Top insider trades (Mon, Mar 30)

Connor’s Commentary

There were 117 new insider trades filed. We also take a deeper look at insider trading returns and win rates in the commentary section.

No insider trades were flagged as High Signal, but I shared my notes on a few of the interesting trades. CEO Watcher Premium subs can see those in the Trade Notes section of this email or the CEO Watcher Premium Dashboard that is linked in the Data Dump section.

As a reminder, if you upgrade to CEO Watcher Premium (link) and find that it isn’t for you, I’ll give you a refund.

• Chief Executive Officer at Palo Alto Networks Inc $PANW purchased $10.00M (first purchase of PANW). Dip Buy: the stock was down -21% in the previous 3 months.

• President and CEO at i-80 Gold Corp. $IAUX purchased $1.40M (first-ever purchase). This increased their listed holdings by 21%. Dip Buy: the stock was down -32% in the previous month. 1 other insider also purchased the stock in the last 30 days.

• Chief Executive Officer at PicS N.V. $PICS purchased $1.01M (first-ever purchase). Dip Buy: the stock was down -36% in the previous month. 2 other insiders also purchased the stock in the last 30 days.

• Chief Executive Officer at Primech Holdings Ltd $PMEC purchased $958.65K (first-ever purchase). Dip Buy: the stock was down -31% in the previous 3 months.

• Director (Varischetti Nicholas D) at FARMERS NATIONAL BANC CORP /OH/ $FMNB purchased $946.81K (largest purchase ever, out of 4). This increased their listed holdings by 46%. 2 other insiders also purchased the stock in the last 30 days.

• President at Kayne Anderson Energy Infrastructure Fund, Inc. $KYN purchased $359.50K (11th largest purchase, out of 38). 2 other insiders also purchased the stock in the last 30 days.

• Director (Zelman Ivy) at Cardinal Infrastructure Group Inc. $CDNL purchased $251.44K (largest purchase ever, out of 2). This increased their listed holdings by 82%. Rip Buy: the stock was up 52% in the previous 3 months.

• Chairman & CEO at MEDIFAST INC $MED purchased $178.72K (largest purchase ever, out of 3).

• President and CEO at Inspired Entertainment, Inc. $INSE purchased $136.63K (2nd largest purchase, out of 2).

• Director (Gen IV Investment Opportunities, LLC) at BATTALION OIL CORP $BATL sold $13.79M (2nd largest sale, out of 2). This decreased their listed holdings by -100%. Rip Sell: the stock was up 20% in the previous month. 2 other insiders also sold the stock in the last 30 days.

• Executive Chairman at WILLIS LEASE FINANCE CORP $WLFC sold $2.74M (3rd largest sale, out of 131). 2 other insiders also sold the stock in the last 30 days.

• PRESIDENT, CMO DD'S DISCOUNTS at ROSS STORES, INC. $ROST sold $1.17M (largest sale ever, out of 4). Rip Sell: the stock was up 71% in the previous year. 4 other insiders also sold the stock in the last 30 days.

• EVP, CFO at CENTURY ALUMINUM CO $CENX sold $845.49K (largest sale ever, out of 2). This decreased their listed holdings by -20%. Rip Sell: the stock was up 88% in the previous 6 months. Their last sale was 814 days ago. 8 other insiders also sold the stock in the last 30 days.

• Executive Chairman at UNIVERSAL INSURANCE HOLDINGS, INC. $UVE sold $692.07K (18th largest sale, out of 82). 1 other insider also sold the stock in the last 30 days.

• Chairman & Rep. Director, ALIJ at AFLAC INC $AFL sold $536.37K (24th largest sale, out of 29). 3 other insiders also sold the stock in the last 30 days.

• Director (Palomarez Javier Alberto) at MASTEC INC $MTZ sold $309.16K (2nd largest sale, out of 3). Rip Sell: the stock was up 43% in the previous 3 months. Their last sale was 475 days ago. 1 other insider also sold the stock in the last 30 days.

