Insider Observations

As companies report their 3Q results, trading restrictions are loosening and insider trading volume is picking up. The increased activity is being led by selling, causing the Sell/Buy Ratio to deteriorate (S/B Ratio is 1.6 which means 8 sell for every 5 buys). We continue to view insider sentiment as neutral, but trending negative. We upgraded 5 stocks this past week. By the way check our Signals Performans and if you want to know more about this Signals Service, please see our contacts below.

We’ve adjusted our insider sector preferences below, upgrading Materials and Real Estate to “most favored”, downgrading Financials to “neutral”, although we expect further changes as the November insider data expands.

While insider selling is picking up at a faster rate than buying, we did not downgrade any stocks this past week. Most of the recent selling has not been unusually aggressive or into weakness, two criteria we focus on while analyzing selling.

Elon Musk and Tesla note:

This weekend Elon Musk proposed selling 10% of his Tesla stock, presumably to realize gains and pay taxes. He is asking Twitter followers for their opinion. According to the most recent proxy, Elon owned 170.5m shares, 88.3m of which are pledged as collateral to secure personal indebtedness, and an additional 73.5 million options. We will not weigh into the debate but want to point out a few things. On November 5th, Kimbal Musk (Elon’s brother) sold 88,000 shares (options and stock) at $1,229, reducing his holdings to roughly 685,000 shares (incl. options). In addition to this, he gifted 25,000 shares to charity. While not his brother’s keeper, it is a little concerning to see this sale just a few days before Elon’s Tweet and potential sale.

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