For months now, I have been telling you to buy stocks that insiders are buying. The idea that management and their board of directors’ members are putting down their own cash to buy stocks in their own companies is a major tenet of my Surge Stock Indicator (SSI) system.
Insiders know the details of their companies. They know the pending sales and what is actually happening on the balance sheet. So, when they are buying – it makes for a confirmation of the other factors that I use in my SSI system to identify stocks that are going to surge and surge big.
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The Magic of the Stock Surge IndicatorAs the saying goes, “the trend is your friend.” In the game of investing, it is best to keep things simple. To follow the path of least resistance where the odds are squarely in your favor. Stocks going up tend to keep going up. And those going down usually continue that trajectory. It really is that simple. Sure, there are terabytes of underlying data that explain an equity’s rise and fall…Click here to download it now.
And to get my current rundown on my stocks that you should be buying this week from my Watch List – you should click here to see the stocks and the reasons behind the buy calls right here.
But let me flip this entirely.
While insider buying is a confirmation of a good company – insider selling is a BIG RED FLAG that something is amok for a company.
I also look at insider trades that are being done to dump shares. Now, I know that management might have their own personal cash needs now and again. But when big chunks of stocks are being sold in a company – that’s a sign that a company might be a sell – and not a buy right now. OR WORSE!
Global Net Lease (GNL) is a company in the commercial property market. It buys and develops properties for leases for corporate and commercial use as well as providing trust services for properties and counsel.
The company has challenges. Commercial properties have been battered during the economic lockdowns that have yet to be fully resolved. And this shows in the not so good return on funds from operations (FFO) that measures the return from actual properties’ rents and direct revenue and not ancillary financial transactions and accounting and tax benefits. The FFO is a measly 9.90% – not horrible – but not good compared to much better peers. And while revenue is a bit up – it is not helping not only FFO but also the return on its actual assets including its properties that are running at a lousy 0.10%.
And this in turn is delivering a terrible return on shareholders’ equity that is negative 1.0%.
Who would want to buy this stock? Well not some of its insiders that have been selling.
In particular, Ed Weil – a leading board member just reported dumping 32,652 shares yesterday for proceeds of $599,509.
Global Net Lease Price Source Bloomberg
The stock is down so far from June 15 to now by 7.25% and who knows how much more carnage shareholders will face – if they don’t pay attention to insider sells.
Academy Sports & Outdoors (ASO) is a sports and sporting goods retailer. This should be a good business as the virus mess meant that more and more folks wanted and needed to get outside and do something, well, sporty. This has been a good market to be in – but perhaps it’s time to sell right now.
Revenue was up a bit recently – but not without costs. Operating margin is not stellar at 7.40% in a market whereby consumers have been able and willing to pay up to buy what they need to do something – anything outside. And the rest of the income statement is not impressive.
This is perhaps why Bill Ennis – a top executive of the company just dumped 51,929 shares for $2.2 million last Friday.
The shares had been running up on the market’s view of sporting goods retailers – but this may be done.
Academy Sports & Outdoors Price Source Bloomberg
The stock is down from last Friday with Bill’s dump of the shares by 3.47% and there may well be more trouble on the horizon for the stock.
Omega Healthcare Investors (OHI) is a real estate investment trust (REIT) focused on longer-term care facilities. This is a challenging market with so much dependence on government programs and subsidies for senior and other patient care.
Revenue is dropping with the past year down by 3.90%. and while the FFO is good at 13.70% – the return on the property and other assets of the REIT is not good at only 2.30%. And neither is the return on shareholders’ equity at a paltry 5.80%.
Perhaps this is why Steve Insoft, a top executive trusted with company development just dumped 50,000 shares for $1.84 million last Monday.
Omega Healthcare Investors Price Source Bloomberg
The stock is down by 5.14% since April to now – showing cracks post its surge late last year in November. Steve may be on to something that development of the company is now challenged or done?
The key takeaway from the three examples from many, many others that I’ve been researching is that insiders can provide confirmation of a good stock – or a troubled stock. I focus on the buying for my stocks that will surge. And I also watch out for when insiders turn and dump as a reason to sell and move on to better stocks that will surge further up.
Buy When Insiders Are Actually Buying & Not Selling
I am ramping up my insider research with a new product that we’re launching here at Traders Agency called Insider Edge. And this is all about stocks with big surges in insiders’ buying their own shares.
If you missed my live event for Insider Edge yesterday, you can still get the full rundown on how to profit by buying stocks that insiders are buying right now by checking out the replay here.