Insider Buying Spree: Buffett’s Big Bet, CEOs Grab Shares, and Activist Investors Make Moves

Cam White | March 12, 2024

Responsive image

Warren Buffett’s well-documented investment philosophy centers on buying great companies at reasonable prices, then holding for the long haul. His recent moves in Liberty Media and Sirius XM underscore this approach. But Buffett isn’t alone; we’re seeing significant insider buying across several sectors, including a surge of CEO purchases and some intriguing activist investor activity.

The Rationale Behind Insider Buying

The adage “follow the smart money” exists for a reason. Insider buying, notably by CEOs, directors, and significant shareholders, signals confidence in their company’s prospects. They have intimate knowledge of the business and often make their stock purchases with an eye toward long-term value creation.

This type of “signaling” can be a valuable indicator for investors who are seeking potential growth opportunities. However, it’s important to exercise caution as insider buying alone shouldn’t be the sole factor in an investment decision.

Buffett’s Liberty Media Play

Warren Buffett’s Berkshire Hathaway has been steadily accumulating shares in Liberty Media Corporation trackers (LSXMA and LSXMK). His recent purchases come on the heels of Liberty Media’s quarterly earnings and the ongoing merger process with Sirius XM.

Market commentators posit several reasons behind Buffett’s bullishness. Liberty Media’s ownership of various valuable assets, including its stake in Formula One racing and the Atlanta Braves, could be a primary motivator. Also, the Sirius XM merger may lead to significant future value unlocking.

The Oracle of Omaha is known for his contrarian streak and ability to identify undervalued, well-managed companies. Liberty Media could fit this description, making it a compelling addition to his portfolio.

CEOs and Other Notable Purchases

The recent wave of insider buying extends beyond behemoths like Liberty Media. Here are some highlights:

  • 89bio (ETNB): R.A. Capital Management’s significant purchase in this biopharmaceutical stock suggests confidence in the company’s pipeline despite the disappointing trial results of a competitor. However, the biotech sector is inherently risky, and thorough research is essential before consideration.
  • Keurig Dr Pepper (KDP): The CEO and directors of Keurig Dr Pepper seized the opportunity to buy shares during a secondary offering. While the company’s recent earnings were mixed, the insider buying hints at a belief in the beverage giant’s long-term strength.
  • SLR Investment (SLRC): The co-CEOs’ hefty investment in this business development company demonstrates their conviction as it navigates the current market environment.
  • Sphere Entertainment (SPHR): The CEO’s continued share purchasing, along with the company’s recent executive appointments and promising quarterly report, paint a bullish picture for this entertainment company.
  • Citi Trends (CTRN): The significant activist investor presence suggests a push for potential change within the company. Investors should monitor the situation for possible strategic shifts and their impact on the stock price.

My Take

While insider buying is a noteworthy signal, it’s crucial to remember that executives and investors have varied motivations – not all transactions should be seen as an endorsement. Thorough research into a company’s fundamentals, industry landscape, and overall market sentiment is essential before making any investment decisions.

This recent wave of insider buying, coupled with Buffett’s renewed interest in Liberty Media, could signal a growing sense of optimism among industry leaders. However, individual investors must not blindly follow the crowd. Smart investing means using information like insider purchases as one data point within a thorough analysis before committing any funds.