Hagerty's Insider Selling: Liquidity Play or Warning Signal?

Hagerty, Inc. (NYSE: HGTY) has become a focal point for investors dissecting the interplay between insider sales and market sentiment. Over the past three months, director Robert I. Kauffman—Hagerty's largest individual shareholder—has sold over 688,047 shares, generating $6.8 million in gross proceeds. These transactions, executed under a Rule 10b5-1 trading plan established in August 2024, are technically pre-scheduled and non-reactive, often used to manage wealth or meet financial obligations. Yet the sheer volume and timing of the sales have sparked debates: Are these liquidity-driven exits, or do they hint at deeper concerns about Hagerty's future?

The Insider Activity: A Closer Look

Kauffman's sales span a range of price points, from $9.82 to $10.19 per share, with a cumulative reduction of his holdings from 3.8 million to 3.49 million shares as of July 21, 2025. Despite the outflows, his remaining stake of 3.49 million shares (valued at ~$34.9 million) and direct ownership of 67,302 shares maintain his voting influence and economic interest. This persistence suggests his selling is not panic-driven but rather a disciplined approach to portfolio diversification.

Contrasting this, director Anthony J. Kuczinski's May 2025 purchase of 28,630 shares at $9.59–$9.75 added $286,000 to his holdings. This “informative” transaction, as analysts call it, signals confidence in Hagerty's valuation and growth trajectory. The mixed signals from insiders highlight a nuanced picture: while Kauffman's sales may reflect liquidity needs, Kuczinski's buy-in underscores optimism about the company's fundamentals.

Market Reactions and Valuation Dynamics

Hagerty's stock has risen 18% year-to-date as of June 24, 2025, but it currently trades at $10.10, below its 200-day moving average of $9.61. This discrepancy raises questions about whether the market is fully pricing in the company's potential.

The stock's elevated valuation—trailing P/E of 50.45 and forward P/E of 35—far outpaces peers like Progressive (PGR) at a P/E of ~12. Bulls argue this premium is justified by Hagerty's 30% annual growth in Hagerty Drivers Club (HDC) membership, its dominance in collector vehicle insurance, and strategic investments in technology (e.g., the Duck Creek platform). Bears, however, highlight regulatory risks, such as the revocation of Hagerty's Municipal Advisor registration under the Exchange Act in Q2 2025, which remains shrouded in opacity.

Investor Sentiment: Caution Amidst Growth

Hagerty's Q1 2025 earnings report—a 18% revenue increase to $319.6 million and tripled net income to $27 million—underscored its operational strength. Yet the juxtaposition of these results with insider selling has created a valuation crossroads. Technical analysts note key levels: resistance at $10.00 and support at $9.20. The stock's low short interest (~1.2% of shares) suggests limited bearish sentiment, but the regulatory overhang and macroeconomic sensitivity (e.g., collector car demand often lags in recessions) warrant caution.

Strategic Implications for Investors

For long-term investors, Hagerty's business model remains compelling. Its 30% annual membership growth in HDC, international expansion, and cloud-based insurance platform position it as a leader in a niche but high-margin market. However, the regulatory uncertainty and insider selling necessitate a wait-and-see approach.

Recommendations:
1. Hold current positions if aligned with long-term growth goals, given Hagerty's robust fundamentals and strategic initiatives.
2. Avoid new buys until Q2 2025 results and regulatory updates are clear, particularly regarding the Municipal Advisor registration revocation.
3. Consider gradual entry if the stock dips below $9.50, a level that could resolve the regulatory overhang positively.

Conclusion: A Tale of Two Signals

Hagerty's insider activity is a double-edged sword. While Kauffman's sales may reflect liquidity needs, they coincide with a stock price that appears overvalued relative to its growth metrics. Conversely, Kuczinski's buy-in and the company's earnings performance signal underlying confidence. Investors must weigh these signals against the broader context: a business with strong niche leadership but elevated risks from regulatory scrutiny and macroeconomic shifts.

In the end, Hagerty's story is one of potential and caution. For those willing to navigate the uncertainty, the company's long-term trajectory could still offer substantial rewards—but patience and prudence are essential.