Billionaires, CEOs, and insiders are going on a buying spree lately with major indices trading at much lower levels. The S&P 500 is down 17% YTD while the NASDAQ is down 27% YTD.
I find it interesting to closely track insider buying because CEOs know more about their businesses than anyone else.
With all the fear in the markets, I’m not surprised that billionaires are going shopping for beaten-down 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 Are Buying Up Stocks
Here’s a list of recent insider buys from 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 purchased $50 million worth of SPOT shares.
- FTX founder and CEO Samuel Bankman-fried bought a 7.6% stake in Robinhood (HOOD).
- Shopify CEO Tobi Luke purchased $10 million worth of SHOP stock.
This is enough buying activity to indicate that these CEOs believe stocks are trading at a discount to their intrinsic values.
Follow the Smart Money
Why is this trend so important? Because it is the exact opposite behavior of what Wall Street billionaires were doing back in November 2021.
Billionaires were dumping stocks last year including Elon Musk who posted the infamous Twitter poll asking his followers if he should sell Tesla stock.
Elon Musk posted that tweet on November 6th, 2021, which ended up being near the NASDAQ all-time high of 16,212.
Now, Elon Musk and other billionaires are deploying capital back into the markets while retail investors are in panic mode.
If billionaires are buying up stocks then why shouldn’t retail investors? Now is the time to create a solid watchlist and scoop up stocks that are either down big 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 big and trading at relative discounts when compared to their cash value per share.
|Company Name (Ticker)||Cash Value Per Share||52 Week Change|
|Marathon Digital (MARA)||$4.78||-56%|
There are Large Cap Buying Opportunities Too
These stocks are good for larger, more mature portfolios due to their much higher market cap and price.
If you are a beginner investor then you should probably invest in small to mid-cap companies at first to help your portfolio grow faster. Large-caps are good for safety but many of the aforementioned companies have grown quite big so you won’t get the highest returns.
Is this the stock market bottom or just simply a dead cat bounce? The Fed plans to raise interest rates several more times in 2022 and we all know how higher interest rates hurt stock market valuations.
If the market reacts negatively to further rate increases then stocks could dip much lower. However, I believe the NASDAQ and S&P 500 have reached long-term support levels and much of the selling pressure has been reduced.
It’s also likely that several companies will either file for bankruptcy or simply run out of cash this year. SPACs are definitely in danger of running out of cash due to supply chain issues and a general lack of extra capital.
For example, Lordstown Motors (RIDE) was forced to sell certain assets to Foxconn for $230 million just to stay afloat. Cash burn will affect a lot of companies throughout 2022 so it’s something to look out for.
If you’re still in the markets since November 2021, then it looks like you survived the worst part of the crash. Many fellow investors have gotten out of the markets because they couldn’t handle the losses and volatility.
If you sold your stocks last November or December, then pat yourself on the back. Perhaps now is the time to consider buying back into the market and taking your portfolio to the next level.
If billionaires are buying stocks again, then what do we have to lose?