Insiders Continue to Sell, Sell, Sell

We have to send a tip of the hat, to ultra popular finance blogger at Zerohedge.com for alerting us to the huge number of insiders who are selling off stock in their companies.

We have noted this sort of activity over the last few months and it appears that corporate insiders are selling with increased fervor. In late April (Insiders Are Selling Into the Rally), insiders were selling at a rate of 8.3 times the amount that insiders were buying. When we revisited the issue about two months later in June (More Evidence of Skepticism from Insiders), insiders had become even more bearish as they were selling at a rate of 9 times for each insider buy.

Now, we are nearly two months later and the ratio of sellers to buyers continues to expand. In the last week, corporate insiders sold 13.6 times more than insiders bought according to information compiled by Finviz. In terms of per transaction value, the sellers are being more aggressive than the buyers as well. Of course, this is not necessarily a sign that the market is about to falter. However, it is always interesting to see what the insiders are doing because they are some of the very most informed investors. Management may be sounding an optimistic tone on many conference calls, but actions speak louder than words. Clearly, the trends are suggesting that stocks are overbought right now, and insiders are lowering their exposure to risk.

Click here to get a graphic of the recent transactions. Interesting to note, that three of the ten insider buys from last week were from Bank of America (BAC) and Citi (C).

Original post

Comments

[buddhabill:]

Your explanaion is undoubtedly the case for some, perhaps many, but it does not address the glaring and increasing imbalance between inside buys and inside sales.

Pete Rose never bet against the Reds when he was managing, but a non-bet clearly meant that he didn't like his team's chances that game. At a minimum it seems like insiders are not betting by way of not buying, and the potential implication remains the same.


On Aug 15 03:52 PM FB5000 wrote:

> You would sell too if your cash comp was limited by bonus constraints
> and you believed higher taxes were coming.
>
> If you get paid in stock as a lot of people do and your comp. is
> limited then you are going to take the cash. Reluctantly but you
> will ldo it.. I have been an insider seller over the years. Steadily
> sold stock into rising and falling share prices. My sales were driven
> by my cash needs. Market timing was not my goal - and you cannot
> sell if you know bad news is coming - that is just way to stupid.
> I think I am pretty typical
>
> Would not get too excited about this data.
>
> Sometimes a cigar is just a cigar

Aug 15 05:37 PM

[whidbey:]

Nothing is sure but conjecture can be edifying.

Under our tax laws many options (so fashionable in past years) are underwater and those "losses" (nondeductible) may affect the holders willingness to risk more losses in remaining options or current stock holdings (cash its attractions). Some wealthy investors maybe hedging their holdings, raising some cash for further diversification later (after the storm). Single stock risks have been amply clear this cycle and faith may have been shaken in heritage stocks of various stripes ( I would sell MSFT every day). Finally, the sellers may smell risk in their own firms and want to keep their capital dry for a later recovery buying opportunity after the crash this fall (they do time the markets shamelessly).

Aug 15 06:20 PM

[BPYHO:]

You don't have to TRY to be AN ASS, you just are one. :)


On Aug 14 07:11 AM Think wrote:

> Insiders could be just cashing in some of the profits...anyway, on
> a more serious note...when did everyone decide to start typing "an"
> instead of "a" in every instance? "An" should only be used before
> words that begin with a vowel sounding first syllable such as "an
> apple" or "an hour (here the 'h' is silent giving a vowel sounding
> syllable)," whereas "a" should be used before consonant sounding
> syllables such as "a horse" or "A GRAPHIC." Not trying to be an ass
> I just see it all the time and it bugs the hell out of me.

Aug 15 07:00 PM

[Supersuperman:]

yea, market is crashing soon. As Dr. Doom put it - not so fast on the recovery..!

www.wealthalchemist.co.../

Aug 15 08:53 PM

[QuasiYoda:]

That Dr Doom article is from June. He has been more bullish lately on CNBC last week. Though I am still expecting a return to the March lows.

Aug 15 11:53 PM

[altaman:]

When you are an ass you do not have to try to be one obviously.


On Aug 14 07:11 AM Think wrote:

> Insiders could be just cashing in some of the profits...anyway, on
> a more serious note...when did everyone decide to start typing "an"
> instead of "a" in every instance? "An" should only be used before
> words that begin with a vowel sounding first syllable such as "an
> apple" or "an hour (here the 'h' is silent giving a vowel sounding
> syllable)," whereas "a" should be used before consonant sounding
> syllables such as "a horse" or "A GRAPHIC." Not trying to be an ass
> I just see it all the time and it bugs the hell out of me.

Aug 16 12:21 AM

[yellowhoard:]

Cap gains rates are going to up substantially.

Only an idiot would not take profits now.

Aug 16 12:30 AM

[fwoitine:]

It seems to me that some of this selling might be due to layoff's.
If someone is out of work, he might sell off some stock or options in order to pay the bills. Also some who own company stock might be disheartened by the company getting rid of them and sell most of their stock in that company.

Aug 16 10:36 AM

[Buckoux:]

Add to that, "Canadian Bill's Corollary" stating; "It is morally wrong to allow a sucker to keep his money" and Christmas, 2009, may well have to wait until 2011. Maybe later.


On Aug 14 04:17 PM AuGod! wrote:
> To reference
> an Historical anecdote, "there's a sucker born every minute and two
> born to take him". PT Barnum.

