Reading into insider buying at Starbucks — plus, what’s driving the market rebound
Every weekday, CNBC Investment Club with Jim Cramer publishes Homestretch, an actionable afternoon update just in time for the final hour of trading on Wall Street. Market update: Stocks are trying to continue the recovery after Thursday’s bad market selling was reflected in Friday’s open. It’s been a choppy few days, but the S&P 500 is still on track for gains for the week. One reason for Friday’s early rebound in AI stocks in particular may have been Vertiv President Dave Cote’s comment on “Squawk on the Street.” The no-nonsense Cote, who ran Honeywell from 2002 to 2017, explained that he isn’t too worried about debt-driven spending on data center projects because of hyperscalers’ ability to generate cash flow. It also has a positive outlook for at least the next five years based on orders. We don’t think this examination of valuations and financing concerns for AI stocks is over yet, but Cote is a safe and secure target, and if he says the outlook for the next few years is strong, he deserves consideration. Insider buying at Starbucks: Tracking insider buying and selling activity can be a good way to gauge sentiment around a stock, but it’s not an exact science. Insider selling can be subtle and difficult to understand, especially if it is part of a predetermined plan. Insiders may sell shares of their companies for many reasons; Maybe they’re about to buy a new home or pay for a wedding. But if an insider buys his company’s shares, there’s only one reason: to make a profit. So when an executive or board member steps forward and makes a purchase, we listen. A filing late Thursday showed Starbucks board member Jørgen Vig Knudstorp purchased 11,700 shares on Nov. 10 at an average price of $85. This represents an investment of approximately $1 million, which is around the threshold of what we consider significant. Knudstorp has been a Starbucks director since March 2017, so he’s seen both the ups and downs at the company. We see this as a vote of confidence in the future of the coffee giant. Next week: The third quarter will be a key stretch of the earnings season. Nvidia, the company at the heart of the AI investment cycle, is due to report after the closing bell on Wednesday, as is cybersecurity stock Palo Alto Networks. We’ll also hear from many major retailers, including Home Depot, Target, Lowe’s, TJX Companies, and Walmart. In terms of economic data, we wait to see what will be released now that the government shutdown is over. (See here for a complete list of stocks in Jim Cramer’s Charitable Trust.) When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation’s portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing the trading alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH THE DISCLAIMERS. NO CIVIL OBLIGATIONS OR DUTIES EXIST OR SHALL BE RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT CAN BE GUARANTEED.
