Kevin O’Leary, popular investor and one of the best co-hosts of “Shark Tank” on ABC, penned a piece for The Daily Mail — the United Kingdom’s most popular publication — revealing the big secret behind why so many billionaires are suddenly selling. And we’re talking about the big dogs. Billionaires like Warren Buffet, the Oracle of Omaha, and Jeff Bezos among many others.
Just a week ago, Jeff Bezos of Amazon, along with Mark Zuckerberg of Meta, sold off billions of dollars worth of stock from their own companies, despite the S&P 500 hitting its best nine months on record, as noted by O’Leary in his article. Warren Buffet took a butcher knife to his company, Berkshire Hathaway’s holdings in Apple, producing a huge store of $277 billion in cash.
The officers and directors of all US companies – the ‘corporate insiders’ – reported the lowest net buying of their respective firms’ shares in a decade (22 percent in September, below the 10-year average of 26 percent), according to InsiderSentiment.com. That set off hysteria in some parts of the mainstream media. Last week, it was reported that Amazon.com’s Jeff Bezos and Meta ‘s Mark Zuckerberg sold billions of dollars of their own company stock this year – even as the S&P 500 notched its best nine months on record. The officers and directors of all US companies – the ‘corporate insiders’ – reported the lowest net buying of their respective firms’ shares in a decade.
The “Shark Tank” star then revealed that a finance professor had a conversation with the Wall Street Journal last week where he said market insiders are concerned that a recession is on the horizon.
‘Insider trading is a very strong predictor of aggregate future stock returns,’ Nejat Seyhun, professor at the Ross School of Business at the University of Michigan, explained. ‘The fact that they are below average suggests that the stock returns in the future will be below average as well.’
O’Leary then explained the reason why so many big shots in the business world are selling off stock in their own companies: they know their limitations.
Sounds like something Dirty Harry might say, doesn’t it?
That’s because it sort of is. Watch the movie and see for yourself. You’ll thank me later.
“For all of their genius and access to ‘insider data’, even Bezos, Zuckerberg and Buffett can’t predict what the market is going to do, so they are diversifying their assets – and you should too,” O’Leary wrote. “I’m here to tell you that ‘insider trading’ is nearly useless. If anyone tells you that they can predict how stocks are going to move – run in the other direction.”
“After all, nearly nine of out of ten hedge fund managers can’t beat the annualized gains of the S&P 500. I don’t take any advice from anyone who claims they can forecast what’s going to happen,” he continued.
The investor then revealed that he’s both buying and selling stocks in this last financial quarter of the year.
“If one group of my investments, like energy industry stocks, has grown to significantly more than 20 percent of my total portfolio then I am going to sell it down. I’ll use that cash to build up my positions in one of the ten other sectors of the market, such as health care, financials or real estate,” he added.
And that’s why this guy is a genius and is so filthy rich. Paying attention to a man like this and learning from him can make you super wealthy. That’s not guaranteed of course. No one can guarantee success.
Toward the end of the piece, O’Leary provided some good advice for those investors who are wondering what they should do with this market rally. He suggested folks continue to invest in a 401K plan that will all but guarantee a return of 8 to 10 percent over an extended length of time. For those who are less risk averse, O’Leary suggested buying high-quality stocks through ETFs such as the Russell 2000.
He closed out by stating, “And remember – if America’s financial gurus can teach the average investor anything it’s that no one can predict the market.”
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