Insider buying falls to eight-year low
Nick Olivari, Reuters
NEW YORK, Aug. 27 - Buying of shares by company executives in their own companies has dropped to the lowest level in almost eight years, according to Lancer Analytics.
“INSIDER SENTIMENT REVERTED back to bearish territory in July after being relatively neutral in June, said Lon Gerber, director of research at Scottsdale, Arizona-based Lancer, a division of Thomson Financial, which tracks insider buying and selling as reported to regulators.
“This change was driven by a dramatic decline in buying activity, to its lowest level since August 1993.”
Insider buying, measured by the dollar value of shares bought, declined to $77.9 million in July, or 50 percent, from $154.7 million in June.
The drop continued the declining trend in share purchases by corporate executives, Gerber said. For the first half of the year, monthly volume of insider purchasing has ranged from $150 million to $180 million, consistently well below its five-year monthly average of $322.1 million, he said.
“It’s a clear indication that executives are seeing the world in the same way as the general public,” said Scotty George, chief investment strategist at Corinthian Partners Asset Management LLC. Both “insiders and the public see the economy in for a protracted period of rest.”
Investors view the aggregate level of buying by insiders --who have the best access to information on their companies’ prospects -- as an indicator of market sentiment. Insiders presumably buy shares when they consider them a bargain relative to their companies’ future business.
Insider selling, measured by the dollar value of shares sold, in July totaled $2.2 billion, the lowest monthly sales volume since October 1998. It was also below the five-year monthly average of $3.5 billion.
“We normally do see a substantial drop in the dollar volume of selling in June and July as insiders are typically restricted from selling near their second-quarter earnings announcements,” Gerber said.
The dollar value sell/buy ratio, a measure of sentiment according to Gerber, almost doubled to a bearish $28.19 in July from $15.29 in June, Gerber said. The ratio’s historic five-year monthly average is $12.85.
