Sell in May and go away is an old investment adage that references the fact that, historically, stocks have done far poorer during the six-month period beginning in May than during the six-month period that begins in November and ends in April. This was clearly the case between 1950 and 2013, at least for stocks in the Dow Jones, which achieved the vast majority of their average annual gains (7.5%) during the latter period as opposed to the stretch beginning in May (0.3%).
However, that adage may no longer ring true in the modern era of passive investing based on stock performance during the past two years, and it doesn’t appear to be stopping insiders from loading up on shares of their companies in the past week, as insider buying has intensified.
We monitor and report on insider buying activity as part of a multi-faceted approach to investing that also includes our market-beating “Best Performing Hedge Funds Strategy”, which gained 4% last quarter vs. a loss of 1% for the S&P 500 ETF (SPY). Since its inception in May 2014 this strategy’s picks have returned 74.4% vs. 49.7% for the SPY. You can see our latest picks by trying our newsletters free of charge for 14 days.
CVS Health Corp (NYSE:CVS)
Who Bought Shares: Chairman David Dorman and Director David Brown
How Many Shares Were Bought: 24,300 @ $62.22 per share and 10,000 @ $61.99 per share, respectively
Date of the Transaction(s): May 4
After more than five years without an insider purchase, not one but two CVS Health Corp (NYSE:CVS) insiders bought shares on May 4, a few days after they slid down near multi-year lows. CVS shares have lost 13% in 2018 and are down by nearly 50% from their 2-year peak hit 22 months ago. Despite a relatively upbeat first-quarter earnings call at the end of April, shares have slid by over 10% in May, which appears to be where insiders finally drew a line in the sand.
Pharmacy-benefit managers (PBMs) like CVS Health Corp (NYSE:CVS) have been under increased scrutiny for months for their role in rising drug prices in the U.S. President Trump is expected to address that issue this week, laying out plans for how his administration will tackle the issue of drug prices, and based on recent comments from members of his staff, it appears that the role of PBMs are in his crosshairs. A Trump healthcare official took aim at PBMs yesterday, stating that their murky role as middlemen serving both manufacturers and drug plans was hurting consumers.
On the next page we’ll look at two other stocks with recent insider buying activity.
Cypress Semiconductor Corporation (NASDAQ:CY)
Who Bought Shares: President and CEO Hassane El-Khoury
How Many Shares Were Bought: 10,000 @ $15.03 per share
Date of the Transaction(s): April 30
Cypress Semiconductor Corporation (NASDAQ:CY) President and CEO Hassane El-Khoury purchased 10,000 shares of the company he leads on April 30, which was made even more significant due to the fact that he had sold shares of Cypress Semiconductor just two months earlier, at a far higher price ($17.60) than the recent purchase. Because of that, El-Khoury agreed to pay $26,545.13 to the issuer to cover what would’ve otherwise been considered profits from a short-swing transaction, meaning he essentially paid $17.60 per share for the 10,000 shares. Given that, the purchase was a strong vote of confidence in the stock, which has had an up-and-down year which has been more down than up recently.
A few days prior to that insider purchase, El-Khoury was upbeat when discussing Cypress Semiconductor Corporation (NASDAQ:CY)’s first-quarter results, praising the company’s innovation within its embedded solutions portfolio as allowing the company to more easily meet the needs of consumers. Cypress’ auto business grew by 15% year-over-year, while the introduction of its ModusToolbox software suite helped drive solid IoT growth.
Kemper Corporation (NYSE:KMPR)
Who Bought Shares: Directors David Storch and George Cochran
How Many Shares Were Bought: 5,000 @ $68.69 per share and 500 @ $68.55 per share, respectively
Date of the Transaction(s): May 2
Lastly we’ll look at Kemper Corporation (NYSE:KMPR), shares of which were purchased by two of the company’s board members last Wednesday. Unlike the majority of insider purchases, particularly when purchases are made by multiple insiders within a short timeframe, shares of Kemper are actually flying high, gaining over 20% since April 27 and more than 34% since April 2.
The insider purchases came on the heels of Kemper Corporation (NYSE:KMPR) releasing first-quarter results on April 30 that dominated analysts’ expectations, with adjusted EPS of $1.10 trouncing estimates by $0.34, while the insurance company’s $693 million in revenue was also $35 million ahead of estimates. Analysts are also bullish on Kemper’s pending acquisition of Infinity Property and Casualty Corp. (NASDAQ:IPCC), which will bring further scale and greater efficiencies to Kemper’s nonstandard auto franchise, which was already a strong performer in the first quarter, as premiums jumped by 23%.