Can insider trading information help us guess who will come out ahead?
NB: this article is timestamped the 28th September 2020.
Governments throw billions into biotech companies for research efforts and into larger pharmaceutical companies for the reservation of the future vaccine.
President Trump called on the Food and Drug Administration to “move quickly” on coronavirus vaccines, in the hope a vaccine could be released before the US election on November 3rd, 2020.
On August 27th, 2020, at the Republican National Convention, President Trump pledged that the push by his administration’s Operation Warp Speed to deliver a COVID-19 vaccine would succeed
“before the end of the year, or maybe even sooner.”
The race to develop the first COVID-19 vaccine is entering a crucial stage with a few candidates entering phase III trials.
If companies can enroll enough participants, some trials could yield results as soon as the end of October 2020, which could allow them to seek emergency authorization before the upcoming US election if a vaccine proves effective.
In this frenzy, there is no doubt that investors see the pharmaceuticals sector as some sort of Gold Rush.
No doubt the first one to obtain FDA agreement will most probably see a boost in its share price as any FDA approval will be followed by heavy positive press coverage.
One can imagine hedge funds and investors would be keen to have access to current ongoing trial data as to the percentage of enrolled participants who did produce effective antibodies against the virus ahead of the market.
As Gordon Gekko puts it in the iconic 1987 movie Wall Street
“The most valuable commodity I know of is information” and he would go all the way to illegal insider trading to fulfill his greed.
This is where Gordon Geeko™ an AI developed by DataCrunch.com can give us insights as to which insiders are betting the most on the success of their Company in this rush for a new COVID-19 vaccine. This algorithm is the geek version of Gordon Gekko, hence the change of Gekko into Geeko, as it has been trained using millions of legal insider trading data points from officers, directors, and 10% owners filed with the Security and Exchange Commission to generate the excess return probability of each trade made by these insiders.
The table below shows the dollar amount net insider trading activity since July 1st, 2020 at the major pharmaceutical companies with vaccine candidates :
There is a huge discrepancy between Eli Lilly (Ticker: LLY) where you have 10 transactions with a total amount of sales of $107 million and Pfizer (Ticker: PFE) where not a single insider sold their shares and a single insider made a transaction valued at half a million dollar.
Interestingly, the biggest transaction was filed with the SEC before the market opened on August 10th, 2020: it is an acquisition made by Ronald Blaylock, a Director at Pfizer. Even Though he was a Director since 2017, he did not previously own any Pfizer stock before he decided to buy 13,000 shares at an average price of $38.55 for a total transaction valued at $501,085. see filing here.
This insider transaction was given a 75% probability to generate an excess return by Gordon Geeko™.
This is no surprise given Ronald Blaylock not only knows Pfizer from the inside but he is also a Wall Street veteran as he was a former investment banker who held senior management positions at UBS, PaineWebber Group, and Citicorp. He most probably knows what he is doing on making such a bold bet on Pfizer.
Let’s put it clearly: we are not saying this insider trade is illegal, as buying shares into your company is totally legal as long as you do not use privileged information. Instead, what may be more informative in the case of Pfizer, is the fact that no insider at Pfizer sold shares over the last three months.
Pfizer share price did not perform well as it is flat since October 1st, 2019, while its quarterly earnings did beat expectations on three out of the last four quarters. Hence Pfizer currently offers a hefty dividend yield of 4.22 %, which compares favorably to the 1.84% average yield of the S&P 500.
Looking at the table above, Gordon Geeko’s winning probability and the dividend yield, the winner is Pfizer!
For those familiar with the famous quotes of the movie Wall Street :
Bud Fox would put it this way
“Blue Horseshoe loves Pfizer”