Net Insider Trading Turns Positive

Sabrient’s research team posts a wide variety of useful data for internal reference, and much of it is used within our quantitative models and client deliverables. One of the things that we track is Net Insider Transactions.

It appears that for the first time since late May, the market has seen positive net Insider Buying, as of October 30. (I tweeted about this last week.) We are simply adding up the number of unique insider purchases during the week minus the number of insider sales, as reported to the SEC on Form 4 – open market transactions. Below is a chart illustrating this point.

Again, Buys represent the open market insider transactions during the given week that increase an insider’s net holdings; while Sells are open market insider transactions during the given week that decrease an insider’s net holdings. (The black line shows the overall market performance.)

Note that for the full year, this metric was the most strongly positive the week ending March 13 (remember the big bounce from the abyss that week?) when it clocked in at 840 buys vs. 189 sells for a net +651. In contrast, the week ending 10/30 was only at +47, but it has been trending up steadily since mid-September.

Of course, I see this as a positive development with respect to near-term market performance, and indeed November has looked quite strong so far. Insiders sell for a lot of reasons, including diversification, retirement, paying for kids’ college expenses or a new vacation home, etc. But they generally only buy on the open market for one reason — i.e., they think the stock is undervalued relative to growth prospects and should go up.

Comments

[untrusting ...:]

What a bunch of total BS. Below is the real insider buy/sell figures and sellers continue to far outweigh buyers by almost a 7:1 ratio on dollar volume. If that's "positive" as this author claims then somebody needs to send this author a dictionary to look up the diffference between postive and negative. Obviously this author has some type of bullish agenda as opposed to presenting anything factual.
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Total insider buying picked up in the latest week with a total of $118MM in buying. Selling continues to overshadow the buying, however, with insiders selling $739MM in stock. Both buying and selling jumped from the latest week’s data. Buying increased by $73MM for the week while selling increased by $284MM

Nov 10 06:15 PM

[enigmaman:]

Insiders sell for a lot of reasons, including diversification, retirement, paying for kids’ college expenses or a new vacation home, etc. But they generally only buy on the open market for one reason — i.e., they think the stock is undervalued relative to growth prospects and should go up.

You forgot to mention another reason for insider selling " fear", insider selling was extremely heavy throughout the rally, but now after the markets are up 60% with many stocks up several hundred percent, you now believe the insiders are buying because they believe their stocks are undervalued. If you really think about it your saying insiders who didn't have a clue back then now have found the courage to buy at the potential top, yes that is an indicator to follow,

Nov 10 06:15 PM

[Scott Marti...:]

Sabrient is a quant firm with lots of data to digest & many ways to interpret it, and for Insider Transactions, we like the concept of counting "votes" so to speak. Each insider who buys or sells on the open market is essentially voting on his company's prospects. Total dollars can be skewed by a few large sellers who might be selling into market strength, but that can't happen with the 1-person/1-vote view.

It's your prerogative to agree or disagree with any insights we might draw from this, but calling it "total BS" and accusing me of having an agenda sure seems like a rude overstatement.

Sabrient's quant approach has proven quite successful, and we do not make calls on the overall market direction. Although we don't manage money ourselves, we primarily serve institutional portfolio managers & hedge funds. Our top picks show excellent performance relative to the benchmarks, and our absolute return long/short strategies show incredible returns in all market conditions. That's why hedge funds like to work with us.

Also, it's worth noting in this discussion that our Sabrient Insider Sentiment Index has shown tremendous performance, and the ETF that tracks it (ticker NFO) just passed its 3-yr anniversary and received a prestigious 4-Star Rating from Morningstar. The index selects a group of stocks based on the number & magnitude of insider purchases and analyst upward revisions. In fact, it has returned 143% from its March low, including dividends.


On Nov 10 06:15 PM untrusting investor wrote:

> What a bunch of total BS. Below is the real insider buy/sell figures
> and sellers continue to far outweigh buyers by almost a 7:1 ratio
> on dollar volume. If that's "positive" as this author claims then
> somebody needs to send this author a dictionary to look up the diffference
> between postive and negative. Obviously this author has some type
> of bullish agenda as opposed to presenting anything factual.
> ======================...
> Total insider buying picked up in the latest week with a total of
> $118MM in buying. Selling continues to overshadow the buying, however,
> with insiders selling $739MM in stock. Both buying and selling jumped
> from the latest week’s data. Buying increased by $73MM for the week
> while selling increased by $284MM

Nov 12 07:15 PM