In a March 2020 blog post when we were in the midst of the stock market crash, I highlighted four businesses where insiders had bought stocks. The table from that post is reproduced below.
These insider purchases were made with their own monies in open market. In other words, they weren’t stocks or options awarded to them as executive compensation. It makes their buys more meaningful since they were increasing their personal stakes in the businesses.
Fast forward one year, let’s review how those purchases have performed since then. I had said then that I continued to hold these positions even though they were down 30% to 60%. One year later, those positions have done well, as you can see in the four charts below:
Insiders who bought shares in March last year have all done well. Out of the four, only Kinder Morgan (KMI) currently shows single-digit (less than S&P 500) capital gain so far. Performance of others range from 31% to 225%.
I should also point out that there were several other CEOs/Insiders who also bought own stocks at that time. The above isn’t an exhaustive list. For instance, Trip Advisor (TRIP) CEO made a substantial purchase in March last year. Fed Ex (FDX) and Exxon Mobil (XOM) board members bought own stocks too. There were probably others too. I don’t have them on my list here because I don’t own a position (except a smallish position in XOM) and don’t track them closely. Still, I admire all insiders who were willing to put their money where their mouths were.
What about other CEOs whose businesses I own? Why didn’t they also buy? There could be many reasons for other owner-insiders not to take advantage of low prices at the time. Many of them are already substantial owners-operators, as I have pointed out before. Others have significant compensation awards tied to company stock performance. No two situations are alike. More importantly even though many of the CEOs not listed here were not big buyers last year, they weren’t bailing out on their businesses either. They weren’t selling their stakes either.
I look into many other factors when I consider buying a business. Factors such as business quality, competitive advantages, growth prospects, etc. So, inside purchases are not my only buy criteria. But when I find durable and successful businesses that are also run by leaders who have convictions in their companies, I pay attention.
For full disclosure, I own above mentioned businesses, but they are not top holdings in my portfolio, as you can see here.