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Many investors love to track which stocks insiders are buying and selling, and for good reason. An insider is described as any director or senior officer of a publicly traded company. Persons or entities with 10% or more ownership of a publicly traded company are also considered insiders. Additionally, insiders are thought to have the most knowledge of the company, and logically so.
In a study from the MIT Press, University of Michigan professor H. Nejat Seyhun tracked stocks that insiders bought over a 19-year period. Seyhun discovered that stocks outperformed the market by 4.5% following an insider purchase. Stocks following an insider sale underperformed the market by 2.7%. The conclusion from this study clearly supports the importance of tracking insider activity.
Furthermore, another study found that insider purchases beat the market by 11.2% annually. Researchers also concluded that company size and insider rank are not significant variables to watch.
So what does this mean for retail investors, and why does it matter? Importantly, insider buying may be more beneficial to track than insider selling. This is because figuring out why an insider sold is a lost cause. There are hundreds of personal reasons why an insider could have sold shares that retail investors may never know. As famed investor Peter Lynch once said, “Insiders might sell their shares for any number of reasons, but they buy them for only one: They think the price will rise.”
With that in mind, let’s take a look at five stocks insiders are buying recently.
- Bed Bath & Beyond (NASDAQ:BBBY)
- Asana (NYSE:ASAN)
- Stitch Fix (NASDAQ:SFIX)
- Warby Parker (NYSE:WRBY)
- Duolingo (NASDAQ:DUOL)
Stocks Insiders Are Buying: Bed Bath & Beyond (BBBY)
Source: Jonathan Weiss / Shutterstock.comBed Bath & Beyond is first on the list of stocks insiders have been buying.
The consumer retailer has also picked up a fair share of insider buying in the last two weeks. Since Jan. 7, the U.S. Securities and Exchange Commission (SEC) has received six Form 4 documents showing that insiders have bought shares. These insiders are:
- Gustavo Arnal, CFO: 15,000 shares purchased at an average price of $13.81.
- Gregg Melnick, Chief Stores Officer: 7,195 shares purchased at an average price of $13.82.
- Rafeh Masood, Chief Customer Officer: 7,000 shares purchased at an average price of $14.
- John Hartmann, Chief Operating Officer: 6,667 shares purchased at an average price of $15.00.
- Joshua Schechter, Director: 6,000 shares purchased at an average price of $13.86
- Joseph Hartsig, Chief Merchandising Officer: 5,000 shares purchased at an average price of $13.78.
With the start of a new year, Bed Bath & Beyond insiders are wasting no time picking up shares. BBBY stock had a lackluster 2021, declining by 18% compared to the S&P 500’s return of 27%. This was partly due to Covid-19 influencing consumers to visit brick-and-mortar stores less frequently. However, it seems like insiders are betting on 2022 to be a turnaround year based on their buying activity. The recent insider buys by five executives and one director on BBBY stock are hard to ignore, so investors should keep a close eye on Bed Bath & Beyond in 2022.
Fans of short squeezes should have BBBY stock on their radar as well. According to the latest data, roughly 27% of shares of BBBY are being shorted. The short interest figure would take more than 5 days to cover.
Asana (ASAN)
Source: rafapress / Shutterstock.comNext on the list of stocks insiders are buying is Asana.
Asana operates as a workplace management platform that includes project, goal and task management. During the third quarter, Asana reported revenue of $100.3 million, up an impressive 70% year over year. The revenue figure also marked the first time the company reported quarterly revenue over $100 million. However, the company still remains unprofitable, reporting a GAAP net loss of $69.3 million during the quarter.
Asana has attracted lots of investor attention in recent months. However, this isn’t because of Asana’s core business or products. Rather, the attention is due to CEO Dustin Moskovitz’s incessant buys of ASAN stock.
Billionaire Dustin Moskovitz is extremely bullish on ASAN stock based on his nonstop buys. According to a Form 4 received on Jan. 14, Moskovitz purchased an additional 250,000 shares of Asana at an average price of $61.32. The day before that, Moskovitz purchased 500,000 shares of ASAN stock at an average price of $64.70. It doesn’t stop there. Moskovitz has now purchased ASAN stock nine times in January. In December, Moskovitz purchased ASAN stock 11 times, or basically once every 3 days.
Moskovitz now owns a total of 14.1 million shares, representing roughly 20% of Asana’s float.
