Bill L.'s  Instablog

Bill L.
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Methodology: setups require certain criteria to be met before trades can be executed, which include weighted statistical studies on several indicators of price, breadth, volume, and sentiment . Amount of risk taken is proportional to how many indicators are aligned. I mainly trade market... More
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  • Thursday, February 14th, 2013 - Insiders Continue To Flee  8 comments
    Feb 14, 2013 5:35 PM | about stocks: EMC, VMW, SPY, DIA, QQQ, IWM, XLF, TLT, IEF, VXX

    Summary: Strong Insider Selling Continues

    Last week I noted how despite the apparent strength in the equity markets, insiders had been using the noise from the "Dow 14,000" party to quietly sell their shares. This week that selling has continued except for a few very large buys in EMC/VMW. Without these large buys, the sell bias would be even more skewed.

    In the table below I've been summing the largest purchases and sales each day in February in both dollar terms and share volume.

    Chart 1: February Insider Activity

    In terms of dollar amount, insiders have been selling almost $10 dollars worth of stock for every $1 dollar in purchases. In terms of share volume, over 7 shares of stock have been sold for every 1 share in purchases.

    If we simply plotted every dollar sold vs dollar bought in a cumulative plot, we can see how the selling is outpacing the buying.

    Chart 2: Cumulative Sales vs Purchases by Insiders

    (click to enlarge)

    We'll see what happens the rest of the month, but when insiders flee their own company's stock in droves, that generally not a good sign.

    On another note, seeing as how insiders at EMC and VM have been making large purchases ($50 million dollar worth give or take), I'll take a look there for anything interesting...

    -Bill L.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in SPY over the next 72 hours.

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Comments (8)
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  • User 24601
    , contributor
    Comments (65) | Send Message
    Your case would be stronger with a comparison to historical insider sell/buy ratios. Without that context, the current ratio is hard to judge. There would usually be more insider selling than buying because of stock compensation.
    14 Feb 2013, 06:13 PM Reply Like
  • Bill L.
    , contributor
    Comments (691) | Send Message
    Author’s reply » I subscribe to several data vendors that report insider activity, and they are indeed showing a strong insider sell bias. I would not be reporting these figures as such otherwise (MTA code of ethics). That said, I'm unable to report their research or show their historical graphs here for copyright reasons (I have asked to reproduce a limited amount of their work for SA and they have declined).


    What I've decided to do instead is keep my own records (which of course has the drawback of having limited history since I just started) by simply taking the 20 largest transactions per day, which is public information, and is not to time consuming to record, and calculate these ratios so readers have some general idea of what direction the insider windsock is blowing.


    Hopefully in a few months we'll have some good ups and downs in the market as well as a longer history in the data set and we can start to see some predictive reoccurring patterns. I'll keep everyone posted in a weekly segment dedicated to insider activity.


    -Bill L.
    14 Feb 2013, 06:45 PM Reply Like
  • SKS1586
    , contributor
    Comments (548) | Send Message
    Thanks a million for taking time to help your followers, understand the market better, with your objective data.
    14 Feb 2013, 08:01 PM Reply Like
  • SeekingTruth
    , contributor
    Comments (1527) | Send Message
    You're on the right track. Thanks.
    Will be watching your work and reports as it all unfolds.
    14 Feb 2013, 09:23 PM Reply Like
  • Bill L.
    , contributor
    Comments (691) | Send Message
    Author’s reply » Third time's the charm?


    Taking a shot on the short side on this break down if S&P breaks 1514...


    -Bill L.
    15 Feb 2013, 02:38 PM Reply Like
  • Momintn
    , contributor
    Comments (6056) | Send Message
    Most executives exercise options and sell. This is how they get paid. But if they only sell some of the shares to pay taxes, then to me this is different from selling all of the shares. What you need to be tracking is if executives over the past year have been acquiring shares overall and building a larger position in their own stock.
    16 Feb 2013, 11:28 AM Reply Like
  • Bill L.
    , contributor
    Comments (691) | Send Message
    Author’s reply »


    -Bill L.
    20 Feb 2013, 04:28 PM Reply Like
  • Bill L.
    , contributor
    Comments (691) | Send Message
    Author’s reply » Buffett, Paulson, and Soros..
    Hard to be in better company when it comes to investing.


    Just saying.


    -Bill L.
    20 Feb 2013, 04:34 PM Reply Like
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