the open market. The director had been on the board for 22 years. His last open market purchase was in 2008. Why was he buying then?
Shares of Vertex Pharmaceuticals are up 125% over the last 5 years. It is outperforming the S&P 500 which is up 85.5% over that same period.
Is director buying like at Vertex Pharmaceuticals one of the strong signals for insider buying?
In June 2024, Zillow Group director Jay Hoag started buying shares. Jay Hoag is the founding partner of Silicon Valley’s TCV. He is an investing professional who partners with companies. This put up a green flag for Asif, as he recalled Hoag buying years earlier at Netflix, which was a successful trade.
Shares of Zillow Group are up 49% since June 7, 2024, when Hoag first started buying shares.
Do investment professional insider buys, like this one at Zillow, send up a strong signal?
On June 26, 2024, RH’s CEO and 10% owner, Gary Friedman, bought $10 million in shares. Tracey was familiar with Friedman’s insider buying, as he had bought in 2016 and 2017 as well. Those purchases turned out to be very successful, with shares of RH rising about 950% since those original purchases.
Zacks Insider Trader portfolio bought shares of RH in June, after Friedman purchased. The portfolio has seen a gain of 38%.
Is the CEO buying, like Friedman did at RH, a strong insider buying signal?
On Nov 4, 2022, a Super Micro Computer director bought 1000 shares at $76. He didn’t stop there. Shiu Leung Chan bought 8 more times with his last purchase on Feb 1, 2024 with the stock at $568.
Zacks Insider Trader bought on Feb 6, 2024. It sold shares several times, exiting the trade completely on March 11, 2024, with a 60% gain.
Does it send a strong signal if the insider dollar-cost-averages into the stock, like Mr. Chan did at Super Micro Computer?
On Aug 13-16, 2024, 5 insiders at Yum China, which operates KFC and Pizza Hut in China, bought shares on the open market. This is what is known as a cluster purchase. The 5 insiders included the GM of KFC, the GM of Pizza Hut, the CEO, the CTO and a Director.
Shares were down nearly 20% on the year when they dove in. On Aug 19, 2024, Zacks Insider Trader portfolio also jumped into the trade. A few weeks later, in Sep 2024, the Chinese government and Central Bank announced various stimulus programs and interest rate cuts meant to boost the Chinese economy.
As a result, shares of Yum China have soared 45.6% over the last month as traders jumped into the China trade.
Does a cluster purchase, like the one at Yum China, send a strong insider signal?
What else do you need to know about insider buying strategies?
Tune into this week’s video podcast to find out.
[In full disclosure, Zacks Insider Trader portfolio currently owns shares of RH and YUMC.]
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Insider Trades: How to Find the Top Stocks
Welcome to Episode #419 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds, and ETFs and how it impacts your life.
This week, Tracey is joined by entrepreneur and author Asif Suria to discuss his new book, The Event-Driven Edge in Investing. It covers six events that provide investors with opportunities including SPACs, management changes, spinoffs, merger arbitrage, stock buybacks and insider trading.
Tracey has been the editor of Zacks Insider Trader newsletter and portfolio for 13 years. She has seen a lot of insider trades over those years. Asif has a lot of experience as well, as he’s been tracking the insider trades for 14 years.
Answering the Pressing Questions
· Who is an “insider” and how does an insider trade work with the SEC?
· What are the strong signals you should be looking for with insider buying?
· What are the false signals traders should ignore?
There are dozens of insider trades going on every week. How can you distinguish between the top trades and the others?
At Zacks, Tracey uses a combination of the Zacks Rank, other strong company fundamentals, as well as her own experience with insider stock trades to narrow it down for the Insider Trader portfolio.
Here are 5 insider stock buys that stood out to Tracey and Asif over the years.
5 Top Insider Buy Stock Trades: What Made Them Stand Out
1. Vertex Pharmaceuticals Inc. (VRTX - Free Report)
In Nov 2020, an independent director at Vertex Pharmaceuticals bought $3.26 million shares in the open market. The director had been on the board for 22 years. His last open market purchase was in 2008. Why was he buying then?
Shares of Vertex Pharmaceuticals are up 125% over the last 5 years. It is outperforming the S&P 500 which is up 85.5% over that same period.
Is director buying like at Vertex Pharmaceuticals one of the strong signals for insider buying?
2. Zillow Group, Inc. (Z - Free Report)
In June 2024, Zillow Group director Jay Hoag started buying shares. Jay Hoag is the founding partner of Silicon Valley’s TCV. He is an investing professional who partners with companies. This put up a green flag for Asif, as he recalled Hoag buying years earlier at Netflix, which was a successful trade.
Shares of Zillow Group are up 49% since June 7, 2024, when Hoag first started buying shares.
Do investment professional insider buys, like this one at Zillow, send up a strong signal?
3. RH (RH - Free Report)
On June 26, 2024, RH’s CEO and 10% owner, Gary Friedman, bought $10 million in shares. Tracey was familiar with Friedman’s insider buying, as he had bought in 2016 and 2017 as well. Those purchases turned out to be very successful, with shares of RH rising about 950% since those original purchases.
Zacks Insider Trader portfolio bought shares of RH in June, after Friedman purchased. The portfolio has seen a gain of 38%.
Is the CEO buying, like Friedman did at RH, a strong insider buying signal?
4. Super Micro Computer, Inc. (SMCI - Free Report)
On Nov 4, 2022, a Super Micro Computer director bought 1000 shares at $76. He didn’t stop there. Shiu Leung Chan bought 8 more times with his last purchase on Feb 1, 2024 with the stock at $568.
Zacks Insider Trader bought on Feb 6, 2024. It sold shares several times, exiting the trade completely on March 11, 2024, with a 60% gain.
Does it send a strong signal if the insider dollar-cost-averages into the stock, like Mr. Chan did at Super Micro Computer?
5. Yum China Holdings, Inc. (YUMC - Free Report)
On Aug 13-16, 2024, 5 insiders at Yum China, which operates KFC and Pizza Hut in China, bought shares on the open market. This is what is known as a cluster purchase. The 5 insiders included the GM of KFC, the GM of Pizza Hut, the CEO, the CTO and a Director.
Shares were down nearly 20% on the year when they dove in. On Aug 19, 2024, Zacks Insider Trader portfolio also jumped into the trade. A few weeks later, in Sep 2024, the Chinese government and Central Bank announced various stimulus programs and interest rate cuts meant to boost the Chinese economy.
As a result, shares of Yum China have soared 45.6% over the last month as traders jumped into the China trade.
Does a cluster purchase, like the one at Yum China, send a strong insider signal?
What else do you need to know about insider buying strategies?
Tune into this week’s video podcast to find out.
[In full disclosure, Zacks Insider Trader portfolio currently owns shares of RH and YUMC.]