U.S. November insider stock sales hit 2-year high
Wednesday December 3, 8:24 pm ET
By Joseph A. Giannone
NEW YORK, Dec 3 (Reuters) - Stock sales by top U.S. corporate executives reached their highest level in more than two years in November, a bearish signal at a time when the stock market has surged amid strong growth in the economy and company earnings.
Last month corporate executives cashed in $4.5 billion worth of their own companies' shares, up 43 percent from October and nearly double the five-year monthly average, according to Thomson Financial's Insider Research, which tracks insider transactions.
Meanwhile 3,680 executives from 1,592 companies engaged in share sales. Both measures set five-year highs.
In recent weeks investors have been barraged by positive economic data and better than expected third-quarter earning reports, sustaining a rally in U.S. stocks. On Wednesday the blue-chip Dow Jones Industrial Average and the broader Standard & Poor's 500 Index reached 18-month highs, while the Nasdaq Composite Index briefly broke the 2,000 barrier for the first time in 22 months before pulling back.
Yet heavy insider sales could give investors pause, since top executives and directors are perceived as knowing their company's prospects best and therefore the figures can serve as a gauge of executive confidence.
Technology company executives sold $1.3 billion of company stock last month, the sector's highest level of profit-taking activity since early 2001. Finance sector sales reached $802 million, its highest in five years, while healthcare executives disposed of $580 million worth of shares.
Insider Research also observed that 56 companies so far in the fourth quarter have exceeded their highest quarterly volumes in at least five years. Among these companies were CBRL Group (NasdaqNM:CBRL - News), Genzyme General Corp. (NasdaqNM:GENZ - News), Nike Inc. (NYSE:NKE - News), Rite Aid Corp. (NYSE:RAD - News) and Sears, Roebuck & Co. (NYSE:S - News), Insider Research said.
Stock-buying activity last month also pointed to a waning of confidence. Insider purchases rose 67 percent to $105 million from October, well below the historical five-year monthly average of $172 million.
Moreover $42.98 were sold for $1 of stock purchased last month, the seventh straight month the sell-buy ratio remained in "very bearish" territory -- well above the $20 mark. Still that represents an improvement from October, when the ratio hit $59, its highest level in at least a decade.
Among those identified taking advantage of robust prices were executives at Fortune Brands Inc. (NYSE:FO - News), which saw its first insider sales since July and whose shares recently reached an all-time high.
And six XM Satellite Radio Holdings (NasdaqNM:XMSR - News) executives combined for the biggest quarterly sales volume and their first disposals since late 2000. The company's shares surged 10-fold in the past year, Insider Research said.
Fourth-quarter activity at credit card issuer Capital One Financial (NYSE:COF - News) reached record levels, continuing a trend of increasing sales. Lee Enterprises Inc. (NYSE:LEE - News) insiders posted the biggest combined sale as its shares trade at record highs.
Meanwhile retailer Saks Inc. (NYSE:SKS - News), hovering near a 52-week high, saw its highest sales levels since 1999.
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