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Follow the Banker! Make a Fortune Using the Insider Code

Karim Rahemtulla, Head Fundamental Tactician

If I mention insider buying and selling, you’ll likely think of shady backroom business deals and Martha Stewart. But that couldn’t be further from the truth.

The truth is that company insiders legally buy and sell shares of their own companies all the time.

They have access to information the average investor could never know – sales since the last quarterly results, new product releases and even employee morale.

And insiders can’t possibly ignore all that when they go into the market… which is why they have to tell you what they’re doing with a Form 4 from the Securities and Exchange Commission (SEC).

They don’t have to tell you the insider information their trading is based on, but they do have to tell you whether they’re buying or selling, in what quantities, and at what prices. All of that is detailed in the SEC form.

And insider activity is the single most intuitive and powerful indicator of where a stock is headed.

I’ve been in the markets for almost 35 years now. I’ve seen a lot of different things happen. I’ve seen crashes and bull markets. I’ve seen scams and scandals. I’ve seen sky-high interest rates, and I’ve seen those rates fall below zero.

These are cycles. We all go through them. But insider trading is a constant. Insiders buy and sell their own companies’ shares through all of that. Now, an insider might sell shares for any number of reasons. But they will buy shares for only one reason: They believe those shares will go up.

See, no matter what the media says and no matter what company executives say, the actions of insiders speak far louder than any talking head or press release.

And the banking sector in particular has seen a huge surge in insider buying recently. The three banks in this report represent the best way to capitalize on that surge…

The Giant of Pittsburgh

Based in Pittsburgh and founded over 170 years ago, PNC Financial Services Group (PNC) is the seventh-largest bank in the United States, with over $556 billion in total assets. But based on the company’s incredible first quarter 2023 results, its leadership thinks it’s about to grow considerably.

For the first quarter of 2023, the company brought in $5.6 billion in total revenue, up 19% over first quarter 2022 revenue. And it saw its earnings per share (EPS) leap 23% over EPS in the first quarter of 2022. PNC’s 20 million customers took out $325 billion in loans for the first quarter of 2023, up 12% over the same figure for the first quarter of 2022.

And with results like that coming in, it’s no wonder that company insiders have been taking advantage and preparing for an incredible 2023. Since the start of the year, PNC CEO William S. Demchak has bought $1.13 million worth of shares.

He was joined by two directors in April and June. Joseph Alvarado bought $123,890 worth in late April 2023, and Bryan Scott Salesky bought $50,840 worth in early June 2023.

Since the start of the year, not one insider has sold so much as one share. Again, insider selling does not necessarily mean company leadership expects share prices to drop. But when no insiders are selling at all, it’s a good sign.

I recommend you follow suit with PNC’s insiders and pick up a few shares for yourself…

Action to Take: Buy PNC Financial Services Group (NYSE: PNC) at $125 or better.

The Lone Star Bank

Westlake, Texas-based Charles Schwab Corp. (SCHW) is a nationwide savings and loan holding company.

Though it’s perhaps better known as an investment brokerage firm with $7.65 trillion in client assets (some of you may very well use it to invest in my recommendations), Charles Schwab also operates as a bank.

And its insiders clearly believe it’s headed in the right direction…

In March, the company’s leadership went on a colossal buying spree. CEO Walter Bettinger bought 50,000 shares for nearly $3 million, and Todd Ricketts, a director, bought 10,000 shares for just over $500,000.

Another five insiders – including Peter Crawford, the chief financial officer; Mark Goldfarb, a director; and Rick Wurster, the president – bought $1.17 million worth of shares between them. And only two insiders have sold since March.

One look at Charles Schwab’s latest results, and it’s no wonder why company leadership is so confident. For the first quarter of 2023, revenues topped $5.1 billion, up 10% over first quarter 2022 revenues. Over the same period, net income totaled $1.6 billion, up 14%. For the first quarter of 2023, adjusted EPS shot up 21% year over year.

Over the quarter, the company opened 1 million new brokerage accounts and saw an average of 5.9 million trades daily.

With Charles Schwab’s strong balance sheet and insider activity, you may want to take a look at it…

Action to Take: Buy Charles Schwab Corp. (NYSE: SCHW) at $56 or better.

An American Classic

With roots dating back to 1863 and headquartered in Minneapolis, U.S. Bancorp (USB) is the fifth-largest bank in the U.S. by total assets, with more than $590 billion. It also just had a remarkable first quarter of 2023.

For the quarter, the company brought in $7.2 billion in revenue, a quarterly record and up 28% over first quarter 2022 revenue. Net interest income totaled $4.6 billion, up a full 45% year over year. Net overall income grew by 20% over the same period.

Total loans and deposits grew by 21.6% and 9.5%, respectively, and the company has total liquidity of $315 billion. And company leadership has clearly taken note and taken advantage…

Throughout 2023, no insiders have sold, but four have loaded up on shares. Three of them are directors. Director Alan Colberg bought $341,400 worth of shares in April, and Director Scott Wine bought just shy of $1 million worth that same month.

In May, Director Richard McKenney bought $607,400 worth of shares, and James Kelligrew, the head of U.S. Bancorp’s Corporate & Commercial Banking segment until recently, bought nearly $500,000 worth of shares as he retired, likely setting himself up with a nice nest egg for retirement.

In all, as of the end of the first quarter, insiders have bought $2.45 million worth of shares this year. And no insiders have sold shares. Clearly, company leadership is expecting big things from U.S. Bancorp, and you should too…

Action to Take: Buy U.S. Bancorp (NYSE: USB) at $32 or better.

Insider Information

Nobody knows a company better than the people running it. And, simply put, their knowledge and share purchases are some of the best indicators for the future performance of their company’s stock.

That’s why, when you see a cluster of insiders buying at once, in a company and in an industry, you should take note. And that’s exactly what I see in the banking sector right now.

It tells me that now is the time to follow the insiders.