A look at 2iQ’s top insider buying signals in 2020

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Insider transaction data proved to be an extremely valuable research tool in 2020. Both early in the year, when equity markets were falling, and later in the year, when stocks were rising, insider transactions provided powerful trading signals for investors, highlighting some very compelling investment opportunities.

Here, we are going to review some of our best insider buying signals in 2020. These signals show just how powerful insider transaction data can be as part of an investment strategy.

Insiders bought stock when markets crashed

Some of our best insider buying signals in 2020 came early in the year when global equity markets were in meltdown mode.

                    Source: 2iQ Research

Dell Technologies is a great example. Like many other stocks, Dell was crushed during the coronavirus sell-off with its share price falling from $53 to $26 in just a few weeks. We noticed at the time, however, that CEO Michael Dell had spent $26 million on DELL stock in mid-March when the stock was trading near $30. The insider’s purchases were timed very well. By late July, Dell stock was trading above $60. By mid-December, it was above $75.

Recreational Vehicle (RV) specialist Camping World Holdings was also crushed during the Covid-19 sell-off. In the space of just a few weeks, its share price fell from $16 to $4. However, we noticed that a number of top-level insiders had been buying during the sell-off and said that, in our view, the stock had the potential to rebound. That was a great call. By August, the stock was trading above $40, delivering a gain of around 900% in just a few months.

MGM Resorts International was another top signal during this period. Here, we spotted a very bullish cluster buying pattern where multiple insiders were buying large amounts of stock at between $10 and $15 per share. Since then, MGM stock has risen to $30, delivering strong returns for these insiders.

There were also plenty of great buying signals out of Europe during this volatile period. German IT firm Adesso is a good example. It had just posted strong full-year results and we noticed that four insiders, including the CFO, had bought a large amount of shares in late March near the €45 level. Since then, the stock has risen to around €100, registering a gain of well over 100%.

In March, we also spotted that Cornelius Patt, the CEO of German online pet food retailer Zooplus, had purchased a large number of shares in his company at around the €95 level. Since then, the stock has risen to €175, registering a gain of about 85%.

Overall, March saw the highest level of insider buying since 1999. As other investors panicked due to the uncertainty in relation to the impact of the coronavirus, insiders stepped up to buy, capitalizing on their information advantages.

    Source: 2iQ Research

Insiders kept buying as stocks rallied

In the second quarter, our insider transaction data continued to highlight some fantastic buying opportunities as stocks rebounded.

In April, we noticed that three insiders at Nordic Semiconductor had just purchased stock near the NOK 50 level. We viewed this cluster buying pattern as bullish. Today, NOD stock trades near NOK 140, meaning it is roughly 180% higher.

Also, in April, we spotted that the CEO and CFO of Dutch lighting company Signify had just spent a substantial amount of money on shares near the €16.50 level. These were the first insider purchases in over two years. By mid-October, Signify stock was trading above €35, delivering a gain of over 100% in six months.

Our best insider buying signal during this period was Upwork, which operates one of the world’s largest freelance employment platforms. Here, we noticed that between 8 May and 11 May Board Member Greg Gretsch – who is a managing director of a venture capital firm that specializes in Series A financings for SaaS and marketplace startups – had spent $5.4 million on stock while it was near the $10 level. We saw this large insider purchase as bullish. Since then, Upwork stock has climbed as high as $40, delivering a gain of 300%.

Around this time, we also observed a bullish buying pattern at Harley-Davidson. It had recently announced that it would be making significant changes to its business model and we thought it was interesting that both the CEO and the CFO had bought a large amount of stock. Both insiders purchased stock while it was under $20. In November, HOG stock rose above $40.

Calix – a leading global provider of cloud platforms, systems, and services – is another stock worth mentioning here. In May, we noticed that Chairman Donald Listwin had just spent $363,000 on stock – his largest purchase in five years. Since that purchase, the stock has risen from $12 to $29, a gain of more than 140%.

Around the same time, we also spotted a large purchase from the Chairwoman at German online fashion retailer Zalando. The stock was trading just above €50 when we covered it. Today, it is trading above €95.

