CEOs are buying these 10 stocks

In this article we take a detailed look at it Insider Buy Alert: CEOs are buying these 10 stocks. If you want to skip our detailed analysis and see the top 5 stocks in this list, click Insider Buy Alert: CEOs are buying these 5 Shares.

CEOs, who sit at the helm of operations with an information advantage, are often tempted to buy or sell shares of their company before events occur that could potentially affect stock prices. In recent years, it has become commonplace for CEOs to engage in illegal forms of insider trading.

Examples of CEOs engaging in illegal forms of insider trading from recent history

Last month, Dutch soccer club AFC Ajax NV suspended its CEO Alex Kroes, saying it had found “strong evidence” that the manager was involved in insider trading. The club accused Kroes of buying more than 17,000 club shares just a week before his appointment.

In March, the SEC alleged in a lawsuit that Andy Bechtolsheim, the billionaire co-founder of Sun Microsystems Inc. and Arista Networks Inc., traded illegally on Cisco’s $2.6 billion offer to buy Acacia Communications Inc., as he had found out about the deal in advance.

Shadow trading

Biotech manager Matthew Panuwat already worked at the biopharmaceutical company Medivation in 2016. He received information that Pfizer was interested in purchasing his company. Panuwat did something new in the world of insider trading: Instead of buying his own shares to profit from the Pfizer deal, he bought call options on Medivation rival Incyte Corporation. According to the SEC’s lawsuit, Panuwat’s idea was to profit from the gains in Incyte’s shares if news of the Pfizer-Medivation deal became public. That’s exactly what happened when Pfizer announced it would buy Medivation for $14 billion. Incyte’s shares skyrocketed and Panuwat pocketed a profit of $120,000. The SEC later won its case because the jury agreed with the panel’s assertions that this type of insider trading – known as shadow trading – was also illegal.

What Outsiders Can Learn from CEOs’ Legal Insider Trading Activities

However, it is not always illegal for CEOs to buy or sell company shares. In fact, founders and CEOs are often expected to get involved. An executive buying shares in his company is often seen as a positive sign. But what can outsiders learn and gain by paying attention to CEOs buying their own company shares? Can the average investor make money by following the stocks that CEOs buy? Researchers have been working on these questions for decades. One of the hottest research topics in the industry is figuring out why CEOs often buy so much of their company’s stock in addition to the stock they already own, through stock offerings, compensation, grants and other means.

The story goes on

Why do CEOs buy their own company shares?

A research paper entitled Have the benefits of CEO purchases been underestimated? says there is “little empirical evidence” as to why CEOs buy their company shares “aside from directly benefiting from trading.” Interestingly, the research found that CEOs often invest in their company shares and expose themselves to “idiosyncratic risks” in order to “extend” their tenure.

Another interesting but surprising finding of the study is that CEOs who make “net purchases” of company stock “tend to have shorter tenures and are employed by smaller companies whose stock price and operating performance have been relatively poor recently.”

Investments by top executives generate the highest returns

Beyond just CEOs, it’s generally helpful for investors to pay attention to what insiders are doing. According to a study by Catalyst Capital Advisors, researchers from Wharton, Harvard, the University of Michigan and the University of Chicago found that insider trades, on average, outperformed market indices. The study says that back-tested insider trade data from 2003 to 2010 also shows that subsequent insider trades slightly outperform the market. The study also discussed the returns to insider purchases based on different insider identities and found that the sequence of insider purchases by senior executives produces the highest net returns

Luis Louro / Shutterstock.com methodology

For this article, we used Insider Monkey’s Insider Trading Stock Screener to identify stocks that have seen insider buying by their CEOs in recent weeks. From these stocks, we selected the 10 companies that had the most insider purchases by CEOs, measured by dollar value. Top names on the list include JB Hunt Transport Services Inc (NASDAQ:JBHT), Hertz Global Holdings Inc (NASDAQ:HTZ) and Skyworks Solutions (NASDAQ:SWKS). Why should you pay attention to insider trading activity? Insider Monkey’s monthly newsletter and Portfolio The book, which focuses on activist hedge funds, insider trading and stock picking from newsletters and conferences for hedge fund investors, returned 199.2% between March 2017 and March 12, 2024, outpacing the S&P 500 ETFs’ gain of 144, 9% by more than 54 percentage points.

