Billionaires, CEOs and insiders have been on a buying spree lately, with major indices trading at much lower levels. The S&P 500 is down 17% year-to-date while the NASDAQ is down 27% year-to-date.
I find it interesting to follow insider buying closely because CEOs know more about their company than anyone else.
With all the fear in the markets, I’m not surprised billionaires are buying rundown stocks that have been oversold.
I don’t have a crystal ball but we can use this data to determine the best entry points for our personal portfolios.
Billionaires buy stocks
Here is a list of recent insider buying of billionaires who bought shares in their own company or stakes in another company in Q2 2022:
- Starbucks founder and interim CEO Howard Schultz bought 137,500 shares of SBUX for a total of $10 million.
- Spotify CEO Daniel Ek bought $50 million of SPOT shares.
- FTX founder and CEO Samuel Bankman-fried bought a 7.6% stake in Robinhood (HOOD).
- Shopify CEO Tobi Luke bought $10 million worth of SHOP stock.
That’s enough buying activity to indicate that these CEOs believe stocks are trading at a discount to their intrinsic values.
Follow smart money
Why is this trend so important? Because it’s exactly the opposite behavior of what Wall Street billionaires were doing in November 2021.
The billionaires were dumped stocks last year, including Elon Musk who posted the infamous Twitter poll asking his followers if he should sell Tesla stock.
Elon Musk posted this tweet on November 6, 2021, which ended up being close to the NASDAQ all-time high of 16,212.
Now Elon Musk and other billionaires are redeploying capital to the markets while retail investors are in panic mode.
If billionaires buy stocks, why not retail investors? Now is the time to build a strong watchlist and grab stocks that are either down from all-time highs or trading near their net asset value.
List of 10 growth stocks that are oversold
I’ve put together a simple chart of 10 growth stocks that are down significantly and trading at relative discounts to their cash value per share.
|Company name (symbol)||Redemption value per share||52 week change|
|Charging station (CHPT)||$0.94||-59%|
|Digital Marathon (MARA)||$4.78||-56%|
|Robin Hood (HOOD)||$7.30||-76%|
There are also large cap buying opportunities
I also view mid- and large-cap stocks such as Coinbase (COIN), Netflix (NFLX), Roku (ROKU), Shopify (SHOP), Amazon (AMZN) and Disney (DIS) as strong candidates for purchase.
These stocks are suitable for larger, more mature portfolios due to their much higher market capitalization and price.
If you’re a newbie investor, you should probably invest in small and mid cap companies first to help your portfolio grow faster. Large caps are good for security, but many of the aforementioned companies have become quite large, so you won’t get the highest returns.
Is it the stock market bottom or just a dead cat bounce? The Fed plans to raise interest rates multiple times in 2022 and we all know how much higher interest rates hurt stock market valuations.
If the market reacts negatively to further rate hikes, stocks could plunge much lower. However, I think the NASDAQ and S&P 500 have reached long-term support levels and much of the selling pressure has been reduced.
It is also likely that several companies will file for bankruptcy or simply run out of cash this year. SPACs are certainly at risk of running out of cash due to supply chain issues and a general lack of additional capital.
For example, Lordstown Motors (RIDE) was forced to sell some assets to Foxconn for $230 million just to stay afloat. Cash burn will affect many businesses throughout 2022, so it’s something to watch.
If you’ve been in the markets since November 2021, it looks like you survived the worst part of the crash. Many other investors pulled out of the markets because they couldn’t handle the losses and the volatility.
If you sold your shares last November or December, then congratulate yourself. Now might be a good time to consider buying back into the market and taking your portfolio to the next level.
If billionaires buy stocks again, what do we have to lose?
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