Insider Buying

The growth stock sell-off: are insiders buying the dip?

Collage of Logos of the companies: (Left to Right) Chewy, Draft Kings, Docu Sign, Adobe, Twilio, PayPal and Wayfair

Growth stocks have taken quite a hit recently as bond yields have moved higher. While the growth-focused Nasdaq Composite index – which consists of over 2,500 stocks listed on the Nasdaq Stock Exchange – is only around 8% below its all-time highs, the damage under the surface has been far greater. Plenty of high-growth Nasdaq names, including the likes of Peloton, Crowdstrike, Rivian, and Coinbase, are down more than 30% from their 2021 highs.

Often, when specific areas of the market experience heavy sell-offs, we see a high level of buying from insiders. Insiders have more information on their businesses than anyone else, so they generally have a good understanding of their companies’ prospects. They also tend to be value investors, and typically like to buy company stock when they believe value is on offer. So, have we seen insider buying in the high growth stocks recently, as share prices have declined? Let’s take a look.

Are insiders buying growth stocks?

An analysis of our insider transaction data reveals that there hasn’t been a huge amount of insider buying in highly popular growth stocks in recent months. Most of the hyper-growth stocks that are popular among retail investors have seen no buying at all, despite the fact that their share prices have come down significantly.

Having said that, there have been a few notable insider purchases across the Nasdaq and New York Stock Exchange recently. Here’s a look at seven large insider buys that look quite interesting to us.

Adobe Inc

Let’s start with software company Adobe (ADBE:US), which has seen its share price fall from around $700 to near $500 over the last few months.

Here, board member Laura Desmond purchased 973 shares between January 6 and January 7 at an average price of $514 per share, spending a total of just under $500,000 on stock. Her purchases represented the first buys from an insider at Adobe since December 2018.

Insider Buying Chart - Adobe Inc

What’s interesting about this insider activity is that Ms. Desmond has an investment background. Currently, she is Founder and CEO of Eagle Vista Partners, a strategic advisory and investment firm focused on marketing and digital technology. She is also an Operating Partner in the Media & Technology Practice at Providence Equity Partners, a private equity investment firm. This background means she is likely to have an excellent understanding of the intrinsic value here.

DocuSign Inc

Another software name that has seen some substantial insider buying recently is DocuSign (DOCU:US), which specializes in e-signature technology. Its share price took a significant hit late last year after the company’s Q4 guidance missed estimates.

Here, CEO Dan Springer spent about $5 million on stock in the first half of December, picking up shares near the $140 mark. This represented the first insider buying since the company went public in 2018. He also spent another $5 million on DOCU stock on January 10, picking up shares near the $130 mark.

Insider Buying Chart - DocuSign Inc

It’s worth noting that Mr. Springer has around 30 years of experience at hyper-growth software-as-a-service (SaaS) companies. Prior to DocuSign, he was Chairman and CEO of Reponsys, where he led the sale of the company to Oracle in 2013 for $1.6 billion. So, he is likely to have a good understanding of DocuSign’s prospects.

Twilio Inc

Twilio (TWLO:US), which provides a cloud communication platform to clients globally, has also seen some insider buying in recent months as its valuation has fallen.

Here, board member Jeffrey Immelt bought 3,400 shares at a price of $296 per share in mid-November. This purchase cost the insider around $1 million and increased his holding in the company by about 25%.

Insider Buying Chart - Twilio Inc

Mr. Immelt – who was CEO of General Electric for 16 years and was named as one of the ‘World’s Best CEOs’ by Barron’s on three occasions – is currently a Venture Partner at New Enterprise Associates where he works within the healthcare and technology investing teams. This suggests he is very capable of spotting an investment opportunity.

The fact that he increased the size of his holding by 25% suggests that he is very confident in the prospects of Twilio.

PayPal Holdings Inc

In the FinTech space, there have been multiple insider purchases at PayPal (PYPL:US), which has experienced a significant pullback recently and is well off its 2021 highs.

Here, Chairman John Donahoe bought 9,780 shares at a price of $204.42 per share on November 9. This trade cost the insider just under $2 million and increased his holding to 67,750 shares. This was only the third buy from an insider since the company’s spinoff from eBay in 2015.

Insider Buying Chart - PayPal Holdings Inc

We then saw two board members, Enrique Lores and David Dorman, spend a total of about $700,000 on stock between November 23 and December 3 at prices of between $180 and $187 per share. It’s worth noting that Mr. Dorman is the Founding Partner of Centerview Capital Technology Fund, a private investment firm.

Chewy Inc

In the e-commerce space, we have seen some interesting buying at Chewy (CHWY:US) recently. Chewy is an online retailer that specializes in pet food. Its share price has taken a hit recently on the back of supply chain and inflationary setbacks.

Here, board member James Star bought 32,278 CHWY shares at an average price of $55.58 per share between December 20 and December 21. This trading activity cost the insider roughly $1.8 million and increased his holding to 74,822 shares.

What stands out about this buying activity from Mr. Star is that it has increased the size of his holding by 76%. The fact that the insider has upped his stake by such a large percentage suggests that he’s very confident the stock is set to rise.

Insider Buying Chart - Chewy Inc

It’s worth noting that Mr. Star has a background in investment management. Currently, he serves as Executive Chairman and Investment Committee Chair of Longview Asset Management LLC, a multi-strategy investment firm that invests on behalf of individuals, trusts and charitable foundations. In the past, he has served as a director or trustee of pension funds, registered mutual funds, and private companies. This background means he is likely to have a good understanding of Chewy’s investment potential.

Wayfair Inc

Another e-commerce stock that has seen some insider buying recently is Wayfair (W:US), which sells furniture, decor, housewares, seasonal decor, and other home goods.

Here, board member Michael Choe bought 10,000 W shares at a price of $258.98 per share on November 22. This trade cost the insider around $2.6 million and increased his holding to 105,160 shares.

Insider Buying Chart - Wayfair Inc

This trading activity is worth highlighting because Mr. Choe is an experienced investor. Since 2017, he has served as the CEO and Managing Director of Charlesbank Capital Partners, an investment management firm managing over $8 billion of capital. He joined Harvard Private Capital Group – the predecessor to Charlesbank – in 1997, and was appointed as Managing Director in 2006 and President in 2014. Given his background, he is likely to have a good understanding of Wayfair’s intrinsic value.

DraftKings Inc

Finally, in the sports betting space, we’ve seen some interesting insider buying at DraftKings (DKNG:US), which went public in 2020 through a SPAC deal with Diamond Eagle Acquisition Corp.

Here, DraftKings’ Vice Chairman Harry Sloan bought 50,000 DKNG shares at a price of $39.52 per share on November 16. This trade – the first from an insider since the company went public – cost Mr. Sloan just under $2 million and increased his holding to 63,035 shares.

Insider Buying Chart - DraftKings Inc

This trade caught our attention due to the fact that Mr. Sloan is an experienced business executive and entrepreneur who, to date, has launched eight SPACs. He was also the founder of Diamond Eagle Acquisition Corp, which merged with DraftKings in 2020. So, he is likely to know the company very well.

The fact that Mr. Sloan spent nearly $2 million on stock suggests he is confident the share price is going higher.

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