By Jake Mann
Over the past week, Facebook (FB) has filled the headlines, with most outlets offering significant coverage of its less-than-stellar public debut. Caught in this bearish milieu, some other social media stocks have been hammered as well. The trio of LinkedIn (LNKD), Zynga (ZNGA), and Yelp (YELP) lost an average of 11.61 percent in the five days following the IPO of Zuckerberg and Co.
On the whole, though, social media stocks have been in the green since the start of 2012 sans Facebook, returning an average of 8.98 percent. One metric that hasn't been brought to the table yet is insider trading behavior. It is worth measuring the insider sentiment surrounding these stocks, as company execs know their businesses better than anyone else. Empirical studies have also proven that investors who mimic or 'monkey' the actions of insiders can beat the market by up to 7 percent per year. Below is a basket of social media stocks and the insider sentiment surrounding them. Just to note, Facebook is not included on this list because it has not filed any Form 4s with the SEC yet.
# Insiders (B/S)
YTD Ret %
Pandora Media (P)
The first thing that immediately stands out about this group is that there have been no insider buys. In fact, the only two stocks that we cannot rate as 'bearish' are Yelp and TripAdvisor. The reasoning behind this is that the former had no transactions whatsoever, and the sales of TRIP Director Dara Khosrowshahi were a result of stock options. Regarding Yelp, the internet-based business review company had its IPO in early March, and investors loved it. After rising over 10 percent in a month, however, the stock has been in the red, losing almost a quarter of its value.
After falling over 40 percent from the $20 range that it had been accustomed to since its 2011 IPO, Groupon received a big boost earlier this month when it reported better-than-expected first quarter earnings. In the following week, GRPN rebounded by over 15 percent, and the company's Product Manager Jeffrey Holden sold at the peak. Specifically, he cut over 5,000 shares from his portfolio for a value of $62,500. This comes on the heels of a much larger trade that Holden made in April, when he sold 56,544 shares worth a little under $700,000.
One stock surrounded by the heaviest insider selling activity has been HomeAway. The online vacation rental company is in a niche market to say the least, though it debuted on the public scene with a market cap of over $4 billion last summer. Since then, shares of AWAY have been cut in half and currently trade in the $20 range. This year, seven HomeAway execs have sold a total of 506,839 shares worth nearly $12 million. What makes these sales significant is that the majority of them were in the open market, rather than stock options.
Finally, the two companies on this list that have the most in common with Facebook are Zynga and LinkedIn. As mentioned above, both have been down in the past week, and both saw insider selling activity before the FB IPO. Between May 11th and May 17th, Dipchand Nishar and J. Stanley Meresman sold 8,750 shares for a total value north of $962,500. Since these trades, both execs have avoided an 11 percent loss.
All in all, the insider-bears in this basket have returned an average of 1.98 percent year to date, compared to the insider-mixed stocks, which have returned 26.49 percent. While investors surely cannot follow a strategy of mimicking insider sentiment alone, it does provide a good starting point for analysis. To stay up-to-date on all insider trading activity, visit Insider Monkey's comprehensive database.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.