In this article, we will take a detailed look at Latest Insider Selling in April 2024: 10 Stocks to Watch. For a quick overview of the 5 such stocks, read our article Latest Insider Selling in April 2024: 5 Stocks to Watch.
Wall Street analysts and wise investors often keep a close eye on insider buying and selling, since academic research has time and again proved that insiders often act as opportunists and make use of insider information while conducting insider transactions. This is especially true for insider purchases, as we have discussed the relevant academic research recently. But what about insider selling? While many believe insider selling is not predictive of anything substantial, there are a few angles in insider selling activity which should not be ignored as they might provide something of value for long-term investors.
When Should You Pay Attention to Insider Selling?
Ben Silverman, director of research at Verity, in his podcast entitled Things All Investors Should Know About Insider Selling, said that there are certain kinds of insider selling activities which are worthy of investors’ attention. Silverman specifically advised investors not to overlook insider selling transactions conducted under the Rule 10b5-1, which allows insiders to sell their company shares by delineating a specific plan, which mentions stock price, amount and transaction date in advance. The analyst said that there has been a misconception in the industry that insider selling under the Rule 10b5-1 is of “vanilla nature” and does not show “opportunistic” tendencies of insiders. Silverman believes some insiders have been using this rule to “sell opportunistically” and some of them have been “very smart about it.”
Important Insider Selling of 2024: Mark Zuckerberg Selling Meta Platforms
One of the examples of such transactions, according to Silverman, is Mark Zuckerberg’s selling Meta Platforms shares under the rule. Zuckerberg started selling Meta Platforms shares last year. He kept selling the stock almost daily, following a pattern. But Silverman said the size of Zuckerberg’s selling increased significantly in February 2024 when the social media company’s shares jumped. Silverman said Meta Platforms co-founder had adopted the Rule 10b5-1 back in July 2023, and at that time he didn’t know at what price Meta shares would be trading in February at 2024.
“But he did have the foresight to prepare for it by setting up Rule 10b5-1 to accelerate selling at certain prices,” Silverman added.
However, Silverman did say that since companies offer special stock options annually to their executives, insiders usually do not need to worry about their company stock price while selling it. Silverman said insiders can often build up “enormous equity exposure” easily.
Silverman’s point regarding insider selling is also backed by academic research. In a paper titled Insider Trading: Frequency Matters, researchers talked about how many insiders use informational advantage while selling shares under the Rule10b5-1. Here is an important excerpt from the study:
“One US example involves selling shares through preprogrammed 10b5-1 plans, a process that on its face might suggest an orderly series of sales over time, but in reality, is often designed to facilitate large sales at the first opportunity. There is evidence that 10b5-1 preprogrammed selling occurs disproportionately before negative earnings surprises (Jagolinzer, 2008) and can predict share price decline more than insider sales in general (Milian, 2016). Other studies find that selling insiders sometimes appear to work subtly with analysts around the timing of earnings revisions (Richardson, Teoh, & Wysocki, 2004), or otherwise massage earnings accrual information (Kraft, Lee, & Lopatta, 2014), or the timing of share repurchases (Bonaime & Ryngaert, 2013) and earnings restatements (Agrawal & Cooper, 2015) to support a stock price before a sale. There is also evidence that insiders sell well in advance of a default (Beneish, Press, & Vargas, 2012) or bankruptcy (Iqbal & Shetty, 2002), or alternatively, reduce selling ahead of receiving a takeover bid (Agrawal & Nasser, 2012). Not every subtle exit strategy involves selling; informationally motivated share disposal occurs through prepaid forward contracts (Jagolinzer, Matsunaga, & Young, 2007) and large charitable gifts (Yermack, 2009).”
Which Sectors and Industries are Seeing Insider Selling in 2024?
Insider Monkey’s analysis shows that since April 10 through April 15, insiders were dumping technology stocks since the sector had the heaviest concentration of insider selling activity in the period. In 2024, February saw the highest insider selling activity, with insiders dumping about $6.4 billion worth of shares in the month, according to data from CNBC. Software and Services saw the heaviest insider selling recently, followed by Biotechnology and Gas, according to CNBC.
Insider Monkey’s monthly newsletter and portfolio that focuses on activist hedge funds, insider trading and stock picks from hedge fund investor newsletters and conferences returned 199.2% between March 2017 and March 12, 2024 and outperformed the S&P 500 ETFs’ 144.9% gain by more than 54 percentage points.
For this article we used Insider Monkey’s insider trading screener to find stocks that saw heavy insider selling in April through April 8. From these companies we chose 10 stocks with the highest insider selling activity in terms of dollar value. Some top names in the list include Apple Inc (NASDAQ:AAPL), Netflix Inc (NASDAQ:NFLX) and Crowdstrike Holdings Inc (NASDAQ:CRWD).
