While all transactions made by corporate insiders are worth noting, some carry more weight than others. Trades placed by high-ranking executives, board chairpersons, and controlling shareholders, tend to peak investors' interest the most. This is because these moves can signal a powerful inflection point in the direction of a company's growth trajectory—and share price.
Trades placed by prominent insiders sometimes occur over time. Sometimes they happen all in one shot on a given day. Either way, they can provide valuable information for investors as to the mindset of those in the know.
Last week several intriguing sale orders were completed by some insider heavyweights. Let's take a look at a few of them and what they may mean for investors.
Is Darden Restaurants Stock Overbought?
The restaurant space has been one of the most popular places to find reopening trades. The well-choreographed move into some restaurant stocks has propelled prices to near-record levels well before sales have returned to pre-pandemic levels.
Darden Restaurants (NYSE: DRI) has been one such stock that investors have aggressively bid up in anticipation of better times ahead. In fact, it may come as a surprise that Darden's stock hasn't had a down year since 2012 despite the COVID-related headwinds. It is already up 25% this year and regularly setting new record highs. Has the market put the cart before the horse?
Chairman and CEO Eugene Lee may think so. On July 7th he exercised vested options as part of a trading plan with Darden trading around $150. The same day, four other insiders took advantage of the high price to sell stock options at nearly three times the strike price. The group certainly can't be criticized for trimming their exposure at that profit level.
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Still, the combined $5.58 million of selling pressure sent Darden stock on a two-day skid that it has since recovered from. It'll be interesting to see if the operator of Olive Garden, LongHorn Steakhouse, and other popular dining destinations can live up to expectations in the post-pandemic economy.
Is Insider Selling Keeping The Boston Beer Company Stock Down?
Let's wash down that LongHorn steak with a frosty mug of Sam Adams. The Boston Beer Company (NYSE: SAM), which owns Sam Adams, Dogfish Head, Angry Orchard, and several other alcohol drink brands has had a heck of a ride off its March 2020 bottom. In April 2021 it climbed as high as $1,349.98, an intraday record. Strong growth in non-beer brands like Twisted Tea and Truly Hard Seltzer have driven some impressive quarterly results.
The Boston Beer Company stock has had a bit of a hangover in recent months. A bout of profit-taking amid valuation concerns has put it 28% off its record peak. A steady parade of selling by Chairman of the Board James Koch has certainly contributed to the slide.
Dating back to May 12th, Mr. Koch has repeated unwound his position in The Boston Beer Company. At the start of the selling, he directly owned nearly 60,000 shares of the company. Two months later he still owns about the same amount as the wave of selling has coincided with the award of several more lots of shares and options.
Over the period he has shed roughly $2.5 million worth of the stock on dozens of occasions. Most recently he trimmed another $2.4 million from his stockpile on July 8th despite the share price having dipped below $1,000. The constant selling has placed persistent pressure on Boston Beer stock.
Investors should keep in mind, however, that as the founder of Samuel Adams back in 1984, Mr. Koch has amassed a net worth of $3 billion. So, the sales even in the aggregate are a relative drop in beer barrel. Yet with no sign of the sales slowing down, investors considering the more attractive entry point may want to hold off until this influential insider takes a break.
Why Did Levi Strauss Insiders Sell Ahead of Good Earnings?
On Friday, Levi Strauss (NYSE: LEVI) reported second-quarter earnings that topped expectations and raised its full-year EPS outlook well above consensus. The maker of blue jeans and other apparel said it expects third-quarter sales to exceed pre-pandemic levels. The stock jumped in heavy trading volume and has continued to rally.
Considering the apparent strength in the business, it's surprising then that a day prior to the Q2 report, former Levi Strauss CEO Elizabeth Eisenhardt trimmed her large position in the company by more than $1.8 million. Granted she no longer has the intimate knowledge of the company as a former executive, but one would think she would still be in the know.
As Ms. Eisenhardt sold on two other occasions this month in the same trust account, investors should note the selling was part of a previously established trading plan. Therefore, this example highlights the importance of noting when major insider selling is being done by a former executive or as part of a predetermined trading plan that is ambivalent to the current share price.
In this case, the timing of the trading plan was unfortunate for the former CEO given the strong earnings report. However, having an established trading plan in place often protects current or former executives from accusations of improper insider trading. Levi Strauss investors that hung on through earnings on the other hand, are enjoying some stylish returns.
Companies in This Article:
|Company||Current Price||Price Change||Dividend Yield||P/E Ratio||Consensus Rating||Consensus Price Target|
|Levi Strauss & Co. (LEVI)||$27.52||flat||0.87%||38.22||Buy||$32.56|
|The Boston Beer (SAM)||$710.00||flat||N/A||37.06||Hold||$1,111.50|
|Darden Restaurants (DRI)||$145.88||flat||3.02%||30.58||Buy||$155.22|