Were you surprised by the strength of the financial stocks in 2016?
Maybe you shouldn’t have been.
One of the biggest CEO insider buys in 2016 was by Jamie Dimon of JPMorgan Chase (NYSE:JPM) who bought 500,000 shares for $26 million in February.
On the day he bought, JPMorgan's shares had hit a new 2016 low and were down 16.5% year-to-date thanks to the early year stock market sell off.
At the time, Dimon already had 7 million shares of JPMorgan stock in his 401k and his wife also owned a million shares in her own account.
It was just Dimon's third purchase of shares on the open market in the prior 12 years. He bought 500,000 shares in January 2009 during the Great Recession doom when bank shares were plunging to multi-year lows and another 500,000 in July 2012.
What did Jamie Dimon know that February?
The shares have since jumped 94%.
In 2016, the Bankers Dove In
But he wasn't the only banker buying in 2016.
At Huntington Bancshares (NASDAQ:HBAN), three corporate insiders, including the CEO and CFO, bought on Feb 1, 2016. Through the end of 2016, those shares jumped 53%.
At Zions Bancorporation (NASDAQ:ZION), between January 28 and February 9, the CEO, the CFO, a director and two Executive Vice Presidents all bought shares. By Dec 31, 2016, they were up 107%.
At KeyCorp (NYSE:KEY), there was a huge cluster buy of insider buying between January 25 and February 8 that resulted in 9 directors and the CEO all buying shares. From Feb 8 through the end of 2016, the shares soared 71%.
They’re at it Again in 2019
2016, it turns out, wasn’t a fluke.
After the big rally off the 2016 lows, the bank stocks stalled out again in 2018.
They are, once again, under-valued.
And the insiders know it.
The bank insiders are back, diving in for more shares in 2019.
For example, in April, the CEO, General Counsel and one of the directors all bought shares of Simmons First National Corp., an Arkansas-based regional bank.
Shares are down nearly 20% over the past year and are up just 3% in 2019. They clearly see a buying opportunity.
Insider Buying Sends a Strong Signal
Why would these CEOs and corporate insiders spend so much of their money on their own companies’ stock when they already own a ton shares already?
Greed!
Pure and simple.
The opportunity to make more money motivates people- even people who are already millionaires like Jamie Dimon.
If top insiders are buying, it’s because they know something very good is going on at the company. Maybe it is a new product. Or contract. Or pending merger.
Whatever the reason, they are very confident that shares will be on the rise. After all, who would buy more stock in a company if they knew it was sinking???
More . . .
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Insider Trading Alert: Buy This Stock Monday AM
When in-the-know officers dip into their own pockets to buy shares of their own company, there’s only one reason: They expect the stock price to go up.
Zacks is now targeting insider moves that include a monster buying spree in a little-known regional bank. The CEO, COO, CFO, and 5 directors just ponied up $2,263,273 of their own money even though some were already awarded shares as part of their compensation. Time to get in on this action.
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Buy When the Insiders Buy
When high level insiders buy, they are required to report the purchases to the SEC within 48 hours of the trade. The trade then becomes public information.
Hedge funds and other professional investors routinely use this information to get an edge on their trades.
For most of us, though, it’s not easy to get access to the insider information. While the media will trumpet huge insider buys like Dimon’s $26 million buy, did you hear anything about Grubhub CEO Matt Maloney’s $1 million stock purchase on Apr 30, 2019?
The challenge is getting easy and reliable access to all the insider trades and then figuring out which ones to buy.
Where to Find the Insider Buys
Anyone can go on the SEC website and get the insider trading information but it’s time consuming to search by individual companies.
Some investment firms collect the insider buying data and can provide it to you as a weekly list. Have you ever seen one of those lists? The sheer number of companies can be overwhelming.
In some instances, the insiders have been known to buy en masse. Then what’s an investor to do?
This happened during the stock market dip in August 2011. As stock prices fell, insiders felt that their companies were undervalued and rushed out to buy shares.
That August, insiders bought stock in 50 different S&P 500 companies in just one week. Even if you got a list of those stocks, how would you narrow it down to the stocks that were truly worth buying?
To solve this problem, our Zacks research team developed a strategy that monitors selected insider buying activity at companies that already show strong earnings and excellent valuations. We do the work of sifting through all the insider buys so you don’t have to.
Just a handful of stocks meet the demanding criteria of our Zacks Insider Trader.
Right now, we’ve narrowed it down to 10 insider buys that make the grade.
Look Into the Portfolio Now
Normally closed to public view, we’ve opened it up temporarily through this weekend. You'll see live recommendations with substantial upside.
For example, there’s a little-known regional bank that insiders are pouring their own money into.
Eight key officers feel so good about the stock price going up that they bought $2.3 million dollars worth of shares:
• The CEO invested $996,500
• The COO/President spent $995,000
• The CFO jumped in with $99,979
• 5 directors kicked in a total of $171,794
You might want to join them.
And as a bonus for exploring insider opportunities like this, you are invited to download Zacks' Special Report, 5 Stocks Set to Double free of charge. These 5 buy-and-holds balance our more active Insider Trader moves. Each is the #1 favorite of a Zacks expert for its potential to jump +100% or more over the next year.
Important note: Access to the Insider Trader portfolio and Special Report is limited. This opportunity ends midnight Sunday, May 12.
See our insider trades and download 5 Stocks Set to Double >>
Best,
Tracey
Tracey Ryniec, Zacks' insider and value strategist, is Editor in Charge of the Insider Trader.
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Zacks Investment Research