Aug 16 02:18 PM

[George "Win...:]

I have noted an increase in insider selling even before Zerohedge was posting it. There is a reason behind this, and being long will be proven wrong soon enough. The primary upward market extension is hard to evaluate, but the imminent compensating will move is not so hard to predict. Historically insider selling triggers at an 11-12% market extension and expands as the extension expands. We are 45% into a primary and 16% into a secondary extension on the NASDAQ (leading). This is due to the introduction of a multi-tiered market regulation system which should (emphasized) save the finacial system within the coming year or so.

Aug 16 04:31 PM

[Longinvestor:]

Insider trading violates two of the widely recommended investment rules:
1. Diversify (if you don't know what you are doing).
2. Learn by experience: buy and hold loses 50% of your nest egg.
3. Decide whether you want to make money by devoting full time to your investments or whether you want to make money by devoting full time to managing your company successfully.

Buffet made rule 1 and I made up the other 2.

Aug 16 04:50 PM

[overbet:]

lower98th, How can I get future reports like this one you posted the link to? thanks


On Aug 14 03:52 PM lower98th wrote:

> So now the Goldman push is to make money on the puts and shorts being
> acquired during the rally?

Aug 16 07:19 PM

[Mono:]

please explain in lamens terms...they are net buyers? is the post by ZH not factual.

honest question


On Aug 16 11:03 PM Freya wrote:

> Oh yes indeedy, Insiders are selling like Mad.
>
> That's why the Barron's Insider Sentiment Index is back on the fringe
> of Bullish Territory as as Insiders Buy, Buy, Buy.
>
> Insiders are usually the Officers and Directors of a Company unless
> you want to redefine what an Insider is.
>
> But, go ahead and publish what is Factually untrue, The Barron's
> Index has been around longer than you and, thank goodness, Investors
> know where to go to get this Information.
>
> You are Familiar with this Publication, aren't you?

Aug 16 11:18 PM

[Mono:]

much appreciated


On Aug 17 03:18 AM Freya wrote:

> There "were", Past Tense.
>
> Insider Buy/Sells do not take in the Number of Individuals but rather
> the Number of shares bought/sold. A large Number from a single company
> can skew the results on a weekly basis.
>
> Two weeks ago, there was a Massive spike into Bearish Territory,
> over the last two weeks, it has been smoothed out. Last week it was
> back in Neutral. This weekend's Barron's Both Print and Online shows
> the Index back down to the Bullish Line.
>
> The same thing happened earlier this year. I do not doubt it will
> occur again.
>
> online.barrons.com/pub...
>
> Market Lab, Insiders. This particular compilation is Free for all
> who want to look at it. I used it in the 70's, am still using it.
>
>
> It is Just Sensationalism to pander on the fears of Investors to
> Use a One Week Reading to get Attention.

Aug 17 10:27 AM

[Mono:]

i could care less. i am better off with you explanation.

again- much appreciated.

gotta a little anxious looking at my 919 stops on GCZ09. oh well...it is what it is. lets see what the USD index comes up with next.

Aug 17 06:38 PM

[highsmith:]

news flash!
when economy is bad, people sell stuff!!

Aug 18 12:13 AM

[dallas steve:]

That is an good point.


On Aug 14 07:11 AM Think wrote:

> Insiders could be just cashing in some of the profits...anyway, on
> a more serious note...when did everyone decide to start typing "an"
> instead of "a" in every instance? "An" should only be used before
> words that begin with a vowel sounding first syllable such as "an
> apple" or "an hour (here the 'h' is silent giving a vowel sounding
> syllable)," whereas "a" should be used before consonant sounding
> syllables such as "a horse" or "A GRAPHIC." Not trying to be an ass
> I just see it all the time and it bugs the hell out of me.

Aug 18 04:20 PM

[TwiceShy:]

My guess would be that many of these insiders are so completely underwater on the debt for their expensive houses and other luxury items purchased while living on credit beyond their means, that they have to take advantage of any rally the market gives them to remain solvent. More likely an act of desperation than malice. Though some others are probably acting akin to someone who, in a crowded theater, sees that it is on fire and tells people that the smoke and flames are just special effects, part of the show, hoping to make it to the exit before the crowd catches on to the danger and crushes for the door in panic.

Aug 18 08:13 PM

[TwiceShy:]

Freya: I'd agree that Bill Gates is a special case and that large sales such as his will affect that indicator. He and his accountant would need to answer whether or not any of his finances are underwater. I wouldn't presume to know in his or any other particular case. Straw man arguments aside, I do still suspect that many of the insiders selling are likely underwater on housing and other debt, and are selling to cover that as the deflationary trend continues (despite massive "stimulus" efforts). And many of those who are not underwater are likely selling to cut down on their debt because it is more expensive in the current deflationary environment than in the past inflationary one.

I think that the main reason "the Public is still close to Panic" is that many are finally beginning to catch onto the fact that the markets are currently more of a confidence play than a real store of value and they really don't know where they can safely put their assets to keep safe what they have saved. They see someone like Bill Gates heading for the exit in a big way and they (rightly) begin to wonder if they should be doing the same.

Aug 20 02:09 PM

[insider_guy:]

Insider buying has been almost non existent the last few months.
Selling has been massive.
In particular, BSX.
Bill Gates is a regular seller of MSFT and has been throughout history, I wouldn't read anything into his selling MSFT.
The BILL & MELINDA GATES FOUNDATION TRUST has been dumping BRK/B, Warren Buffett's Company, Berkshire Hathaway also.
www.insiderstockdump.com/

Aug 28 03:32 PM