Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Insiders often sell stock – that is just part and parcel with executive level compensation so selling is very common place. Often it is given too much credence in the marketplace. Sometimes it means bad things coming down the pike, but often it just means selling… period. However, actual buying by corporate executives is a much better signal since it’s a lot less common and indicates actual faith by executives that their stock price is undervalued. According to an insider signal by newsletter guru Mark Hulbert – the action of late indicates a bullish signal. This is the inverse of some very bearish signals in September thru early October.
Via Marketwatch:
- The stock market is likely to be higher at year’s end. That, at least, is the conclusion I draw from the recent behavior of corporate insiders, who are behaving in ways that suggest the correction’s bottom is at hand.
- Consider the latest insider data, courtesy of the Vickers Weekly Insider Report, published by Argus Research. The indicator that they calculate on which I place particular attention is a ratio of all shares that insiders have recently sold in the open market to the number that they have purchased.
- For the week that ended last Friday, this sell-to-buy ratio stood at 1.58 to 1, which is less than half the average level over the last decade of 3.4 to 1. At the bull-market high earlier this fall, in contrast, the insiders’ sell-to-buy ratio got as high as 6.86 to 1.
- In other words, at least when measured according to this indicator, the insiders are more than four times more optimistic about their companies’ shares now than two months ago. This much insider enthusiasm is a good sign.
- In fact, since the bull market that began in March 2009, there have been just three occasions prior to now in which the sell-to-buy ratio dropped below 2 to 1. Each came within a few weeks of a significant low in the market.
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
