With U.S. stock indices setting fresh record highs this year, it stands to reason that some stocks are overvalued or due for a correction. Figuring out which ones fall into these categories is the harder part.
One way to gain insight on what stocks are good sell or even short candidates is to look at what corporate insiders are doing. If an executive or board member has recently sold shares, it can imply that the stock has limited upside. There are also situations where insider sells reflect an individual's need to raise cash for taxes or some other personal obligation.
So, while we don't always know why an insider is selling, we can often assume it's a bearish signal. Let's take a look at three stocks (other than AMC) where insiders have recently cashed in on some strong gains.
Does Southern Copper Stock Have More Downside?
Southern Copper (NYSE:SCCO) shareholders have watched their stock continue to rise this year after gains of 38% and 53% in 2019 and 2020, respectively. The copper mining company is benefitting from a surge in the price of the red metal which reached an all-time high last month. Some analysts see copper prices climbing to new heights in the second half of the year on strong production of electric vehicles (EV) and limited supply conditions.
While this may be the case, Southern Copper board members have been trimming their positions with the stock near record highs. In fact, you have to go all the way back to July 2020 to find the last insider purchase.
Over the last three week, Vicente Ariztegui Andeve sold more than $160,000 worth of Southern Copper stock in two separate transactions. This week another director, Luis Miguel Palomino Bonilla shed 3,000 shares, or 40%, from his holdings at prices just under $70. Southern Copper has twice peeked above $80 only to pull back below $70.
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It's hard to say if the stock will sustain a rally past $80. But as long as board members continue to sell, it will be hard to convince the market that the stock hasn't run too far too fast.
Is it a Good Time to Sell Expeditors International Stock?
Shipping and logistics company Expeditors International (NASDAQ:EXPD) hasn't seen its stock have a down year since 2012. The impressive run has only accelerated this year with the stock already up 31%. A rebound in economic activity has Expeditors enjoying greater airfreight volumes and pricing.
Last quarter it crushed analysts' expectations on the top and bottom line thanks to a 29% year-over-year increase in airfreight tonnage and ocean containers. The strong cash flow and balance sheet gave management the confidence to raise the semi-annual dividend 11.5% to $0.58.
It all sounds pretty good, but some insiders appear to be thinking it's good to take some profits while Expeditors International is in the fast lane. Earlier this month, the stock reached an all-time split-adjusted high above $126.
A couple of weeks prior, President of Global Geographies Richard Rostan sold more than $3.6 million worth of Expeditors. This came in the form of stock options which Mr. Rostan turned around and sold on the same day he acquired them. Although this was a fraction of his equity ownership, the 'flip' nature of the transaction and its size is worth noting.
On the same day director Robert Wright sold 4,500 shares at a price of $118.50. This was preceded a week earlier by a nearly $500,000 sell by Chief Investment Officer Christopher McClincy.
So, the business looks healthy at Expeditors International, but the recent insider selling is worth monitoring to see if the road ahead stays smooth.
Is Lennox International Stock a Sell?
Lennox International (NYSE:LII) has also had an impressive run over the last 10 years. Share of the heating, air conditioning, and refrigeration specialist are trading near an all-time high thanks to steady demand from its massive residential and commercial customer base. Most of the company's sales come from replacements, but it is also benefitting from elevated home construction activity.
Lately, however, some key insider sells have suggested Lennox stock is due for a cooldown. On May 4th, President & COO of the Commercial business Elliot Zimmer completed a more than $200,000 sale shedding one-fourth of his holdings. Then from May 13th to May 18th, Chairman & CEO Todd Bluedorn executed sales valued at more than $10 million. On May 19th, another executive Douglas Young cashed out more than $1.1 million of his Lennox stake.
Interestingly, since this flurry of insider selling, a pair of ominous technical patterns have emerged on the daily chart. The bearish head and shoulders top formations point to a possible slide to the $309 to $316 range within the next few months.
The market seems to be taking the cue from insiders on this one. Lennox International has finished lower in seven of the last eight trading sessions, so it appears to be one overheated runner in correction mode.
Companies in This Article:
|Company||Current Price||Price Change||Dividend Yield||P/E Ratio||Consensus Rating||Consensus Price Target|
|Lennox International (LII)||$305.83||flat||1.20%||23.49||Hold||$306.00|
|Southern Copper (SCCO)||$58.51||flat||6.15%||16.21||Hold||$64.63|