“Davidson” submits:
Q1 2022 hedge fund letters, conferences and more
The overall pace of insider activity has turned notably bullish in recent weeks. Insiders are the most informed Value Investors and buying and option accumulation during market downturns when overall market psychology is most negative has always provided excellent insight specially so if one connects historical financials, historical pricing of those financials and prior insider history.
The recent sharp price declines have produced a jump in buying vs selling. Typically, buying activity is not uniform with each company having a relatively unique pattern of market pricing independent often of others within the same sector. As a result, insider buying tends to be distributed throughout the market cycle without providing a gross signal. However, gross shifts towards pessimism results in surges across multiple sectors resulting in a general signal that is useful when the headlines are decidedly negative with 90%+ predicting additional declines. Most predictions are based on technical analysis with forecasts of economic decline based on vague interpretations of govt policy.
Performing an analysis including insider buying activity requires a comprehensive evaluation. It is when one examines which insiders are buying, what they are saying about their business prospects in comparison to past buying/accumulation periods and price declines and in comparison to historical financials and current context of trends in economic indicators, one always finds sound argument. This does not mean unexpected events cannot impact the contest extending the time required for managements to resume their business performance. More often than not, one acquires shares deeply discounted vs. where they are likely to shift 3yrs-5yrs.
Even with this bout of insider bullishness, investing remains one single issue at a time. In a 30 issue portfolio carefully selected using the criteria stated, one tends to see less overall price volatility with decent long-term outcomes. For investors using fund managers, it is equally useful to know if the current pricing has a lower risk to new capital. Insider buying indicates this is so.
