Always keep an eye on insider buying.
After all, who knows the company better than an insider – the CEO, CFO, COO, and directors? If they’re buying a sizable number of shares, it’s often a good idea to start looking into why and perhaps follow them into the stock.
That’s because they’re typically privy to information on new products, competition, and the operating environment of the firm. We also have to consider that insiders who are buying their stock wouldn’t put up their own money unless they believed the move would be profitable.
However, even insiders can get it wrong. So always do your due diligence before following.
Over the last few weeks, Carvana (CVNA) Chief Product Office Daniel Gill bought 133,000 shares at $7.62 for just over $1 million. That’s after the stock plummeted from a high of about $400 to a current price of less than $8 a share. Not only is the market concerned about liquidity with this stock, analysts are still downgrading the stock. Most recently, Oppenheimer downgraded the stock from a buy to a hold.
Earnings haven’t been so hot either. In its most recent quarter, revenue fell 3% year over year to $3.39 billion. That was also below expectations for $3.7 billion. Its net loss was $283 million, or $2.67 a share, which was far worse than expectations for $1.90.
Unfortunately, the stock is headed down the drain. While it’s a great sign to see an insider bet $1 million on the CVNA stock, we’re not sure why they bothered.
Home Depot (HD)
Home Depot director Paula Santilli paid $500,000 for 1,583 shares at an average price of $315.80 each. While inflation has been a pain, company earnings have remained strong. In its latest earnings report, HD earned $4.24 a share, which beat expectations for $4.12. Sales came in at $38.9 billion, which topped estimates for $38 billion. Same store sales were up 4.3%.
“Our customer has proven resilient,” said CFO Richard McPhail, as quoted by Barron’s. “We feel confident they will continue to manage with flexibility through a dynamic environment while growing faster than our market and delivering exceptional shareholder value.” Technically, if HD can break above double-top resistance around $326.38, it could potentially test $340.
Travel tech company Sabre Corp. saw its CEO Michael Randolfi buy 100,000 shares between $4.75 and $4.80 on November 22. SABR was also beaten down for most of the year, but is starting to show signs of life with the insider buying and a recovery in travel plans.