10. Intrusion Inc. (NASDAQ:INTZ)

Number of hedge fund investors: 3

Texas-based cybersecurity company Intrusion Inc. (NASDAQ:INTZ) ranks 10th on our list of top stocks with CEO insider buying activity. On April 22, Intrusion Inc. (NASDAQ:INTZ) CEO Scott Anthony purchased 585,748 shares of Intrusion Inc. (NASDAQ:INTZ) at $1.70 per share. Since then, the stock has risen 0.63% through May 7.

Of the 933 hedge funds in Insider Monkey’s database, only three hedge funds owned Intrusion Inc. (NASDAQ:INTZ) at the end of 2023.

9. Heartland Express, Inc. (NASDAQ:HTLD)

Number of hedge fund investors: 8

Michael J. Gerdin, CEO of truckload service provider Heartland Express, Inc. (NASDAQ:HTLD), has been adding to his company stock lately. On May 1, he purchased a whopping 107,605 shares of Heartland Express, Inc. (NASDAQ:HTLD) for $10.74 per share. On April 26, he had purchased 190,696 shares of Heartland Express, Inc. (NASDAQ:HTLD) at $10.11 per share. From April 26 to May 7, the stock gained about 5.6%.

Like HTLD, JB Hunt Transport Services Inc (NASDAQ:JBHT), Hertz Global Holdings Inc (NASDAQ:HTZ) and Skyworks Solutions (NASDAQ:SWKS) also report insider buying by CEOs.

8. Lumen Technologies Inc (NYSE:LUMN)

Number of hedge fund investors: 17

Kathleen E. Johnson, CEO of communications solutions, cloud and networking company Lumen Technologies Inc (NYSE:LUMN), purchased 750,000 shares of Lumen Technologies Inc (NYSE:LUMN) on May 2 at $1.28 per share. The net value of this transaction was $959,850. Since this transaction, the share price has increased by 4%.

As of the end of the fourth quarter of 2023, 17 hedge funds out of the 933 funds tracked by Insider Monkey owned shares of Lumen Technologies Inc (NYSE:LUMN).

Longleaf Partners Fund stated the following regarding Lumen Technologies, Inc. (NYSE:LUMN) in its fourth quarter 2023 investor letter:

7. Macerich Co (NYSE:MAC)

Number of hedge fund investors: 19

California-based REIT Macerich Co (NYSE:MAC) is among stocks that have recently seen insider buying by CEOs. On May 6, Macerich Co (NYSE: MAC) CEO Jackson Hsieh purchased 140,000 shares of Macerich Co (NYSE: MAC) at $14.26 per share. On May 6th, the stock closed at $14.68, while as of midday on May 7th it was trading at around $15.21.

Last month, Macerich Co (NYSE:MAC) reported first-quarter results. FFO was $0.33 in the period, missing estimates by $0.06. Revenue for the quarter fell 2.8% year-over-year to $208.78 million, beating estimates by $5.26 million.

6. Hexcel Corp (NYSE:HXL)

Number of hedge fund investors: 27

Materials company Hexcel Corp (NYSE:HXL) is among stocks that have seen insider buying by its CEO. On May 1, Hexcel Corp (NYSE:HXL) CEO Tom Gentile purchased 15,000 shares of Hexcel Corp (NYSE:HXL) at $66.25 per share. The total value of this transaction is $993,763. Since this transaction, the stock has gained about 7%. As of the end of the fourth quarter of 2023, 27 hedge funds tracked by Insider Monkey held shares in Hexcel Corp (NYSE:HXL). In addition to HXL, JB Hunt Transport Services Inc (NASDAQ:JBHT), Hertz Global Holdings Inc (NASDAQ:HTZ) and Skyworks Solutions (NASDAQ:SWKS) also recorded insider buying.

TimesSquare Capital US Mid Cap Growth Strategy stated the following regarding Hexcel Corporation (NYSE:HXL) in its fourth quarter 2023 investor letter:

Click here to continue reading and watching Insider Buy Alert: CEOs are buying these 5 Shares.

Recommended articles:

Disclosure. None. Insider Buy Alert: CEOs are buying these 10 stocks was originally published on Insider Monkey.