Insider's Buying & Selling (General News)

[winston]

Insider's Buying or Selling

It has been said that insiders buying is a good sign as they buy only for one reason.

And insiders selling is not so good an indicator, as they sell for a variety of reasons.

So do you buy when you see an insider buying ?

And are the insiders really that savvy an investor ?

They may know their company very well but does it also mean that they know the stock-market well ?

I think some insiders are too close to the trees so they cant see the forest that well ...

[winston]

Are You Using This Powerful, Reliable Indicator? by Karim Rahemtulla


If you think there are no investment opportunities out there, think again.

Sure, it's not easy to find them in a market that is all over the place at the moment. But it certainly helps if you know where to start looking.

In times like these, you have to be adept at spotting signals and ready to go long or short at any given moment. That's what happened in my Smart Cap Alert last week...

Shaking Down Company Insiders for Profits

A company that I'd been tracking for a while announced its quarterly earnings.

The numbers were good, but not a home run-type performance. Its future earnings outlook was excellent - although not quite enough to make me salivate.

But here's the rub: The reason I started following the company's progress was because of one of the strongest, most reliable indicators out there.

Insider buying.

About two months ago, I noticed that a couple of the company's insiders had made very large purchases. But here's the thing about insider buying: Most people make the mistake of thinking that insider buying means immediate gratification for shareholders.

It doesn't. Insiders cannot buy on non-public information, but they can buy if they think the company has a great chance of landing something huge or if they see business metrics improving.

For investors, the reason why insider buying is such a good signal is that it usually precedes a run-up in the company's share price by about six months.

Earnings Out... Shares Down... But No Panic

Anyway, after the company reported its earnings and revenue, the shares fell by about 10% in the days after the report.

Time to panic? Nope.

At that point, I was looking to see whether the insiders would step up after a so-so earnings release. How would they react? Would they put even more money into their own stock?

As I said earlier, insiders usually buy because they're expecting outsized returns after a period of six months or more. And the big purchases were made two months prior to the release, not because they were using it as a point at which they could sell.

In fact, they couldn't sell then even if they wanted to, since they'd run foul of insider trading regulations, which require the purchaser to hold the shares for six months before being able to trade them.

So what happened?

Buy Now... Gains Later

Two days after the release, the insiders stepped up to the plate again and bought shares in large quantities.

One insider actually snapped up almost $1 million worth. This came on the back of a $5 million purchase in one transaction in the weeks leading up to the earnings release.

Bear in mind that the company in question only has a market cap of about $800 million, so insider purchases like this are huge. It would be like Steve Jobs stepping up and buying $1.2 billion worth of Apple (Nasdaq: AAPL) shares at one time.

The key point here, though, is this: Whether the shares rally in the short-term is inconsequential. The insiders are expecting better times ahead, not today.

Of course, the market will react to this, too - and no matter how strongly an insider feels about his company, short of an acquisition, all bets are off if the market tanks.

Do You Want to Fly High Or Fly By the Seat of Your Pants?

In markets like this one, some opportunities are better than others.

But time and again, empirical evidence has shown that large insider buying from more than a couple of company insiders is one of the market's most reliable indicators.

The choice is yours...

Either track down winning stocks by looking for signals that send those stocks to you... or fly blind with hope and a prayer.


Source: Investment U

[winston]

Didn't Peter Lynch that Insiders Sell for a variety of reasons and Buy only for reason. So there's no need for you to worry when you see that the CEO of Genting is selling


Insider Selling To Buying Surpasses 1,400-1 by Tyler Durden

Insider Selling recovery

For all those who thought last week's "dramatic" improvement in the ratio of insider selling to buying from 650:1 to "just" 290:1 was a sign things are turning and insiders may soon be selling only 100 or so times more stock per week than buying, we have some bad news.

According to Bloomberg, the latest ratio of insider selling to buying was 1,411 to 1. Let us repeat: 1,411 to 1. Needless to say, corporate insiders are totally buying the Fed reflation story, and the economic recovery. Like, totally.

http://www.zerohedge.com/article/inside ... ses-1400-1

[winston]

Insiders Dumping Stocks At An Astonishing Rate: Should You Follow?
By Andrew Mickey

The Federal Reserve announced its going to pump more than $800 billion of new cash into the economy.

Financial assets, as they’ve done for the past two years, have responded strongly to the pump.

There are, however, a lot of causes for concern. One of the big ones that recently grabbed a lot of headlines is record levels of insider selling.

There’s nothing that spooks investors like insider selling.

