GE's 2017 insider cluster buy
When several insiders buy at once, it's one of the strongest signals in the data. At General Electric in 2017, it wasn't enough.
- Lead buyer
- John Flannery, CEO
- CEO bought
- Nov 15, 2017
- CEO's shares
- 60,000 @ $18.27
- Biggest buy
- 3M shares, Loews
- Insiders
- CEO + 2 directors
- Combined
- About $56M
The setup
GE cut its dividend and laid out a turnaround plan at its investor day on November 13, 2017. Its shares were already down 42% for the year.
Within days, insiders stepped in. Chairman and CEO John Flannery bought 60,000 shares at $18.27, about $1.1 million, on November 15. On November 21, director James Tisch bought 3 million shares for Loews Corporation, which he ran, at $17.83 to $17.99, roughly $54 million. At least one more director bought about $1 million.
What happened next
- CEO John Flannery buys 60,000 shares at $18.27.
- Director James Tisch buys 3 million shares for Loews at about $17.90. The cluster is complete.
- GE replaces Flannery with Larry Culp, a little over a year into his tenure. The shares are down more than 35% for 2018.
- Shares fall as low as $6.66, matching their lowest close of the 2009 financial crisis, down more than 61% for the year.−64% vs. the CEO's price
What InsiderBeacon would have flagged
A CEO plus two directors buying within days is exactly the pattern the cluster detector looks for. This one would have scored high and triggered cluster alerts. See how the score works.
The takeaway
A cluster raises the odds; it doesn't remove the risk. GE's insiders bought into a turnaround, the shares kept falling, and the CEO was replaced within a year. Insiders can be wrong together, especially when a company's problems run deep.
Sources
- General Electric chairman and CEO John Flannery discloses purchase of 60,000 shares, CNBC, November 17, 2017
- Insiders and Wall Street heavyweights jumping on 4 battered large caps, 24/7 Wall St., November 28, 2017
- Flannery ousted at GE after less than 2 years, WBUR, October 1, 2018
- GE shares fall to $6.66, the lowest close during the financial crisis, CNBC, December 11, 2018
This case study is for education, not investment advice. Past insider purchases don't predict future returns. We chose these cases because their filings and outcomes are well documented, and we include losses on purpose.