Insider Trading Sentiment In The QQQ

May.21.12 | About: PowerShares QQQ (QQQ)

By Jake Mann

Known as the "triple Qs" or the "trips" to Wall Street junkies, the Powershares QQQ (NASDAQ:QQQ) is one of the most actively traded ETFs in the markets today. Officially tracking the Nasdaq-100 index, the QQQ is a cap-weighted fund that gives investors exposure to companies in the tech, biotech and consumer discretionary realms.

Below are the top 10 stocks - in order of largest to smallest - that are currently in the QQQ, with a description of the insider trading sentiment surrounding each stock over the past three months. It should be noted that insiders typically sell for a variety of reasons, but buying behavior is a much stronger indicator. For example, if a company has a 3 to 3 insider buy/sell ratio, we can still say that insider sentiment surrounding the stock is bullish.

Stock

Insider Sentiment

# Insiders (B/S)

3MO Ret %

Apple, Inc. (NASDAQ:AAPL)

Bearish

0/6

5.63

Microsoft Corp (NASDAQ:MSFT)

Mixed

1/3

-6.34

Google, Inc. (NASDAQ:GOOG)

Bearish

0/11

-0.70

Oracle Corp (NASDAQ:ORCL)

Bearish

0/3

-11.05

Intel Corp (NASDAQ:INTC)

Bearish

0/4

-4.75

Qualcomm, Inc. (NASDAQ:QCOM)

Bearish

0/7

-10.46

Cisco Systems Inc. (NASDAQ:CSCO)

Bearish

0/3

-18.83

Amazon.com Inc. (NASDAQ:AMZN)

Bearish

0/4

17.18

Comcast Corp (NASDAQ:CMCSA)

Bearish

0/2

-3.07

Amgen Inc. (NASDAQ:AMGN)

Bearish

0/4

2.02

Click to enlarge

The first thing that is immediately noticeable is that on the whole, insiders in these 10 companies have been extremely bearish over the past three months. At the same time, each stock has lost an average of 3.04% in this period. In fact, the only company with any moderate buying activity has been Microsoft, where Director J. Stephen Luczo bought 16,000 shares earlier this month for a total value of nearly $500,000. This transaction pales in comparison to the sales of Apple CEO Timothy Cook, who sold a healthy amount of stock options worth over $64 million, or Google Director John L Doerr, who sold $8.4 million in his holdings earlier this month. A total of 11 insiders have sold GOOG stock over this period, with Doerr leading the way.

As the graphic above represents, investors who blindly followed bearish insiders would have been in the right six out of nine times. While investors surely cannot follow a strategy of mimicking insiders alone, it is always important to monitor the transactions that surround the stocks in your portfolio. It has been proven that those who follow insiders can outperform the market by up to 7 percentage points over a 12-month period, according to recent studies.

Disclosure: I am long MSFT.