Insiders are jumping ship on this

So-called “stock market experts” look at a lot of things—they look at the price per earnings ratio, the total valuation, the barrier of entry level for potential competition, etc. etc.…

And yes, those things can be important. But I tend to first focus on what the people with the most information and the most to lose are doing.

That’s why I’m glad I picked up on the fact that insiders are bailing on this stock every chance they get…

Just days ago there was a very noticeable spike in the selling volume for one technology stock.

That selling was a consequence of more than 1 million shares—a value of well over $40 million—being dumped by a handful of insiders, and it coincided with a drop in the price of the stock in question from a height of $47 at the end of April to $39 in a matter of 5 trading days.

That fall would have cost you 17% of your trade if you got in at the wrong time.

The tech company and stock I’m talking about is GrubHub, Inc. (GRUB), which appears to be facing some rough action after going public a year ago.

To sum things up for GRUB, check out the facts about Benjamin Spero, a director of GRUB who indirectly holds shares through Spectrum Equity:

Before GRUB’s initial public offering, Spectrum was the company’s largest shareholder at 12%. However, after Spero’s most recent activity that consisted of selling a huge yet another huge chunk of his shares, Spectrum is down to just a 2.9% stake in GRUB.

And, as I’ve explained, he’s not the only insider jumping ship on restaurant pick-up and delivery company.

But why?

Well, the sentiment surrounding GRUB is that a high valuation mixed with low barrier to entry to the competition and other factors are making this company an unattractive stock.

The insiders could simply be telling us that they agree, and that they don’t have a solution for it, so they’re getting out while they can.

Whether or not that feeling is accurate, would you buy a stock that an insider like Spero has dumped over 5 million shares of over the past year?

My advice is to avoid GRUB right now, and instead invest your capital in some of the most attractive penny stocks that I’ll be including in the next issue of Midas Premium.