When Seeking Alpha contacted me at the end of 2021 to see if I would be interested in writing an article about my outlook for 2022, I appreciated the opportunity to participate in their virtual tour table. I hesitated for a while before pasting the photo of a bear on my article entitled “Positions for 2022: a changing of the guard“but I was sufficiently aware of the challenges we were likely to face in 2022 that I decided to go ahead. I wrote the following in this article,
We are coming off of two incredible years of recovery where the S&P 500 and Nasdaq have generated gains of 46% and 74%, respectively (at the time of writing) since the start of 2020. This is despite a recent pullback in growth stocks. Looking from the outside and through the lens of a market player in early 2020, this kind of performance during a global pandemic with multiple waves of infection is beyond comprehension. In other words, markets remain mostly unpredictable. There is, however, one rule that has managed to stand the test of time and that is, “Don’t fight the Fed. When the Fed decides to open or close the floodgates, it is better to go with the flow rather than fight against the strong current.
With the government and market participants agreeing that inflation is not transitory, we will likely see some Fed tightening, which could result in a “don’t fight the Fed” scenario, but in a sense reverse.
The main driver for the stock market will likely be Fed action and sector/style rotation due to the anticipated rise in interest rates.
The first interest rate hike last month was a modest 25 basis points, but Jerome Powell indicated that a 50 basis point hike would be on the table in May. Market participants are now expecting at least two 50 basis point hikes and potentially a 75 basis point hike. A rise of 75 basis points would be very unusual and signal that inflation is proving very difficult to control. In this environment, it’s no surprise that the S&P 500 fell almost 3% last week and the Nasdaq fell 3.69%. While we may see some respite in selling in the coming days, risk continues to remain on the downside for equities in general with some pockets of opportunity.
Insider buying normally tends to increase during periods of market weakness, but we haven’t seen this yet as we are in the midst of earnings season quiet periods at most companies. I expect a significant increase in insider buying next month. Like I tweeted earlier this week, we’re seeing a bewildering amount of insider buying in housing-related companies and this week was no exception with the CEO of mortgage originator Rocket Companies (RKT) buying even more shares. The market, worried about a housing downturn, hasn’t really bullied these companies in recent months and many of them are therefore trading at very low valuations, as is often the case during cyclical peaks. . It is possible that insiders are either myopic and not seeing the big picture, or are looking beyond this cycle and think they are well positioned after the bottom of the cycle.
An interesting insider buy this week was made by a director of retail REIT CBL & Associates (NYSE: CBL), who emerged from bankruptcy end of 2021. Jonathan Heller, Partner at Canyon Partners, joined the board of directors of CBL last October. Canyon Partners is a multi-strategy hedge fund with nearly $21 billion in assets under management that focuses on distressed securities, restructurings and real estate, among other areas. Considering CBL emerged from restructuring last year, it’s no surprise to see Canyon involved. Mr. Heller made this purchase in several accounts including a joint account with his spouse and through a trust set up for the benefit of his children.
Insider buying declined last week, with insiders buying $41.43 million worth of shares from $64.39 million the previous week. Sales also fell to $704.53 million from $1.58 billion the previous week.
The insider sell/buy ratio is calculated by dividing the total insider sells in a given week by the total insider buys that week. The adjusted ratio for the past week fell to 17. In other words, insiders sold 17 times more shares than they bought. The sell/buy ratio this week was favorable compared to the previous week when the ratio stood at 24.52.
Notable Insider Buys:
1. CBL & Associates Properties, Inc. (CBL): $29.09
Director Jonathan M. Heller acquired 100,000 shares of this retail REIT, paying $32.25 per share for a total consideration of $3.23 million. 70,000 of these shares were purchased indirectly through a trust.
|PER: N/A||Forward P/E: -74.59||Industry P/E: 36.33|
|S/S: 1.73||Price/Book: 12.63||EV/EBITDA: 10.8|
|Market cap: $992.71M||Avg. Daily volume: 114,820||52 week range: $25.96 – $43.5|
2. BlackRock, Inc. (BLK): $662.94
Director William E. Ford acquired 3,000 shares of this asset management company, paying $687.96 per share for a total consideration of $2.06 million. Mr. Ford increased his stake by 25.18% to 14,915 shares with this purchase.