Late in the second quarter, we highlighted a bullish buying pattern at Resideo Technologies, a US-based company that specialises in smart home solutions. Here, multiple insiders were buying stock at around the $9 to $10 level. Since that report, Resideo stock has had a great run, rising above $20.

Insiders capitalized on information advantages

In July, we spotted a bullish buying pattern at UK electrical goods retailer AO World. Here, we noticed that Co-Founder and CEO John Roberts had made his first purchase of shares since June 2017, buying 154,495 at a price of 144p per share. Today, AO World shares trade at 425p, meaning that the insider is up nearly 200% on his purchase price.

Also in July, we noticed that Marvin Ellison – who is CEO at Lowe’s and a prominent figure in the logistics world – had just spent $360,000 on shares in FedEx Corp, a company in which he is a board member. This purchase was timed well. Since then, the stock has climbed from $165 to $253 – a gain of over 50%.

Online fashion retailer Boohoo Group was another stock we highlighted in July. Its share price had crashed earlier in the month due to reports over poor working conditions at factories linked to the company. However, we noticed that Boohoo Co-Founders Mahmud Kamani and Carol Kane had both spent substantial amounts of money on Boohoo shares. Boohoo’s share price has risen from 214p to 360p since that report – a gain of about 70%.

In August, we spotted a large purchase from a top insider at Volex. It’s a UK-based company that supplies power cords to a range of markets. Our data showed that Chairman Nat Rothschild had just spent £825,000 on stock. Volex shares have climbed from 165p to 316p since that report – a gain of over 90%.

Insiders predicted the recovery

September was an excellent month for insider buying signals. One of our best signals here was Guess?. Here, we spotted that CEO Carlos Alberini had just spent $1 million on stock, boosting his holding by 35%. Guess? stock has risen from $12 to $22 since that report – a gain of over 80%.

Another consumer discretionary stock we highlighted at the time was jewelry designer Pandora. We thought it was interesting that CEO Alexander Lacik had recently purchased 38,560 shares in the company, spending a total of around USD $2.5 million on stock. This purchase had boosted his holding by over 30%. Since this report, the stock has risen from DKK 410 to DKK 620 – a gain of more than 50%.

In the financials sector, we spotted some large insider purchases at US financial services firm B.Riley Financial during this period. Here, we noted that Chairman and Co-Chief Executive Officer Bryant R. Riley was aggressively purchasing RILY stock. The stock has climbed from around $26 to $44 – a gain of about 70% – since our report.

Also in September, we highlighted some bullish buying at US tech firm Ribbon Communications. We liked the fact that both CEO Bruce McClelland and CFO Miguel Lopez had recently made a number of large purchases, boostings their holdings significantly. These insiders were buying while the stock was trading between $4 and $4.50. Since that report, Ribbon’s share price has climbed as high as $7.40.

Finally, another insider buying signal from 2020 that is worth mentioning is a bullish buy at FuboTV in October. Here, we noticed that Waverley Capital – a venture capital group co-founded by FuboTV Chairman Edgar Bronfman Jr – had just spent $2 million on stock, paying $10 per share. Shortly after that report, the stock climbed as high as $60, delivering a gain of 500%, although it has pulled back to around $25 recently.

Insider transaction data: powerful in all market conditions

There are a number of takeaways from these insider buying signals.

Firstly, the insider transaction data generated trading signals across a wide range of sectors during 2020. While many of our best signals last year came from the technology sector (Upwork, Nordic Semiconductor, FuboTV) there were also strong signals in other sectors such as consumer discretionary (Camping World Holdings, Guess?, Pandora), financials (B.Riley Financial), hospitality (MGM Resorts International), and industrials (FedEx).

Secondly, the data generated signals across all market capitalizations. The list of stocks above features large-cap companies (FedEx, Dell Technologies), mid-cap companies (Harley-Davidson, Boohoo Group), small-cap companies (Zooplus, Upwork) and micro-cap companies (Volex).

Third, there were trading opportunities across many different geographic regions. While many of the best insider buying signals were from US-listed stocks, there were also plenty of strong signals from Europe and the UK.

Finally, we were able to spot opportunities in all market conditions. Insiders bought stock while share prices were falling and also bought stock while markets were rising.

Overall, insider transaction data was a very valuable research tool in 2020.

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