• Director (Nolen Billy) at AAR CORP $AIR sold $173.38K (first-ever sale). This decreased their listed holdings by -100%. Rip Sell: the stock was up 36% in the previous 3 months.

• and more…

Commentary

Let’s take a deeper look at the performance of filtered v unfiltered insider trades (mean returns, median returns, and win rates).

Reminders about our dataset

Our database includes all insider buys and sells from 2009-2024 (~900k trades).

The insider trades are pulled from the SEC EDGAR database.

We filter out over 80% of all insider trades before running our analysis because they contain an error, are planned trades, or are too small (or the company is too small). Read about how we filter trades here.

All returns are calculated using the “next trading day open price after the filing was made public,” as this best reflects the price we would be able to buy/sell the stock. 

• For example, for an insider trade filed on a Wednesday (regardless of what time it is filed), we use the open price on Thursday.

The returns in the charts are “adjusted returns,” which just means we include dividends, stock splits, etc.

The dataset includes stocks that were acquired, delisted, went bankrupt, etc. This prevents survivorship bias.

Mean Returns

In the previous write-up (link), we showed how we filter out low-signal insider trades, which significantly increases the average returns of insider purchases (21.6% 1y returns for filtered purchases v 12.4% for low signal purchases).

It also slightly improves the average returns of insider sales (ie the stocks go up less after filtered insider sales). Stocks from filtered sales underperform the low-signal sales by 1 point over the following year (11.9% v 12.9%).

Interestingly, the charts above show that low-signal purchases actually have lower 1y returns than low-signal insider sales (10.6% v 12.3%). You definitely want to avoid low-signal purchases.

Median Returns

Unsurprisingly, median returns paint a less rosy picture.

The median 1y return for filtered insider purchases was 9.2% versus 4.2% for the low-signal purchases and 15.9% for the S&P.

I say this is unsurprising because most stocks actually lose money in the long term (link), and most stocks underperform the S&P each year. From 1926 through 2014, the mean annual return for stocks was 14.74% while the median was only 5.23% (link).

The stock market is driven by positive outliers.

This works in favor of insider sales, as the median 1y return is way below the S&P (8.0% for filtered sales, 8.1% for low-signal sales, and 15.0% for the S&P).

As I’ve mentioned before, using insider sales to identify stocks likely to underperform the S&P is easy. Finding stocks likely to deliver negative returns is much harder.

Win Rates

Filtered insider purchases also have significantly higher 1y win rates (i.e., the 1y return is > 0%) than the low-signal insider purchases. Filtered purchases have a 60% 1y win rate verses 55% for low-signal purchases.

Filtered insider sales actually have a slightly worse 1y win rate (i.e., the 1y return is < 0 %) than the low-signal sales. Filtered sales have a 39% 1y win rate, versus 40% for low-signal sales.

Returns Versus the Benchmark

Using the S&P as the benchmark, we can see that properly filtering insider purchases is the difference between underperforming and outperforming the benchmark. Filtered insider purchases outperform buying the S&P by 2.4% while the low-signal purchases underperform by 4.4%.

As mentioned previously, finding insider sales that underperform the market is fairly easy. Filtered insider sales underperform the S&P by 2.5% while the low-signal insider sales underperform by 1.3%.

As expected, the win rates for insider purchases when compared to the benchmark (ie, the stock outperformed the S&P) are under 50%. Filtered purchases have a 44% 1y win rate verses 37% for low-signal purchases.

Insider sales have a better than 50% win rate versus the benchmark (ie, the stock underperformed the S&P). Filtered insider sales have a 58% 1y win rate, versus 57% for low-signal sales.

Conclusion

With proper filtering, the average insider purchase meaningfully outperforms the S&P over the following year. However, as with the market itself, the returns on insider purchases are driven by positive outliers.

For insider sales, most underperform the S&P. However, the stocks still have positive average returns.

In future write-ups, we’ll explore other factors that can help identify insider trades with even better mean and median returns.

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