|PER: 17.35||Front P/E: 14.91||Industry P/E: 13.13|
|P/S: 5.19||Price/Book: 2.67||EV/EBITDA: 13.3|
|Market cap: $100.59 billion||Avg. Daily volume: 869,446||52 week range: $660.15 – $973.16|
3. Rocket Companies, Inc. (RKT): $8.67
Chief executive Jay Farner acquired 129,000 shares of this mortgage and other originator, paying $9.28 per share for a total consideration of $1.19 million. Mr. Farner increased his stake by 7.67% to 1,810,707 shares with this purchase.
|PER: 3.73||Front P/E: 6.83||Industry PER: 7.54|
|P/S: 1.31||Price/Book: 1.65||EV/EBITDA: 4.24|
|Market cap: $17.23 billion||Avg. Daily Volume: 5,505,265||52 week range: $8.66 – $23.33|
4. Hasbro, Inc. (HAS): $87.93
CEO Christian P. Cocks acquired 10,102 shares of Hasbro, paying $89.59 per share for a total consideration of $905,046. Mr. Cocks increased his stake by 18.09% to 65,945 shares with this purchase.
|PER: 28.36||Front P/E: 14.98||Industry PER: 21.90|
|S/S: 1.9||Price/Book: 4.02||EV/EBITDA: 13.44|
|Market cap: $12.22 billion||Avg. Daily volume: 1,390,963||52 week range: $81.16 – $105.73|
5. Clene Inc. (CLNN): $2.87
Director David J. Matlin acquired 132,891 shares of this biotech company, paying $3.01 per share for a total consideration of $400,002. Mr. Matlin increased his stake by 7.77% to 1,844,288 shares with this purchase.
|PER: N/A||Forward P/E: -5.42||Industry P/E: 81.33|
|P/S: 251.06||Price/Booking: 14.21||EV/EBITDA: -3.33|
|Market cap: $181.52M||Avg. Daily volume: 99,012||52 week range: $2.36 – $17.82|
You can check the full list of purchases from this Insider buying page.
Notable insider sales:
1. Alphabet Inc. (GOOG) (GOOGL): $2392.28
Director Lawrence Page sold 83,332 shares of Alphabet for $2,566.05, generating $213.83 million from the sale.
|PER: 21.32||Front P/E: 17.44||Industry PER: 20.16|
|P/S: 6.14||Price/Book: 6.29||EV/EBITDA: 16.13|
|Market capitalization: $1.58 T||Avg. Daily volume: 1,542,733||52 week range: $2230.05 – $3042|
2. Bentley Systems, Incorporated (BSY): $41.81
Director Raymond B. Bentley sold 464,605 shares of this infrastructure engineering software solutions provider for $44.05, generating $20.46 million from the sale.
|PER: 139.37||P/E front: 45.95||Industry P/E: 52.42|
|P/S: 12:47 p.m.||Price/Book: 31.46||EV/EBITDA: 87.28|
|Market cap: $12.03 billion||Avg. Daily volume: 977,131||52 week range: $34.45 – $71.92|
3. Airbnb, Inc. (ABNB): $156.09
Chief Financial Officer Dave Stephenson sold 35,000 shares of Airbnb for $177.81, generating $6.22 million from the sale.
|PER: N/A||Front P/E: 76.14||Industry P/E: 1,306.33|
|P/S: 16.75||Price/Book: 20.71||EV/EBITDA: 176.83|
|Market cap: $100.35 billion||Avg. Daily volume: 5,987,901||52 week range: $129.71 – $212.584|
4. Targa Resources Corp. (TRGP): $76.17
The shares of this midstream energy asset owner were sold by 2 insiders:
- Director Joe Bob Perkins sold 66,350 shares for $78.37, generating $5.19 million from the sale. 38,406 of these shares were sold indirectly by Perkins Blue House Investments Limited Partnership.
- Business manager Robert Muraro sold 10,000 shares for $80.10, generating $801,044 from the sale.
|PER: N/A||Front P/E: 17.23||Industry P/E: 11.84|
|P/S: 1.03||Price/Book: 8.64||EV/EBITDA: 12.63|
|Market cap: $17.39 billion||Avg. Daily volume: 1,658,463||52 week range: $33.59 – $81.5|
5. Interactive Brokers Group, Inc. (IBKR): $61
Chairman Thomas Peterffy sold 80,000 shares of this investment brokerage firm for $65.18, generating $5.21 million from the sale.
|PER: 18.83||Front P/E: 13.5||Industry P/E: 13.13|
|P/S: 9.24||Price/Booking: 2.5||EV/EBITDA: N/A|
|Market cap: $25.42 billion||Avg. Daily volume: 893,673||52 week range: $56.95 – $82.83|
You can check the full list of sales from this Insider sales page.