Between Elon Musk (Tesla), Jeff Bezos (Amazon), Mark Zuckerberg (Meta Platforms), Larry Page (Google), Sergey Brin (Google), and the Walton family (Walmart), a combined $69 billion worth of company stock has been sold in 2021.
Was this just a coincidence or is there something more to it?
Why did these owners sell?
Lofty valuations and tax implications combined with inflation concerns are definitely having an impact, with the sales by institutional owners 79% higher than the 10-year average.
However, the sales, in this case, were all pre-scheduled. Insiders are required to prepare the sale of stock well in advance; they do not have the luxury to decide to sell off billions of dollars worth of stock at a moment’s notice.
It’s never nice to see insiders selling their stock, but it isn’t exclusively a negative sign. There’s generally only one reason behind insider buying — they think a company’s value will increase — but there can be many reasons to sell a stock, whether it be personal circumstances or some other reason, such as capital gains and income tax hikes incoming for wealthy individuals in 2022.
For example, Satya Nadella, CEO of Microsoft, sold close enough to half of his stake in the company in November, but revealed that the sale was for “personal financial planning and diversification reasons”.
It doesn’t mean that CEOs are selling because they believe there is a recession or mass correction on the way, rather, they are taking advantage of a situation where their shareholdings have appreciated rapidly in the last 12-18 months.
Conversely, in light of the above, Warren Buffett’s Berkshire Hathway has been buying back its stock for the last 18 months, and as the famed investor once said:
“Time in the market beats timing the market”.
When the dot com bubble burst in March 2000, Amazon shares fell over 90% in the two years that followed. Now, look where it is. Stock market news sets off a stream of emotional investing, so sometimes it’s better to filter out the noise and focus on your long-term strategy.
If you want instant diversification, look no further than ETFs. These types of investments are your bread and butter when it comes to looking for easy ways to diversify your portfolio.
While they may not be able to provide the huge growth that individual stocks can, ETFs are great ways to add stability and consistent gains to your portfolio.
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Financial Writer at MyWallSt
David's favorite stock is Google. He's a daily user of its YouTube platform, where you can learn or find something brand new at the touch of a button. He believes the company will continue to grow for many years to come.