C-Suite Buy of the Week: Executive Buying Trends Offer Clues for 2025 InvestmentsC-Suite Buy of the Week:

As we move into the New Year, it is a good time to revisit what we do and do not know about insider trading.

We know that corporate officers’ and directors’ trading has to be revealed to the public via a filing with the Securities and Exchange Commission.

We know that, in most cases, insider buying is far more informative than insider selling. Most insider selling reveals very little real information, as there are dozens of reasons for insiders to be cashing in stocks, most of which have little to do with business prospects.

The exception to this rule is when we see clusters of insiders or large sales by top executives at or near 52-week lows. This always needs to be investigated, as the odds of several executives having a personal cash need when the stock is in a downtrend are pretty slim.

We know that insiders buy stocks for only one reason: they believe the stock price will go higher based on what they know about the business.

They are not as concerned with profits measured in percentages as they are with profits measured in multiples of the stock price.

Most of the time, insiders are contrarian and value-oriented when buying shares. Clusters of large insider buys often indicate a stock is getting near the lows and is ripe for a turnaround.

When we see insiders go against that habit and buy near 52-week highs, it is very informative and indicates that nonpublic knowledge will lead to higher prices sooner rather than later.

The top executives earn higher excess returns on their purchases than directors and low-level executives. Most of the time, the CEO and CFO have the highest returns.

 That makes sense since they see more of the big picture than anyone else. Most of the time, they are the ones painting the picture.

The CFO tends to earn higher returns than the CEO. That also makes sense since they understand both the picture and vision and what that means for the financial statements.

These are not opinions.

These are facts and conclusions drawn from academic studies and real-world results.

We will look for opportunities created by all these rules as we go through 2025.

Since today is the first trading day of 2025, I thought we would take a look at some stocks where the CEO or CFO was making large purchases of stocks that Wall Street hates. Big money buying in the open market often indicates that hatred is misplaced.

Take Tidewater TDW, for example. Tidewater owns and operates a substantial fleet of offshore vessels, providing logistical support, crew transportation, and equipment delivery to offshore rigs, platforms, and facilities. They own the boats that take people, tools, and supplies to offshore drilling rigs worldwide.

It has not been a great business for several years now. Oil and gas prices have been in a range for some time now. Prices supported onshore activity, but offshore activity has been moribund. Politics and misguided energy policies have played a role in creating weakness in the industry as well.

Shares of Tidewater hit a high of $110 back in mid-year and have plunged by more than 50% since. There have been signs that offshore demand is picking up, and key executives at Tidewater apparently think the worst is over.

CEO Quintin Kneen spent almost $2 million on shares last month. Well-known value investor Robert Robotti is a large shareholder and director and has also been buying. Robotti purchased another million shares of stock last month.

Any increased offshore oil and gas activity will send this stock skyrocketing toward its 52-week highs. Any news that causes a spike in oil and gas demand or pricing could easily make Tidewater one of the top-performing stocks of 2025.

Shares of Dave & Buster’s Entertainment PLAY have not been very entertaining lately. The company has been losing far more than analysts expected, and after the last quarter’s report, the CEO resigned. Wall Street hates the stock, and traders have been dumping it. Dave & Buster’s shares are now down almost 60% from the 52-week highs.

Chairman of the board Kevin Sheehan has stepped in as interim CEO. Upon taking the role, Mr. Sheehan must have liked what he saw amidst the carnage as he broke out his checkbook and purchased another $1.4 million worth of stock. Two other directors also made six-figure open-market purchases of the stock.

The board of directors feels pretty good about the future, as it authorized a new $100 million stock buyback to take advantage of the bargain pricing. Almost 20% of the float is sold short, so any good news could squeeze the shares.

Insiders are not always right about their purchases, but they are right more often than not, and the rewards can be spectacular.