The U.S. markets took a massive hit in March from the coronavirus crisis but this downtrend went in favor of some company insiders as they scooped up their own companies’ shares at throwaway prices. The COVID-19 pandemic induced an indiscriminate selling in global markets, notwithstanding the valuation, the worth of the companies or sector strength. This made some hidden gems real bargains and that’s where the company insiders jumped in to capitalize on the opportunity.
Inside Insider Buying
The buying of a company’s shares by its own employees is called insider buying. Strong insider buying shows that the company’s officials are optimistic about the stock. It could be because of the fact that company’s officials are about to launch some new products and anticipate the stock will soar ahead or because they find the stock trading at a cheaper valuation.
Whatever the case, solid insider buying signals strength in the stock. “In researching insider buying trends from 1975 to 1994, Seyhun found that stocks with significant insider buying outperformed the market by 4.5%,” as quoted on investorplace.com.
What Led to the Buying Spree?
The S&P 500 was down 24.1% in the past month (as of Mar 25). This corrected equity valuation to a large extent and insider buyers thus have started taking advantage of the prevailing low prices (read: Bet on Low-Beta ETFs in an Uncertain Market).
So, if you want to cash in on the bullish signals sent by the corporate insiders, you can very well play these below-mentioned ETFs. We highlight some stocks that saw solid insider buying (per an investorplace article) in the recent past. ETFs with exposure to these stocks can be paid attention to.
Exxon Mobil Corp (XOM - Free Report)
This energy bellwether has seen its shares fall 31.2% in the past month (as of Mar 25, 2020). It has about 25% exposure to iShares U.S. Energy ETF (IYE - Free Report) and Energy Select Sector SPDR (XLE - Free Report) each.
Live Nation (LYV - Free Report)
It is the world's premier live entertainment company, consisting of Live Nation, Ticketmaster and Front Line Management Group. Its shares have declined 26.9% in the past month (as of Mar 25). The stock has exposure to Invesco S&P 500 Equal Weight Communication Services ETF EWCO).
New Residential Investment Corp (NRZ - Free Report)
The real estate company focuses on investing in and actively managing investments related to residential real estate. Its shares have slumped 68.9% in the past month. The stock has 6.43% exposure to iShares Mortgage Real Estate ETF REM and a 5.5% focus on VanEck Vectors Mortgage REIT Income ETF (MORT - Free Report) .
Lowe’s Companies Inc. (LOW - Free Report)
This leading home improvement retailer’s shares have plunged 34.8% in the past month. The stock has 4.8% exposure to iShares U.S. Home Construction ETF (ITB - Free Report) , 4.7% focus on SPDR S&P Homebuilders ETF (XHB - Free Report) and 3.8% weight inVanEck Vectors Retail ETF (RTH - Free Report) .
Planet Fitness Inc (PLNT - Free Report)
Shares of this leading franchisors and operators of fitness centers in the United States have dropped 38% in the past month. The stock has exposure to Invesco DWA Consumer Cyclicals Momentum ETF PEZ (3.54%).
Wells Fargo (WFC - Free Report)
The financial biggie has seen its shares decrease 37.6% in the past month. The stock has presence in the funds like First Trust Nasdaq Bank ETF FTXO (by 7.63%), Invesco KBW Bank ETF KBWB (7.38%), First Trust Morningstar Dividend Leaders FDL (6.08%) among others.
Pureplay Insider Sentiment ETF in Focus
Apart from the aforementioned stocks, ETFs like Direxion All Cap Insider Sentiment Shares KNOW are a way to play insider buying.The fund tracks the S&P composite 1500 Executive Activity & Analyst Estimate Index. The index is designed to identify securities that receive favorable analyst ratings and are being acquired by company insiders, such as top management, directors and large institutional holders. The top three holdings of the fund are Edwards Lifesciences (5.23%), IDEXX Laboratories (5.20%) and Microsoft (5.08%). Its net expense ratio is 0.66%.
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