Posted by on March 10, 2017 12:10 am
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Categories: Business Corporate finance Economic history of the Dutch Republic Economy Employee stock option Finance Financial history of the Dutch Republic Financial market Insider investment strategy Insider Selling Market Conditions money Morgan Stanley NASDAQ New York Stock Exchange Options stock stock market Technical Analysis Washington Service

If ‘everything is awesome’ then someone will have to explain to us why corporate executives are buying their own firms’ shares at the slowest pace in at least 29 years.  According to the Washington Service, there were a total of 279 insider buyers in January, the lowest since 1988.  Moreover, the number of sellers has also grown in recent months, pushing the ratio of buyers to sellers in February to its lowest since 1988 as well.

Meanwhile, Ned Davis Research points out that insider selling has been elevated enough to trigger his firm’s in-house bearish signal for 11 weeks in a row, the longest stretch since 2014.

Insider selling is generating a “sell” signal to analysts at Ned Davis Research Inc., a research firm that uses technical analysis. Insider selling at firms whose shares trade on the New York Stock Exchange, Nasdaq Stock Market and American Stock Exchange triggered its in-house bearish signal for 11 straight weeks, the longest stretch since 2014.

“The fact that we’ve gotten more selling is a sign of concern that maybe the market has gone a little too far too fast,” said Ed Clissold, chief U.S. strategist at Ned Davis. “We wouldn’t be surprised if there was a modest pullback given how far the market has run.”

Insider Buys

Of course, as the WSJ notes, insiders sell stock for a variety of reasons, and often simply for diversification or to fund personal expenditures.  That said, when insider selling reaches the extremes we’re seeing today, it’s hard to imagine that valuations aren’t playing some role in the decision making process.

Insider selling can give mixed signals, too, and the absolute figures alone don’t themselves portend an imminent decline in stocks. Corporate executives can sell their stockholdings for many reasons, and selling generally outpaces buying regardless of market conditions.

“People sell for a variety for reasons, exercising options or buying a house,” said John Buckingham, chief investment officer at Al Frank Asset Management. “But generally there’s one reason to buy—you think your company is undervalued.”

During early months of any year, executives who received stock-based compensation are freed up to take money off the table, so selling tends to be higher, according to Ben Silverman, director of research at InsiderScore, a research firm.

Meanwhile, some of the largest sellers of the “Trump Rally” have been the executives running the biggest beneficiaries of that same rally, namely the wall street banks.  Morgan Stanley CEO James Gorman sold shares for the first time in six years just days after the presidential election, exercising options on 200,000 shares, and then sold an additional 100,000 shares later that month.


JP Morgan insiders have also been large sellers of the Trump rally…


…as have the folks at Goldman where insiders dumped 100’s of thousands of shares right after Trump’s election and have continued to sell heavily ever since.


Meanwhile, BAML is the only wall street bank that seems to have faith in the Trump rally. 


Could it be that maybe everything is not all that awesome after all?


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