Consider buying Resideo Technologies (REZI), as a director with an incredible track record of successful purchases has recently added to their position. Newly public Avidia Bancorp (AVBC) also presents a bullish opportunity, with eight different insiders conducting significant cluster buying since its IPO. A major red flag has appeared in Affirm Holdings (AFRM), where the CEO is selling shares for the first time ever and the CAO, who previously sold at the all-time peak, has also started a new selling plan. Similarly, investors should be cautious with Caterpillar (CAT) and Liquidia (LQDA), as key executives at both companies have recently made their first-ever stock sales after strong price increases. Finally, heavy insider selling clusters at Medpace (MEDP) and Carvana (CVNA) suggest leadership believes these stocks may be overvalued.

Medpace (MEDP)

• The CEO sold $18 million worth of stock shortly after the stock price popped 50% post-earnings. This followed a $22 million sale he made right after the pop.
• Multiple other insiders (at least five) also sold stock after the price surge.
• The CEO's sale was part of a 10b5-1 plan (a pre-scheduled trading plan), but he significantly increased the size of the sale after the stock's run-up.
• The podcast notes that when insiders increase their scheduled sales by over 2x the average, the stock tends to underperform going forward.
• Caveat: The CEO made an even larger sale ($188 million) in April 2024, and the stock continued to rise, indicating his past large sales haven't always successfully timed the top.

Takeaways

• The cluster of selling from multiple insiders, including the CEO, immediately after a massive price increase is a bearish signal.
• The CEO is actively increasing his selling volume at these higher prices, suggesting he may believe the stock is fully valued or overvalued.
• Investors holding MEDP might consider this a signal to review their position and potentially take some profits, given the heavy insider selling.

Caterpillar (CAT)

• The Executive Chairman made his first-ever sale of Caterpillar stock.
• Two other insiders, a director and a group president, also recently sold shares.
• This is notable for a "stodgy old company" that is up 30% in the last six months and doesn't typically see much insider selling.
• One of the selling directors has a history of "pretty good timing" on their sales.

Takeaways

• A first-ever sale by a top executive like the chairman is a significant bearish signal. It suggests a potential change in their long-term outlook on the company's valuation.
• The fact that three different insiders are selling around the same time (a "selling cluster") strengthens the negative signal.
• This could be an early warning that the stock's recent run-up may be nearing a peak.

Carvana (CVNA)

• There has been an "unbelievable amount" of ongoing insider selling from the CEO (Ernest Garcia III) and his father (Ernest Garcia II), who is a 10% owner.
• They have a history of selling heavily when they believe the stock is overvalued.
• What's new is that other insiders are now joining in: the VP of Accounting, CFO, and COO have recently started selling shares via 10b5-1 plans.

Takeaways

• The selling from the Garcia family is not new, but the fact that other key executives are now starting to sell is a notable bearish development.
• It signals that the belief that the stock is overvalued may be spreading within the company's leadership.
• While the stock's strong momentum makes it very difficult to time a short position, the widening insider selling is a significant red flag for long-term holders.

Affirm Holdings (AFRM)

• CEO Max Levchin has started a 10b5-1 selling plan for the first time ever. He had never sold shares before.
• The Chief Accounting Officer also recently started a new 10b5-1 plan. Her only other scheduled selling plan was in November 2021, right at the stock's all-time high of around $160, before it fell over 90%.
• This is happening amidst broader economic concerns about the health of the consumer, which could impact Affirm's business.

Takeaways

• This is a very strong bearish signal. A founder/CEO selling for the first time is a major event.
• The Chief Accounting Officer's impeccable timing on her last sale (at the absolute peak) makes her new selling plan extremely noteworthy.
• The combination of the CEO's first-ever sale and the CAO's historically well-timed selling suggests that top leadership may see significant risk or believe the stock is overvalued at current levels.

Liquidia (LQDA)

• A director made a $19 million sale of the stock.
• This was not only his largest sale ever, but his only sale ever. His entire history before this consisted of purchases.
• Other insiders were also selling, though some of it was to cover taxes. The director's sale was a discretionary, unscheduled sale.
• The stock is up 66% in the last three months.

Takeaways

• A long-time insider and consistent buyer suddenly making their first-ever sale, especially a large one, is a powerful bearish signal.
• It suggests a significant change in the insider's perspective on the stock's value after its recent strong performance.

Resideo Technologies (REZI)

• A director with an "incredible" track record of successful purchases has bought more stock. His previous buys were followed by gains of over 100%.
• This follows recent purchases from another major insider, CDN Partners.
• The stock is already up 60% in the last three months.
• Potential Catalyst: The company is in the building sector, which could benefit from potential government stimulus in housing.

Takeaways

• This is a strong bullish signal. Multiple insiders are buying, and one has a fantastic track record of timing his purchases for maximum returns.
• The only minor caveat is that this insider is now "buying into strength" (after the stock has already run up), whereas his previous successful buys were "buying the dip."
• The combination of expert insider buying and a potential positive industry catalyst makes REZI a noteworthy opportunity.

Avidia Bancorp (AVBC)

• The company held its IPO in early August.
• Since the IPO, there has been a significant amount of insider buying.
• A total of 23 purchases have been made by 8 different insiders.

Takeaways

• This is a strong bullish signal, often referred to as "cluster buying."
• When multiple insiders at a newly public company are using their own money to buy shares on the open market, it shows a high degree of confidence in the company's future prospects.
• For investors interested in the banking sector, this heavy insider buying makes AVBC worth a closer look.