10. Starwood Property Trust Inc (NYSE:STWD) [Parent company: Starwood Capital Group]
Number of Hedge Fund Investors: 19
Starwood Property Trust Inc (NYSE:STWD) ranks 10th in our list of the stocks insiders are selling these days. Barry S. Sternlicht, a director at Starwood Property Trust Inc (NYSE:STWD), on April 1 sold 973,000 shares of the REIT at $23.08 per share. In addition to Starwood, Apple Inc (NASDAQ:AAPL), Netflix Inc (NASDAQ:NFLX) and Crowdstrike Holdings Inc (NASDAQ:CRWD) also saw insider selling in April.
9. nCino Inc (NASDAQ:NCNO)
Number of Hedge Fund Investors: 20
Financial technology solutions company nCino Inc (NASDAQ:NCNO) shares have gained about 43% over the past one year. The stock recently saw insider selling activity as Insight Holdings Group, LLC., which has a director and 10% stake owner status at nCino Inc (NASDAQ:NCNO), sold 1,031,659 company shares at $35.20 per share on April 1. Since then the stock is down 3.22%. Another director at nCino Inc (NASDAQ:NCNO), Jeff Horing also sold 5.1 million shares of nCino Inc (NASDAQ:NCNO) at $35.20 per share on April 1.
Baron Small Cap Fund stated the following regarding NCino, Inc. (NASDAQ:NCNO) in its fourth quarter 2023 investor letter:
“This quarter we initiated a position in NCino, Inc. (NASDAQ:NCNO), a leading provider of cloud-based banking software that was founded in 2012. The company’s platform helps more than 1,850 global financial institutions modernize their processes around client onboarding and account opening, making loans, and managing loans after they have been originated. NCino’s solutions support a large majority of customers at a financial institution, including commercial, small business, consumer, and mortgage customers.
NCino operates in a large market – the addressable market is approximately $10 billion in the Americas and $18.5 billion on a global basis – and has achieved high levels of customer satisfaction as evidenced by a strong net promoter score of 74 and very little voluntary churn. The company’s solutions are deeply embedded in customer workflows and generate a strong return on investment in the form higher revenue from more loans, lower costs from a reduction in paper-based processes, faster decision making, and improved efficiency with the ability to consolidate several legacy systems. Relative to the competition, nCino’s solution has several advantages, including operating a cloud-native single platform (built on top of Salesforce) that is free from legacy tech debt, having a well-known brand that is highly regarded in the marketplace (especially strong in commercial banking), and a long history of successful deployments with an impressive roster of customers (institutions like Bank of America, Wells Fargo, Barclays, Fifth Third, and many others) who can then serve as reference accounts.
NCino is well positioned to drive mid-teens or greater organic revenue growth for many years driven by a combination of growth with existing clients (even within its large U.S. customers, we estimate that nCino is only around mid-20% penetrated today), increasing penetration of nIQ (data analytics and machine learning products), continuing to win new commercial clients, gaining traction in newer end-markets like consumer loans and mortgages, and ramping its international expansion. The company is already seeing good success in the U.K., Canada, New Zealand, Japan, and several countries in continental Europe. The company has also started to ramp its margin profile, but we see a path for additional margin expansion from the low double-digit range today up to 30% to 35% operating margins over time. We believe there is a long runway for profitable growth for nCino, as banks and other financial institutions choose it as a partner to help digitize and transition to the cloud.”
8. Ares Management Corp (NYSE:ARES)
Number of Hedge Fund Investors: 29
Ares Management Corp (NYSE:ARES) ranks eighth in our list of the stocks insiders are selling. On April 3, Ares Management Corp’s (NYSE:ARES) co-founder and executive chairman of the board, Antony P. Ressler, sold 399,601 shares of Ares Management Corp (NYSE:ARES) at $132.95 per share. Since April 3 the stock is up 1.65%.
7. Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL)
Number of Hedge Fund Investors: 33
Pennsylvania-based biotechnology company Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) is one of the stocks insiders are selling in April. On April 3, Rebecca Taub, Madrigal Pharmaceuticals, Inc.’s (NASDAQ:MDGL) Chief Medical Officer, sold 73,888 shares of Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) at $243.92 per share. Since this transaction the stock is down 0.9%.
In addition to MDGL, insiders are also selling Apple Inc (NASDAQ:AAPL), Netflix Inc (NASDAQ:NFLX) and Crowdstrike Holdings Inc (NASDAQ:CRWD).
6. Dell Technologies Inc (NYSE:DELL)
Number of Hedge Fund Investors: 56
Dell Technologies Inc (NYSE:DELL) has been seeing heavy insider selling activity recently. On April 3, William F. Scannell, the President of Global Sales and Customer Operations at Dell Technologies Inc (NYSE:DELL), dumped 106,483 Dell Technologies Inc (NYSE:DELL) shares at $129.15 per share on April 3. Since then the stock is up 3.22%. On April 4, Slta V (Gp), L.L.C., which has a director and 10% stake owner status at Dell Technologies Inc (NYSE:DELL), also sold 346,931 shares of Dell Technologies Inc (NYSE:DELL) at $133.19 per share.
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Disclosure. None. Latest Insider Selling in April 2024: 10 Stocks to Watch was initially published on Insider Monkey.
