Naturally, as the lead analyst of our tech-focused investment research advisory Innovation Investor, I’ve been bullish on tech stocks amid this recent market rout.
The thesis is simple. Next-gen technology platforms continue to reshape our lives – regardless of what’s going on in Europe, or with inflation, or with gas prices. And the companies creating the best versions of those platforms will grow revenues and earnings rapidly over the next several years.
And, indeed, as go revenues and earnings, so go stock prices. Therefore, as tech companies expand profits in the coming years, tech stocks will soar. What we’re seeing now is just a speedbump in the road toward technological dominance.
However, even operating under that bullish thesis, I’ve been waiting for one thing to happen before I go “all-in” with buying tech stocks on this dip.
And that’s insider buying.
Tech stocks have been crashing for months now. Yet, insiders weren’t buying the dip in December, January, or February. And that’s slightly worrisome because those are the folks who know the most about their businesses. If they aren’t buying, why should we be?
But that has suddenly and dramatically changed over the past two weeks.
Since the last week of February, insiders at hypergrowth tech companies have gone on an enormous buying spree, the likes of which I’ve never seen before.
So the last shoe – so to speak – has dropped. With insiders buying the dip like this, it is time for us to go all-in with tech stocks.
The $300 Million Tech Stocks Buying Spree
I do a lot of market research. And within that, I’ve noticed an interesting pattern emerge recently.
Ever since the Russo-Ukrainian crisis began and the market sell-off accelerated, I’ve read quite a few headlines about insiders buying the dip in crashing tech stocks.
Of course, I dug deeper. I analyzed insider buying activity over the past few weeks. And I specifically focused on hypergrowth tech stocks since the last week of February, roughly around the time Russia invaded Ukraine.
What I discovered is astonishing. Truly, it made my jaw drop.
Insiders at hypergrowth tech companies have gone on enormous buying sprees over the past two weeks. And when I say enormous, I mean enormous.
In total, more than 30 corporate insiders have bought over $290 millionworth of stock across 27 different hypergrowth tech stocks in past two weeks alone.
CEOs and CFOs are buying. Board members and hedge funds are buying. And they’re all buying in huge chunks across multiple purchases.
This is an insider buying splurge I haven’t seen before.
And guess what? A lot of the buying happens to be centered around stocks that we own in our Innovation Investor portfolio.
See the chart below. It includes a list of all hypergrowth tech stock insider purchases from the last two weeks. The tickers are redacted for confidentiality purposes. But the stocks we own in Innovation Investor are bolded to emphasize the portfolio’s robust exposure to this buying spree.
A chart listing recent insider buying activity of hypergrowth tech stocks
The investment implication? Corporate insiders believe many of the stocks we own are due for a huge bounce over the next few months.
And we couldn’t agree more.
Pay Attention to Tech Stocks Buybacks
It isn’t just this massive insider buying spree that has us bullish on tech stocks at the moment. It’s also all the huge buyback programs that tech companies are launching right now.
This past week, Amazon (NASDAQ:AMZN) announced a $10 billion share buyback program, while AppliedMaterials (NASDAQ:AMAT) announced a $6 billion buyback plan of its own. Two weeks ago, Advanced Micro Devices (NASDAQ:AMD) launched its $8 billion buyback program. Cisco (NASDAQ:CSCO), meanwhile, has expanded its buyback by $15 billion, and Meta (NASDAQ:FB) bought back around $6 billion of its stock in January alone.
Companies tend to issue new programs like this — and significantly expand current ones — when the board of directors feel the stock price is undervalued. And clearly, big tech board members believe prices are currently way undervalued .
Not to mention, both Amazon and Alphabet (NASDAQ:GOOG) recently announced major stock splits. This is yet another move that speaks to insider confidence about the go-forward prospects of those stocks.
In other words, everywhere you look, insiders are flashing bullish signals about tech stocks. We’re following those signals and buying the dip.
Buy the Dip
Following insider buying is an historically proven successful investment strategy. And it’s one that makes a lot of fundamental sense.
That’s why I’ve been waiting to see some serious insider buying amid the recent selloff. After the Covid-19 stock dump of March 2020, the huge acceleration of insider buying in late March and early April coincided with the bottom of the crash.
We’re starting to see a similar acceleration today. And it is most profound in hypergrowth tech stocks.
Does that mean we’ve hit bottom? Not necessarily. But it does mean that the people who know the most about hypergrowth tech stocks are betting their own money that those stocks will rise sharply in value over the next few months and years.
That’s bullish. In fact, that’s really bullish.
And that’s why we believe — if you’re a long-term investor — the best thing you can be doing right now is buying the dip in tech stocks.
