Insider Selling, Buying and My Biotech Gamble
We're hearing about some big sales that hit before the market fall, but I'm watching the buying, and pulling the trigger on one name.
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Insider selling just before the recent equity selloff has been the talk of the town.
Warren Buffett cleared out a good portion of his stake in Bank of America BAC and Apple AAPL. The CEO of Nvidia NVDA sold over a $1 billion worth of his stake in the artificial intelligence juggernaut. ...
Well, as the saying goes, hindsight is 20/20.
I, however, have been grousing about the dearth of insider buying in the market in recent months. Yet, insider selling seemed rampant in some of the high-flyers that were leading the rally in 2024 ... until we hit July. It was one of many reasons I have been quite cautious around equities throughout most of the year.
Now we still are not seeing much of an increase in insider purchases. That may change if stocks sell off further. A trend, however, seems to be appearing in insider buying in lot of smaller and regional banks like Texas Capital Bancshares, Inc. TCBI, First Interstate BancSystem, Inc. FIBK and Merchants Bancorp MBIN. Perhaps banking executives at these smaller regional names are signaling they see brighter times ahead for these institutions as the yield curve finally normalizes after being inverted for over two years now. Merchants look cheap at under seven-times earnings.
And then we have General Motors GM, whose CFO purchased some $1.1 million worth of shares late in July. The shares are down around 20% over the past four weeks and it was the only insider purchases in the shares in 14 months. The stock is cheap enough for me to own if I wasn’t so worried that the U.S. is heading into a recession in the coming months.
Finally, we have insider buying that has me quite interested: Adverum Biotechnologies, Inc. ADVM. I was on the fence with this small biotech until recently, as it is somewhat of a lottery ticket stock. But a beneficial owner of the company purchased just over $2.5 million worth of shares in July. This triggered me to take a small position in the name via some covered call orders. In addition, the stock currently trades at a slight discount to cash.
The company’s main -- and really its only -- asset outside its cash balance is Ixoberogene soroparvovec, formerly called "ADVM-022," and which is used in the treatment of "wet" age-related macular degeneration, a rare eye condition that can lead to blindness. Abnormal blood vessels that appear under the retina cause scarring of the macula as they leak blood and other fluids.
How would this product play a role in the therapy of the condition?
Advernum's gene therapy candidate is used to deliver an already-approved treatment, anti-vascular endothelial growth factor aflibercept, which is found in Regeneron’s REGN mega-blockbuster therapy Eylea. After positive mid-stage trial data this year, Adverum plans to kick off a pivotal late-stage clinical study in the first half of 2025. This is also a name that analyst firms have found some new enthusiasm on with five "Buy" ratings since late June.
If the market continues to head lower, insider purchases might pick up at more advantageous entry points.
At the time of publication, Jensen was long ADVM.
