DESPITE “GREEN SHOOTS” INSIDER SALES SPIKE
The latest data on insider selling shows little relief in the relentless unloading of company stock by corporate insiders. In the last two weeks insiders sold over $335MM in stock vs listed insider purchases of just over $12MM. As has been the trend over the course of the last few weeks the list of insider selling has been long and the amounts have been staggering. The buy side, on the other hand, is represented by low rated, low priced stocks whose insiders rarely purchase over $500K.
One might think that with all of these “green shoots” the insiders at major U.S. corporations would begin buying up their own shares voraciously. Especially after a nice little run like we’ve seen lately. After all, with stocks still 35% off their highs and a full blown economic recovery (supposedly) on the horizon it would make nothing but sense than to buy your own shares, right?
Although there were signs of life in early May the overall trend in buying remains very low. As we’ve noted before it’s not the mountain of selling that most concerns us, but the total lack of buying. Insiders sell for many reasons, but they only buy their own stock when they are confident that the price will rise. As of now, insider buying remains incredibly weak which is more than likely a vote of (no) confidence in future business operations.
Chart Source: Insidercow.com
*Click charts for larger images
TPC,
The insider data is fascinating. Historically, it would be interesting to see the insider buy:sell ratio plotted against market performance and possibly even market volume esp given the low volumes of later.
Thanks..
-ty
Do you have a link to where you got this information?
Nice work as always TPC
In response to the first comment. I have seen that data but I cannot find the link at the moment. The study I read found that insider activity tends to occur in advance (typically about 6 months) of a market move. Insiders tend to see the probelms earlier and get out earlier leaving poor little retail investors naked in a blizzard. Take it as a bearish signal, but not an immediate bearish signal. It is considered to be a lagging indicator.
Way back in January we had noticed this trend and also related it to stock buybacks: http://www.marketfolly.com/2009/01/where-are-stock-buybacks.html
Insiders weren’t buying and then the companies themselves weren’t buying. Obviously since then, buybacks have popped up here and there and Walmart’s announcement today is a big one. But, the insider buys are definitely a solid thing to track (we always keep an eye on it) and the fear everyone has is amazing. No one is confident enough to really step in and buy in droves. And, as you’ve highlighted, the sales are pumping out as people want to shore up their personal balance sheets and reduce their risk.
By the way don’t know if you’ve seen this resource but MSN tracks the largest insider buys/sales every 30 days and its good to check in on: http://news.moneycentral.msn.com/process/insider/top10insider.aspx
Jay
@ Ty, what you’re referring to can be found here:
http://www.secform4.com/i-ratios.htm
@ James,
I got the latest updates from Fin Viz
@ Jay,
Always good to hear from a fellow blogger. Read your work every day. As for insider trading – I can’t say that it impacts my trading much, but I definitely like to follow it. Some companies and managers are particularly interesting (such as Bob Toll – . It’s nice to keep the macro picture in mind nonetheless.UA:F [1.8.5_1061]
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@ Charlie
If insider activity occurs in “advance,” then it must be a leading indicator, not a “lagging” indicator as you stated. Maybe just a slip, but I wanted to clarify for less experienced readers who may be confused by your statement.
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