FLEX's Insider Selling Spree and Institutional Exodus: A Cautionary Signal?

The recent surge in insider selling at Flex Ltd. (FLEX) has raised eyebrows among investors. Over the past six months, 27 insiders—including top executives like CEO Revathi Advaithi—have sold millions of shares, while not a single insider purchase has been reported. Meanwhile, major institutional investors like FMR LLC and Boston Partners have slashed their stakes by over 20%. This collective exodus suggests a growing lack of confidence in FLEX's trajectory. Here's why investors should take note.

The Insider Sell-Off: A Cause for Concern

FLEX's leadership has been aggressively offloading shares. CEO Revathi Advaithi alone sold 3.56 million shares worth $14.5 million since December 2024. Other top executives, including CFO Kwang Hooi Tan and General Counsel David Offer, contributed to $35.7 million in total insider sales. Notably, no insider has bought a single share in this period—a stark contrast to the "buy" signals often seen from confident management teams.

This selling coincides with a 14% decline in FLEX's stock price since January 2025. While executives may have personal financial reasons for selling, the absence of purchases by insiders—a group with unique insight into the company's health—raises red flags. As Peter Lynch famously noted, “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.”

Institutional Investors Hit the Exit Button

Institutional confidence is also waning. FMR LLC (manager of Fidelity funds) reduced its stake by 21.7% in Q1 2025, offloading $209 million in shares. Boston Partners followed suit, cutting holdings by 23.7%. Even Victory Capital Management, a long-time backer, trimmed its position by 58.4%. While some funds like Pacer Advisors increased stakes, the net outflow of $313 million from 270 funds signals broader skepticism.

What's Driving the Exodus?

The sell-off may reflect concerns about FLEX's competitive position. The company faces mounting pressure from Chinese manufacturers undercutting prices, while its reliance on volatile sectors like consumer electronics leaves it exposed to economic slowdowns. Additionally, FLEX's Q2 2025 revenue guidance of $6.0–6.4 billion falls short of 2024's $25.5 billion annual run rate, hinting at slowing demand.

A Cautionary Stance for Investors

The combination of insider selling and institutional disinvestment paints a cautionary picture. While FLEX's adjusted EPS growth of 12% year-over-year offers some comfort, the lack of internal and external buying suggests investors should proceed with caution.

Recommendation:
- Hold or Reduce Exposure: Avoid adding new positions until there's evidence of stabilizing fundamentals or insider buying.
- Monitor Earnings and Guidance: FLEX's Q3 results, due in late 2025, will be critical. Downward revisions could trigger further declines.
- Consider Short-Term Plays: Traders might use options to hedge against downside, but long-term investors should wait for clearer signs of recovery.

In the words of Warren Buffett, “Be fearful when others are greedy, and greedy when others are fearful.” With FLEX's leadership and institutions running for the exits, now may be the time to heed that advice.