Frank Holding Jr. Once Again Purchases Class B Shares of First Citizens

Insider Weekends

We saw a big surge in insider activity last week and as is often the case these days, most of that activity was concentrated in energy companies and regional banks. To put things in perspective, during the course of the week, we reported on insider buying in nearly 150 companies in our daily event-driven monitors.

Given the increase in insider buying, I was curious to see if the 13 week moving average of the Insider Sell/Buy ratio provided any signals about the direction of the broader market. To reiterate, the Insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by the total insider purchases that week.

I used a 13 week moving average because we often see insider activity concentrated in a period of 5 to 6 weeks each quarter. This is when insiders are outside of company-imposed quiet periods and can trade more opportunistically. The 13 week moving average smooths out this seasonal impact.

As you can see from the chart above, the sell/buy ratio dropped sharply during the early weeks of the COVID-19 pandemic and provided a positive signal in March 2020. It provided a negative signal in late 2021, which translated to an excellent time to get out of stocks and especially tech stocks. The positive signals it provided multiple times in 2022 were premature. The negative signal it once again provided in early 2024 was followed by market weakness at the start of 2024 but that weakness did not persist for long.

Looking at this data, I would be cautious of overall market conditions if this ratio spikes above 35 and more optimistic if it drops below 10. The current level doesn’t provide a strong signal in either direction. It is worth mentioning that I don’t use a single metric like the Insider Sell/Buy ratio to make allocation decisions and it is part of a mosaic of indicators I look at.

First Citizens BancShares (FCNCA): $1,807.49

Market Cap: $24.38B

For this week’s idea, we decided to focus on insider buying at a bank that we last wrote about in June 2023 in an article titled First Citizens Dual Class Arbitrage. We wanted to revisit First Citizens because we saw insider buying by both the CEO and CFO following a strong earnings report and continued post-SVB acquisition growth.

First Citizens BancShares, founded in 1898 and headquartered in Raleigh, North Carolina, has grown into a financial powerhouse with over $218 billion in total assets and more than 500 branches across 23 states. While it still maintains regional banking roots, their most notable recent acquisition was Silicon Valley Bank in March 2023, which doubled the company’s size overnight to $219 billion in assets.

The deal was highly favorable, with First Citizens paying just $500 million in cash and receiving a $16 billion discount on SVB’s assets, along with a five-year loss-sharing agreement with the FDIC. The Holding family has been at the helm of First Citizens for three generations, owning about 34% of the company across class A and class B shares.