Hulbert: Corporate insiders are dumping stocks at 25-year highs

It's a sell sign: Corporate insiders are more bearish than at any time since at least 1990.

Such bearishness isn’t evident from the traditional sell-to-buy ratio, which stands at above average levels but no higher today than a year ago; Mark Hulbert highlights an alternative sell-buy calculation that strips out those who own more than 5% of a company’s shares - typically institutional investors, whose past transactions typically have shown no correlation with subsequent market moves.

Based on this adjusted ratio, corporate officers and directors in recent weeks have sold an average of six shares of their company’s stock for every one they bought - more than double the average since 1990.

Selling has been particularly aggressive in the capital goods, tech, consumer durables (autos, construction, appliances) and consumer non-durables (food and beverages, clothing, tobacco) sectors; pessimism isn't so rampant in energy, industrials and financials.

Comments (21)
  • dacama1
    , contributor
    Comments (221) | Send Message
    I think it is more of a behavior issue than an economic indicator. The insiders who are not fortunate like the >5% owners (who were likely wealthy before this bull market) have seen a huge increase in the value of their options. They want to change their position from paper wealth to money in the bank. Once an stock option holder has reached their comfort level of cash their selling slows down. Just a thought.
    15 Mar 2014, 08:51 AM Reply Like
  • tmow
    , contributor
    Comments (518) | Send Message
    Also, tax season is upon us. A lot of new taxes for the wealthy to deal with, and they are selling while prices are still good so that they can pay their taxes in April.
    15 Mar 2014, 09:08 AM Reply Like
  • MohanTX
    , contributor
    Comments (133) | Send Message
    Tax increases on rich...i.e. earning 1 million dollars a year in capital gain taxes, is not that much.


    They are a whining group...In fifties they were paying over 50 and 60 percent of their income. They spent money for Reagan's election campaign and within 3 years they got a return of 1000% percent for that money spent.


    These guys will be pushing for taxes paid on estates after death. These guys are itching to eliminate this tax, called as Death Tax....
    16 Mar 2014, 06:47 AM Reply Like
  • rungrandpa
    , contributor
    Comments (337) | Send Message
    I think it is a preview of next quarter's earnings reports.
    15 Mar 2014, 09:56 AM Reply Like
  • Brian Barbour
    , contributor
    Comments (1351) | Send Message
    Hulbert has been running these bear stories 24/7 on MarketWatch. It is almost like he is wanting a crash.
    15 Mar 2014, 11:15 AM Reply Like
  • kussey
    , contributor
    Comments (276) | Send Message
    I noticed that too. Unfortunately, you have to wonder when people are always printing negative stories and where their money is. No doubt, he is shorting the market and hoping to stir the pot...


    Sometimes it pays not to read Marketwatch...


    15 Mar 2014, 02:57 PM Reply Like
  • larger20
    , contributor
    Comments (53) | Send Message
    Noticed that as well....Its about time someone shut him up
    15 Mar 2014, 10:43 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (6294) | Send Message
    It could be partly to raise funds to pay taxes. Also, as a director or officer portfolios can become imbalanced. Now would be a good time to diversify.


    Not all officers and directors have proven ability to predict outcomes. Vickers does an analysis of that factor, for individual companies, I don't know if it's available for the market.


    I would worry about Russian aggression or the Chinese credit bubble more than insider sales.
    15 Mar 2014, 11:41 AM Reply Like
  • berloe
    , contributor
    Comments (2230) | Send Message
    Right on, Tom, but how much should I worry? I've been adding some names.
    15 Mar 2014, 12:36 PM Reply Like
  • justaminute
    , contributor
    Comments (1925) | Send Message
    I would not worry about the Russians. Germany has announced they can't do anything. China won't do anything. The US won't do anything. The events may cause a dip in the markets, but they will only be temporary. Putin will annex Crimea and the world will watch and whine. If this is a real problem, it will not rear it's head for years. Nothing happened when he took part of Georgia, nothing will happen when he takes Crimea. If he splits Ukraine in half it will ratchet up the rhetoric, but again, nothing will happen. Until, at a point some years distant, this becomes a really large issue will some cataclysmic event occur.
    15 Mar 2014, 03:41 PM Reply Like
  • BrainDamage
    , contributor
    Comments (59) | Send Message
    Don't let the entire BOD at Keurig Green Mountain hear about this... they pretty much just all made insider purchases last week.


    Of course, KGM likes to buck the trend... they were going up throughout the entire recession.
    15 Mar 2014, 11:44 AM Reply Like
  • dividend_growth
    , contributor
    Comments (2894) | Send Message
    Wasn't 1990 a great time to buy stocks?
    15 Mar 2014, 03:09 PM Reply Like
  • manfredthree
    , contributor
    Comments (3188) | Send Message
    The title of this article actually misrepresents what the Article should be telling you if you read the whole Hulbert piece and research his own qualifications contained therein. You need to do the reading and study the qualifications.
    Bottom line is that market cap of almost every insider holding we look at has been increasing not decreasing. The fact that Hulbert and SA have neither done nor retained this work to be done tells us most of what we need to know.
    15 Mar 2014, 03:41 PM Reply Like
  • BioDoubt
    , contributor
    Comments (19) | Send Message
    From the article:
    "For his calculation, Seyhun strips out the largest shareholders from the sell-to-buy ratio. Currently that adjusted figure shows a record level of insider bearishness. According to this measure, corporate officers and directors in recent weeks have sold an average of six shares of their company’s stock for every one that they bought. That is more than double the average adjusted ratio since 1990, which is when Seyhun’s data begin."


    So no, the title pretty much matches the article.
    16 Mar 2014, 11:23 AM Reply Like
  • Tack
    , contributor
    Comments (16556) | Send Message
    Just remember, insiders sell for all kinds of reasons, but they only buy for one. Pay less attention to selling and more attention to those insiders buying.
    15 Mar 2014, 03:53 PM Reply Like
  • bbro
    , contributor
    Comments (11240) | Send Message
    1/01/90 to 1/01/93 VFINX up 35.2% dividends reinvested...
    15 Mar 2014, 05:25 PM Reply Like
  • quabbin
    , contributor
    Comments (127) | Send Message
    The good old days.......
    15 Mar 2014, 10:45 PM Reply Like
  • eagle1003
    , contributor
    Comments (1944) | Send Message
    High levels of insider selling should never be discounted, particularly when the selling is concentrated in specific sectors or industries. Such selling is very telling when the CFO or CEO are selling shares they own personally. Director activity is less important as is the selling of shares that have been immediately acquired via options.
    15 Mar 2014, 06:14 PM Reply Like
  • quabbin
    , contributor
    Comments (127) | Send Message
    ADI at 50.
    Finally options from the days of Jerry in the money.
    Jig is up.
    Pay attention to dcama1 not t
    15 Mar 2014, 10:50 PM Reply Like
  • SaltyDog62
    , contributor
    Comments (841) | Send Message
    Overweight Energy and Financials, just a coincidence tho, as that is where the highest yield is to be found. Likely to continue adding Energy, oil and nat gas.
    16 Mar 2014, 06:17 AM Reply Like
  • User 15627562
    , contributor
    Comment (1) | Send Message
    Opportunity knocks
    16 Mar 2014, 10:09 AM Reply Like
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