Please ensure Javascript is enabled for purposes of website accessibility

2 Stocks Insiders Have Been Buying During the Coronavirus Market Crash

By Beth McKenna - Mar 24, 2020 at 12:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Insiders in many companies have been furiously dumping stock over the last month, but there are exceptions.

The stock market is taking a beating from the coronavirus disease 2019 (COVID-19) pandemic, which promises to significantly hurt the U.S. and world economies.

As of Monday, the S&P 500 index had dropped 33.9% since February 19, when it reached an all-time high.

Insiders in many companies have been furiously dumping stock. That said, some insiders have been buying shares during the market sell-off. This can be a quite bullish sign, as there's generally only one reason insiders buy shares of their companies: They expect the price to rise.

Below are two companies insiders have been buying this month. To be clear, I'm not recommending you buy these stocks. However, both are worth at least putting on your watch list and exploring further.

"Buy stock" on a green key surrounded by gray keys on a keyboard.

Image source: Getty Images.

Two stocks insiders have been buying

Company

Market Cap

Dividend Yield

Forward P/E

Projected 5-Year Annualized EPS Growth*

YTD 2020 / 10-Year Returns

TransDigm (TDG 3.84%) $13 billion --

16.4

12.6% (46.2%) / 1,020%
Parsons Corporation (PSN 5.37%) $2.5 billion -- 12.4 N/A (8.5% this year; 19.1% next year) (34.2%) / N/A
S&P 500 -- 2.6%   -- (30.4%) / 135%

Data sources: Yahoo! Finance and YCharts. Data as of March 23, 2020. EPS = earnings per share. YTD = year to date. P/E = price-to-earnings ratio. *Wall Street's consensus estimates.

TransDigm Group

TransDigm is a leading producer of highly engineered aerospace components, systems, and subsystems. Its products are used on nearly all commercial and military aircraft currently in service, according to the company. Its products range from pumps and valves to lighting and instrumentation.

The company's business is poised to take a notable hit from the pandemic. Commercial air traffic has slowed to a crawl because of lockdowns in certain U.S. states and in other parts of the world, along with widespread travel restrictions in many countries. So its commercial business will probably take a while to get back to speed. However, its military business should prove quite resilient during the pandemic and during an economic contraction or recession.

Apparently, director Robert Small thought the coronavirus-driven sell-off was overdone. From March 10 through March 13, he bought 518,100 shares at an average price of just over $450 per share for a total cost of nearly $233.2 million. As it turned out, he jumped in too soon, as the stock closed at $301.53 on Monday.

For context on his timing, on March 12, the World Health Organization (WHO) declared the spread of COVID-19 a pandemic.

Parsons Corporation

Parsons describes itself as a "leading provider of technology-driven solutions in the defense, intelligence, and critical infrastructure markets." Its expertise is in areas such as cybersecurity, intelligence, defense, connected communities (think smart cities), and physical infrastructure.

The company does work for U.S. government agencies, including the military and intelligence agencies, and select allies, as well as for commercial customers worldwide. Its government work should make it less sensitive than many stocks to a downturn in the U.S. economy.

This company is probably a new name to many investors. While Parsons was founded in 1944, it's relatively new to the public markets; it held its initial public offering (IPO) in early May 2019. It went public at $27 per share and had gained 49.8% through Feb. 19, versus the broader market's 17.4% return over that period. After the market sell-off, it's about back to its IPO price, as it closed at $26.87 per share on Monday.

On March 12, CEO Charles Harrington bought 10,000 shares at $28.51 per share for a cost of $285,140. He then came back for more the next day, buying 6,000 shares at $29.44 per share for a cost of $176,634. In total, he's bought 16,000 shares in March at an average cost of nearly $28.86 for a total of $461,774.

On March 12, CFO George Ball scooped up 30,000 shares at $29.40 per share for a cost of $882,000. Joining the C-suite occupants in their mid-month buyfest was director Harry McMahon. On March 13, he bought 8,600 shares at $29.18 per share and then, three days later, 8,900 shares at $28.27 per share. In total, McMahon's buys set him back $502,589.

This type of insider buying -- two top insiders (CEO and CFO) each spending big money on company stock at about the same time -- is a particularly bullish sign.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

TransDigm Group Incorporated Stock Quote
TransDigm Group Incorporated
TDG
$538.75 (3.84%) $19.92
Parsons Corporation Stock Quote
Parsons Corporation
PSN
$40.39 (5.37%) $2.06

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
321%
 
S&P 500 Returns
111%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.