However, it should be noted that Moskovitz’s purchases are pursuant to a 10b5-1 pre-arranged trading form. Nonetheless, these purchases demonstrate that Moskovitz is bullish on ASAN stock.
Today, many insiders buy or sell stock through a 10b5-1 form. This form allows insiders to make prearranged trades for a pre-defined period in order to avoid accusations of insider trading. Additionally, the plan allows insiders to schedule trades during blackout periods, such as quarterly earnings and corporate events, as long as they file a 10b5-1 form well in advance.
Stocks Insiders Are Buying: Stitch Fix (SFIX)
Source: Sharaf Maksumov / Shutterstock.comStitch Fix is an online fashion platform that sends consumers clothing based on a style quiz. Once the style quiz is taken, a personal stylist reviews the consumer’s selection and decides which clothes to send. Recently, Stitch Fix announced a $150 million share repurchase program, which is always a positive signal from management. However, since its IPO in late 2017, shares of SFIX have basically remained stagnant, even though revenue has increased steadily.
Regardless, an investment firm is now taking advantage of Stitch Fix’s stagnant price.
According to a Form 4 received on Jan. 12, Working Capital Advisors purchased 37,383 shares of SFIX stock at an average price of $17.73. The United Kingdom-based investment firm offers “portfolio management, financial planning, and trading services.”
After the most recent purchase, Working Capital owns 11.4 million shares of Stitch Fix. However, out of those 11.4 million shares, 4.9 million are owned directly by High Street Partners, while 6.4 million shares are owned directly by the Working Capital Fund. Working Capital Advisors acts as the investment manager for both entities. Furthermore, Working Capital now owns a 16.4% stake based on SFIX stock’s float of 69.02 million shares.
Duolingo (DUOL)
Source: dennizn / ShutterstockLast year, Duolingo made its public debut on the Nasdaq Exchange for $102 a share. Afterwards, shares of DUOL stock ballooned to as high as $205 before quickly cooling off. Duolingo operates as a language learning application and website that offers services to individuals and learning institutions. During Q3, Duolingo reported that it had 2.2 million paying subscribers, up 49% year 0ver year. Monthly active users (MAUs) also increased to 41.7 million, an all-time high. Now, these impressive numbers are catching the attention of a $13 billion hedge fund.
In a Form 4 received on Jan. 14, Durable Capital Partners purchased shares of Duolingo on Jan. 12-14. In total, the purchase amounted to 157,977 shares. In addition, the shares were bought from prices ranging from $90.86 to $103.87. After its recent purchase, Durable Capital now owns a 10.8% stake in DUOL stock. Furthermore, it should be noted that Durable Capital purchased the shares through its Durable Capital Master Fund, which is a fund managed by Durable Capital.
Since Q4 of 2019, Durable Capital’s assets under management (AUM) have increased by an impressive $10 billion. The fund focuses on small and mid-sized market capitalization investments that “have the capabilities and headroom to compound wealth at scale over the long term.”
Durable Capital’s purchase suggests that Duolingo may see some upside this year. This is because Durable Capital has an average holding period of 3.3 quarters for stocks in its portfolio.
Stocks Insiders Are Buying: Warby Parker (WRBY)
Source: Dev Chatterjee / Shutterstock.comLast on the list of stocks insiders are buying is Warby Parker.
Warby Parker debuted on the New York Stock Exchange last year via a direct listing and closed at $54.49 on its opening day, soaring more than 30% above its $40 reference price. However, WRBY stock currently trades near $33. Warby Parker operates as an online and brick-and-mortar retailer of vision products. The company also offers home try on, where consumers can sample a variety of glasses delivered to their home and select their favorite. Glasses make up about 95% of the company’s sales, while contact lenses account for 2%. Additionally, Warby Parker is actively working to expand its market share in both categories. Now, the same hedge fund that recently picked up shares of DUOL stock has picked up shares of WRBY stock as well.
According to a Form 4 received on Jan. 14, Durable Capital Partners purchased shares of WRBY stock on Jan. 12-14. The total purchase amounted to a massive 628,645 shares. Furthermore, the shares were bought at prices ranging from $33.31 to $38.72 through Durable Capital’s Durable Capital Master Fund. After the purchase, Durable Capital now owns 12.47 million shares of WRBY stock, which represents roughly 23% of the float. Similar to its DUOL investment, Durable Capital’s holding period suggests that the fund sees upside for WRBY stock within the next year.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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