US stock market closed sharply on Wednesday, with the market falling for the third consecutive trading day, with technology and biotech leading the decline. Investors are weighing durable goods order data and a merger deal between Kraft Foods and Heinz.
MarketWatch columnist Anora Mahmudova wrote an article today that the market leader's biotechnology and solar sectors have been out of strength recently, and there has been a trend of profit-taking, dragging down the market for three consecutive negatives. Despite this, many company executives have increased their holdings against the trend, and executives in the three major sectors have increased their holdings, namely biotech stocks, real estate investment trusts and small and medium-sized bank stocks. In addition, many aviation stocks and energy stocks have received net increase in executives. Investors can focus on these 10 stocks.
Mahmudova wrote that as the end of the first quarter approached, investors chose to make a profit and sold the most profitable QRUO, which had the highest gains in the first quarter. The two most eye-catching sectors in the US stock market in the first quarter were solar energy and biopharmaceuticals. On the contrary, crude oil and the euro, which performed the weakest in the first quarter, rose today. In terms of
sector, the strengthening sector is a consumer necessity, energy and utilities sector. In the consumer necessities sector, the food sector rose overall due to the positive impact of the merger of Kraft and Heinz by the stock god Buffett's big move. Oatmeal maker General Mills rose 1.24%, while consumer optional products, finance, industrial and technology sectors weakened. It is worth noting that the leading biochemical sector in the early stage suffered a tragic decline today, with Gilead falling 1.3%, and Biogen, which rose sharply last week, fell 3.81% today.
Biotech sector ETF (IBB) plummeted 5% in a single day, causing the Nasdaq to hit its biggest drop in a year, while technology blue chip stocks also performed poorly, with Apple falling 1.68%, Intel falling 2.31%, and Microsoft falling 2.87%.
Against the backdrop of biopharmaceutical stocks and technology stocks leading the decline, the Dow Jones Industrial Average fell 300 points in a single day, and the Nasdaq fell 2.37%, setting the largest single-day decline since April 2014. The trading volume of the Nasdaq Exchange reached 2.05 billion shares, a heavy drop in volume.
Although the three stocks performed poorly on the week, some analysts pointed out that many executives of companies have increased their holdings in their own stocks against the trend.
Mahmudova pointed out that Jonathan Moreland, the founder of the investor service company Insider Insights, recently accepted an interview with the famous magazine Barrons. In the interview, he strongly recommended the varieties that executives continue to increase their holdings.
Moreland has been studying insider trading and the increase and decrease of executives' holdings for 25 years. Since 1990, he has devoted himself to the company's announcements and discovered the relationship between the increase and decrease of executives' holdings and the stock future trend.
executives’ share reduction is not uncommon in the capital market now, but the continuous increase in executives’ shareholdings demonstrates the management’s confidence in the company’s future development, and the stock price is expected to rise in the future.
He said that he would use the increase in holdings from executives as the first condition for stock selection, and then further screen stocks through fundamental factors such as valuation and cash flow.
According to his stock selection ideas, the cumulative returns of the stocks he selected in the past five years were as high as 93.6%, slightly lower than the 96.7% increase of the Russell 2000 Index in the past five years. However, in the longer term, since the establishment of Insider Insights, its cumulative returns of stock selection have indeed outperformed the market, with cumulative returns of as high as 242.9%, outperforming the small-cap stock index's 225.1% increase in the same period.
In recent years, as the bull market continues to deepen, executives' share reduction efforts have been increasing. There have been frequent situations where executives sell stocks and cash out, but it has become rare for executives to increase their shareholdings. Regarding this situation, Moreland believes that the overall valuation is currently high, and it is not a bad signal that the appropriate share reduction of executives is not a bad news. However, some sectors have received collective shareholdings from executives under such a background, namely biotech stocks, real estate investment trusts and small and medium-sized bank stocks. Therefore, it increased its holdings of biotech stocks in the early stage.
Biotech sector, he is very optimistic about Amgen and Valeant Pharmaceuticals. He said that in the past year, hedge fund ValueAct Capital has bought Amgen in large quantities, and its stock price has also risen all the way, with executives increasing their holdings by a total of US$431,000, but its stock price is currently high and should be avoided in the short term. After a full correction, it can increase its holdings again.
Moreland pointed out that there are three other biotech stocks that are worthy of optimism, namely Mirati Therapeutics, Rockwell Medical and Novavax. Mirati's major shareholder increased its holdings by a total of US$21.5 million last year, and the latter two were frequently increased by executives, and the three stocks were all rated as buys.
Real Estate Investment Trust sector, Agree Realty and Monmouth Real Estate Investment are worth promising in the future. The former received a $864,000 increase in executives, and the latter also received a $200,000 increase in holdings.
financial sector, diversified financial services companies have frequently received increased holdings from executives, Ladenburg Thalmann Financial Services has repeatedly received increased holdings from executives in the past year, and Cincinnati Financial executives have increased their holdings by a total of US$1 million. An AmTrust Financial Services director spent US$4 million to increase their holdings in August last year.
Moreland said that in addition to the three major sectors mentioned above, many individual stocks in the aviation and energy sectors also received increased holdings from executives. In terms of airline stocks, Delta Air Lines has bought a net worth of $591,000 in the past year. In the past six months, oil prices have plummeted continuously, airline profits have increased significantly, and economic recovery has also boosted its profitability. Recently, its shareholders have significantly increased their holdings in the company and have continuously raised their profit expectations. Delta is still worthy of investors' attention.
Moreland is a little cautious about the energy sector. Although he noticed that energy companies have received large net increase in executives, it is difficult for the sector to achieve great results overall. Among the sectors, there are two stocks worth paying attention to. Hornbeck Offshore Services received an increase of more than $2 million from executives, and Oasis Petroleum received an increase of up to $45.7 million from major shareholder SPO Advisory in January this year.
