- CEO purchases can be a useful way to narrow down your field of potential stocks to buy.
- CEOs who are invested in their own companies are often shareholder friendly.
- The fact that these three CEOs made big bets on themselves during the coronavirus outbreak means they see a recovery on the horizon.
With the market at multi-year lows, investor sentiment is waning. Despite the doom and gloom on Wall Street, many are still looking for stocks to buy in hopes of a V-shaped recovery.
Everyday investors aren’t the only ones buying the dip—some CEOs have snapped up shares of their own companies while they’re discounted. A vote of confidence from the person in charge could send a powerful message to investors about which stocks to buy.
CEO compensation is typically tied to company performance, but by purchasing considerable amounts of company stock these leaders are sending a strong message to shareholders.
CEOs Who Bought the Dip
Wells Fargo (NYSE:WFC) CEO and President Charles Scharf is one such executive who has significantly increased his position in his own firm. He bought 173,000 shares of WFC on Mar. 13—increasing his holdings by 4,304.55%.
Scharf’s confidence in WFC says a lot, especially considering the bank was already in trouble heading into the coronavirus crisis.
Wells Fargo was on my watchlist at the beginning of this year because the bank seemed to be on track for a strong recovery following its fake account scandal. However, the bank was ordered to pay $3 billion in fines to settle its remaining lawsuits.
The financial penalty isn’t the only black cloud hanging over the bank’s head. Wells Fargo is also working to gain back customer trust in the wake of the scandal.
So, with coronavirus and an impending recession making people nervous about the state of the banking industry, betting on Wells Fargo might sound risky.
But WFC might actually be one of the better plays in the banking sector. Lower interest rates will be hard on banks, but Wells Fargo is actually in the best position among its peers.
Residential mortgages make up 15% of WFC’s overall assets. Those loans are locked down at a specific rate and shouldn’t be impacted by the Fed’s rate cut.
Wells Fargo doesn’t come without risk, but Scharf’s faith in the bank adds to its case as one of the best coronavirus stocks.
Brookfield Property Management
Another CEO that’s standing by his firm is Brian Kingston of Brookfield Property Management (NASDAQ:BPYU).
In February, the REIT noted that it was able to sell a whopping $3.3 billion worth of assets for $1.8 billion in profits. Using that cash, the firm purchased a host of properties it expects will deliver “much higher returns.”
Unfortunately, $753 million was spent on office buildings that could see some turnover in the months a head as businesses are forced to close their doors. $159 million went toward retail properties in China, which are are also likely to see an impact from both coronavirus and the economic aftermath.
Still, Kingston obviously has faith that BPYU will recover. He scooped up 115,000 shares of his own firm on March 12, a 95.8% increase to his position.
Just a few weeks earlier on Feb. 28, Kingson bought up 75,000 BPYU shares—at the time increasing his stake in the company by 166.67%.
With so much uncertainty ahead, I’d be hesitant to choose Brookfield Property Management as one of the top stocks. But it’s certainly worth putting on your watchlist—any CEO that’s willing to put his own wealth on the line is going to win over some investors.
Dunne Ronan, an executive vice president and CEO of Verizon Consumer Group, recently bet big on his own telecom stock.
On Feb. 28 he increased his position in Verizon (NYSE:VZ) by 124.22% by purchasing 18,839 shares. Since then, his investment has decreased mildly, but he’s likely in it for the long run.
Before coronavirus hit, Verizon had fallen out of favor among investors because of its lack of future growth catalysts. The uncertainty that the virus has brought to market coupled with recession predictions have made VZ one of the top telecom stocks to buy.
Frank Louthan IV of Raymond James said as much last week when he upgraded the stock to ‘outperform’. Louthan said he likes Verizon’s “defensive characteristics with steady free-cash flow and more importantly lower leverage.”
Plus, VZ offers an impressive 4.75% dividend yield, which offers a layer of protection in a turbulent market.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com. The above should not be considered trading advice from CCN.com.
Last modified: September 23, 2020 1:40 PM