Key Points
- Insiders are selling these stocks, but it's not the worry it could be with secular trends in place to support the market.
- Widening Internet use and deepening service penetration are among the drivers for these businesses.
- Insiders sell, but institutions buy, and the analysts support these quality AI plays.
Insider selling can be a red flag for investors, but most often, it is not. In most cases, because insider selling is highly regulated, the sales are well-telegraphed and of little impact on the market. At worst, this activity could cap gains in an otherwise high-quality stock, which is the point of this article. The stocks with the most active insider selling are not names investors should be shedding; these are names that should be targeted for dip-buying opportunities.
The stocks on this list are among the hottest names in tech and run the gamut from blue-chip manufacturing to business services and security. Insider activity may weigh on the price action, but there are stronger forces in play. Among them are widening Internet use, growing dependence on the cloud, deepening penetration of digital services and robust investor support.
Jabil insiders cap gains, uptrend enters consolidation
Tech manufacturing leader Jabil Inc. (NYSE: JBL) is in a strong uptrend, but gains were recently capped, and insiders are part of the reason. Eleven insiders made 19 sales, putting it at the top of the list for the preceding 90-day period. The caveat is that insiders own only 2.75% of the stock, and the activity is consistent with companies that utilize share-based compensation. Institutional involvement remains high at 93% despite the selling, and the institutional activity has been supportive in 2023.
Analysts rate the stock as a consensus of Buy but view it as fairly valued near current levels. The consensus target is trending higher compared to last year due to several strong quarters and an improving outlook driven by AI. Jabil also upped its share repurchase plans to $2.5 billion, or about 15% of the market cap, to offset shares issued for employee compensation and drive shareholder value.
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Datadog, Inc. on brink of reversal
Shares of cyber security firm Datadog (NASDAQ: DDOG) are up strongly over the past few weeks despite heavy insider selling. Ten sellers made 21 transactions over the last 90 days to leave their holdings hovering near 15%. Sales are a vegetable soup of C-suite executives, including the CEO, CFO, CTO, CRO, COO, president, and director. Institutions are also selling into the rally in Q4 but remain supportive on balance. Institutions own about 70% of this stock, and the analysts see it advancing about 25% at the high end of the range. The consensus, which lags the market, may continue to rise due to the latest earnings report. The company produced better-than-expected results, raised guidance and received several upgrades.
Braze insiders sell, sell sell
Customer engagement platform Braze (NASDAQ: BRZE) has fewer insiders selling, eight, but they are making multiple transactions per person with more than 25 sales in the last 90 days. As bad as it may look, this activity is consistent with share-based compensation and insufficient to hold down the market. The stock price rose 27% in the past four weeks, trading above critical resistance. Institutions have sold into the rally, so there is a risk the market will be capped, but that is offset by analysts' activity, which rates the stock at Moderate Buy. The next visible catalyst is the Q3 results, which are expected in early December.
Salesforce.com insiders are the most active
Salesforce.com (NYSE: CRM) has the fewest insiders making sales, six, but they are the most active, with an average of 10 each. Even so, insider selling offers little cause for concern, and it is offset by institutional activity. The institutions own nearly 80% of the stock and are buyers in 2023. Their activity spiked in Q3, consistent with the floor in the price action. Institutional activity is steady in Q4; analysts view the stock as a Moderate Buy with at least a 7% upside. The recent activity includes two downgrades and several price target reductions but to levels consistent with the consensus.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Jabil (JBL) | $145.00 | +3.2% | 0.22% | 13.16 | Moderate Buy | $153.17 |
| Datadog (DDOG) | $149.46 | +1.7% | N/A | 282.01 | Moderate Buy | $155.56 |
| Braze (BRZE) | $44.31 | +0.7% | N/A | -38.87 | Moderate Buy | $53.74 |
| Salesforce (CRM) | $343.65 | +2.2% | 0.47% | 56.52 | Moderate Buy | $378.86 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
