INSIDER BUYING REMAINS NEAR RECORD LOWS
24 August 2009 by Cullen Roche
12 Comments
One of the most confounding components of the 50% rally in stocks since March has been the extraordinarily low levels of insider buying compared to insider selling. As we’ve been reporting for months, the negative trend in insider buying and selling continues today. The latest insider buying and selling statistics continue to show a vote of no confidence from corporate insiders. In the last two weeks insiders purchased just over $17MM versus sales of over $700MM. All of this makes you wonder what corporate insiders are seeing that the investment community isn’t. The following chart from insidercow shows just how skewed the data has been in recent months:
Click for larger image
Hong Kong Lee has been raising cash by selling non-core business and trim down core business for more than 12 months even though HSI is making new high.
He is one of few savvy investors like Buffet. Is there a way to find out most recent Buffet’s move?
Don’t forget the process of deleveraging that individuals are going through – those that had been using shares in their company as a savings plan, or with vested shares may simply be selling shares when they are able to in order to pay down debts / fund their lifestyle. Even if this effect is not great enough to be the driving force be hind the stats, it would at least present a headwind in my opinion.
It just goes to show you what insiders know about making money in the stock market.
Insiders see future earnings and are taking advantage of this up-draft.
It seems as if insiders are actually quite prescient using their own money to buy; quite contrary to their records with corporate cash.
Insider purchase is also increasing according to the table.
Hi TPC, what happened to the latest “What’s on Tap?”? could not find it, system issue in case?
What is more interesting is what do insiders do in all previous recoveries and not just the last 12 months. Only from that can we infer if the insiders have an advantage in timing a recovery.
On the other hand, if something so obvious is a good market indicator, everyone will follow it. As a result the indicator will self destruct.
Paul,
It probably got kicked back a few pages….
It’s not confounding my friend, a good majority of this rally has been a lie. I’d say, for example, anything above 850.
They remember their history better than most.
From “The Great Money Illusion” by Marc Faber (1989):
Statistics have shown that insiders have been good market timers in the past. They have been heavy buyers at important market lows and large sellers near market tops. The heaviest insider buying over the last 10 years took place in 1974. Insiders were relatively heavy sellers in 1976 (Dow high 1026), bought heavily in early 1978 (Dow low 736.75), sold heavily shortly before the November massacre of the same year (the Dow dropped by 115 points from 1009 to 894), were again heavy buyers shortly before the March 1980 low of 729.95, and sold heavily at the end of 1980. In late 1981 and throughout the first six months of 1982, shortly before the market took off, insiders were also heavy buyers of stocks but turned to heavy selling near the 1983 top. In 1984 and 1985, they bought shares just before the market rose. The only time they got it really wrong was in 1987, when they failed to liquidate their holdings as they had doen near previous highs.