Billionaire CEOs have been aggressively selling their own shares. So far in 2024… Amazon’s Jeff Bezos share sales total more than $13 billion… Nvidia’s CEO Jensen Huang has raked in a $713 million windfall… Palantir’s CEO Alex Karp’s sold over $177 million worth of the company’s shares… And it’s not only CEOs!
US stocks have recently seen huge outflows by institutional investors. According to Bank of America, net sales reached around $6 billion last week – the second largest in at least 15 years.
That’s not all…
Warren Buffett’s Berkshire has sold $133 billion of stock so far in 2024 – compared with just $33 billion in the first nine months of 2023.
So, what’s going on?
Why insiders are rushing and selling…
Before you panic, there is a perfectly valid explanation for some of the insider selling.
For example, Jeff Bezos has in the past, sold Amazon stock to fund and support other projects. The biggest and most notable being Blue Origin, his private aerospace company.
In the case of Nvidia, Jensen Huang’s stock sales relate to a prearranged plan adopted in March 2024. The trading plan, known as a 10b5-1, enables company insiders to trade a firm’s stock in a predetermined manner. Even after selling, Jensen Huang remains the largest shareholder in Nvidia.
Just note: Right now, Nvidia is very expensive on a valuation basis. To support this valuation going forward, Nvidia will need to continue achieving stellar revenue and earnings numbers.
On the other hand, I suspect Palantir’s CEO Alex Karp sales strictly relate to the company’s stunning +150% share price rise this year. After all, Palantir is now one of the most expensive stocks on the S&P 500. So, if you are a Palantir shareholder, you may want to lock in profits.
And what about Buffett’s Berkshire?
One of Buffett’s/Berkshire’s biggest stock sales this year has been Apple. In fact, since the end of 2023, Buffett has sold around 70% of Apple holdings.
While Buffett still loves Apple, the reality is the company’s growth engine has stalled. Over the past two years, iPhone, iPad and iMac sales have suffered. Additionally, Apple is far behind competitors in terms of AI.
The problem is if a growth company’s sales stall, it will hurt earnings and therefore, valuation. So, Buffett’s selling makes sense.
Interestingly, Berkshire’s stock sales have helped drive up its cash pile. Today, Berkshire holds a whopping $325 billion in cash.
That’s larger than the market cap of all but 27 public companies in the world!
Many are debating what the growing cash hoard means.
Perhaps it’s a lack of value and attractive stock opportunities. Or the slowing US economy. Or the expensive US stock market. Or all the above.
Either way, insider stock selling is something you should not ignore – especially in a high-flying stock market like today.
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