It's time for executives to put up, or shut up.
Let's face it, markets are reeling a bit. Greece is sparking a "sell now, ask questions later" mindset among investors -- the normal occurrence for this type of high-stakes event. Here at home, we kind of know where the Fed's head is, but remain concerned that Yellen goes on a stretch of asset price crushing rate increases next year. With so many things to consider and fret about right now, what better sign of confidence than if executives were to step up to buy their supposedly discounted stock prices?
If you listen to these high-powered folks speak, they should be buying stock of their company hand over fist. In the restaurant space, total sales growth is going to be inflated nicely this year by the opening of hundreds of new locations across the country. Chipotle (CMG) will open around 200 new restaurants. Franchised businesses, such as Buffalo Wild Wings (BWLD) and DineEquity (DIN) are full steam ahead with their enthusiastic franchisees.
Tech companies, from restaurant tech firm Ziosk to action cam maker GoPro (GPRO), are introducing new products to excite the masses -- and in the process have them pay full prices. For every FedEx (FDX) earnings whiff out there, in my view, there are three times the number of companies doing far, far better with their sales and profit margins. So, no better time for execs to buy a bit of their stock.
My colleague Tim Melvin wrote earlier in the week that if the CEO is buying the stock, maybe you should follow. The same goes for the CFO. According to insider transactions data published by ThomsonReuters, levels of executive buying are approaching "bullish." Somewhat heartening to see, when you wake up and read today about plunging Chinese markets. Going back to prior periods this year when the index neared bullish levels, execs did step up and buy their stock. The Dow Jones Industrial Average and S&P 500 subsequently went on decent short-term runs higher.
How would you know if execs are buying their stock in this volatile environment (or even using corporate cash coffers to more aggressively do buybacks)? Here is the layman's list:
- Seemingly bad news for the market is met with buying in big names that have sold off, such as in the transport space.
- Watch the volume in the stock at levels that represent historical lows; if stocks hold at those lows, it could be a sign execs are nibbling at the stock.
In the chart below, circles indicate moves higher in stocks as insider selling activity hit "bullish" levels.
Source: Yahoo Finance
Weekend Food for Thought
On Thursday, I spent the day walking the floor at the International Franchise Expo in New York City. It was a little overwhelming; so many energetic people to talk to at established companies and hungry upstarts across all industries. One feeling I left with was the long road McDonald's (MCD) ¿ a direct competitor of Starbucks (SBUX), which is held in the Action Alerts Plus portfolio co-managed by Jim Cramer -- is facing in delivering better results.
Carl's Jr., with its supersized burgers and sexy TV commercials, is making its way to the East Coast. The entire event was filled with promising new pizza and burger concepts -- their restaurants are laid out for order customization, face-to-face staff and customer interaction and boast menus with a good bit of all-natural ingredients.
As I have noted lately, I remain a fan of sweet treat companies Dunkin Donuts (DNKN) and Krispy Kreme (KKD). The event was filled with new cookie (especially macaroons) and cake (build-your-own cake business models, very party-friendly) concepts, underscoring the appetite in a country to indulge a couple times a week.