The declines in equity values in the past year, along with the massive interventions by global central banks to stabilize credit markets, has helped after 17 months to make equities look attractive again as the major averages continue to sustain gains and uptrend.
However, executives and insiders at U.S. companies are taking advantage of this situation by unloading shares at the fastest pace since the start of the financial crisis in late 2007.
Insiders from New York Stock Exchange-listed companies sold $8.32 worth of stock for every dollar bought in the first three weeks of April, according to Washington Service, which analyzes stock transactions of corporate insiders for more than 500 institutional clients.
That’s the fastest rate of selling since October 2007, when U.S. stocks peaked and the…bear market that wiped out more than half the market value of U.S. companies began. The $42.5 million in insider purchases through April 20 would represent the smallest amount for a full month since July 1992, data going back more than 20 years show. That drop preceded a 2.4 percent slide in the S&P 500 in August 1992.
Insider behavior certainly matters because they know more than outsiders and their actions sometimes can provide the most accurate reflection of the prospects for the company or the markets in general going forward. However, there is always the possibility that corporate execs and insiders may have become too cautious.
“Things are a lot better than they were,” said Green, director of research at Penn Capital, which oversees $3 billion in Cherry Hill, New Jersey. Recent history also shows that “insiders have been wrong,” he said.
Let’s hope that’s the case.