The premise is a simple one. Insiders know their company best. They know how well the company is doing. They can see problems months before the markets do.

So when they buy, conventional wisdom views it as a good sign. When they sell, it’s a bad sign. And when they all sell, it’s a bad sign for the overall markets.

That’s why when a recent CNBC report found insider selling has reached record highs, a lot of people are taking note.

This could be the exact wrong move to make right now. Here’s why.

3,177-to-1: Insiders Running for the Exits

There are a lot of “leading indicators” out there. The proverbial canaries in the coal mine are sectors which are directly tied to consumer activity and business investment.

Two of those are technology and retail – technology because it’s highly correlated to business investment and retail because it shows how much consumers are really spending.

Lately, insiders of companies in these bellwether sectors have been dumping shares at an astonishing rate.

CNBC’s John Melloy reports in Insider Selling Volume at Highest Level Ever Tracked:

The largest companies in three of the most important leading sectors of the market have seen their executives classified as insiders sell more than 120 million shares of stock over the last six months. Top executives at these very same companies bought just 38,000 shares over that same time period, making for an eye-popping sell to buy ratio of 3,177 to one.

That’s an absolutely astonishing ratio for sure. But we’ve got to remember, CEOs and CFOs of Fortune 500 companies are, as a group, just as terrible investors as most everyone else.

The Insider Selling Fallacy

The table below on insider selling shows how poorly insiders have done over the past eight years:

The chart reveals two clear trends about insider buying and selling.

First, insiders buy most heavily on “dips.” They tend to view a decline in the overall markets as a time to buy. Whether that’s a 5% or 10% correction or more, they’re buyers when the markets are headed down.

Almost every time the market fell, they bought over the past few years. They really started buying in 2007 when the markets felt the first whiff of the subprime meltdown. It turned out to be the worst possible time to buy stocks in the past decade.

Second, insiders sell most heavily when the markets are doing well. While the markets were rallying from 2003 lows to a peak in 2007, their selling was about equal with buying. The markets went up and up while insiders sold and sold.

These two tendencies show insiders are terrible investors. They buy every dip – whether stocks are headed lower or not – and they sell every rally – whether stocks are eventually headed higher.

That’s why it’s no surprise, given the market rally, to see insiders selling so much. Its further proof that insider selling as a whole is nothing to be concerned about.

Wait for the Turning Point

Massive insider selling will be just another “warning sign” to keep the majority of investors on the sidelines.

The Fed’s free money policies will likely keep stocks headed higher and create asset bubbles of enormous proportions.

It was a Fed injection of liquidity during the currency crisis and Russian debt default of the late 1990s that created the tech bubble. The Fed’s response to the tech bust created the housing bubble. The Fed’s current unprecedented response to the housing bust that preceded response to the housing bust will inevitably create an unprecedented bubble in many financial assets.

In the next Prosperity Dispatch we’ll look at which assets the money will likely flow to, why, and look at how much higher those bubbles can go.

http://www.dailymarkets.com/stock/2010/ ... ou-follow/

[winston]

Stock Buybacks vs Insider Buying: 70:1 Ratio By Barry Ritholtz

“While insiders are willing to use corporate cash to try to support the value of their stock-based compensation, they don’t seem to think their stocks are attractively priced.“
-Charles Biderman, Trimtabs

Over the years, I have been critical of Trimtab’s Charles Biderman (See this, this, this and this). I suspect much of the visibility his model was dependent upon to track investor money flows had disappeared into dark pools or derivatives. Thus, the ability to peer into mutual funds asset buying and forecast equity movements was compromised.

My critiques of Biderman’s research has been he has lacked the data to support his views, which were too bullish heading into the 2007 peak, too bearish during the 103% rally.

Examples include a late 2007 comment that “Fear and ignorance seem to be gripping retail investors” (Doh!) or the April 2008 claim that the economy was emerging from the recession (Um, not exactly).

However, in a recent research report, TrimTabs seems to have some ugly Insider Buying data that supports their bearish views.

Biderman observes that while US firms spent $124 billion in stock buybacks in Q2, insiders bought less than $2 billion of company stock with their own money.

That 70:1 ratio is a sharp contrast between “what insiders are doing with their own money and what they’re doing with the money of the companies they manage.”

http://www.ritholtz.com/blog/2011/07/in ... 701-ratio/

[winston]

INSIDERS CAN’T GET OUT OF THIS MARKET FAST ENOUGH by Cullen Roche

Insider selling and buying data can be tricky. In general, it’s noisy data to say the least and generally useless for various reasons.

The few times when I’ve found that it becomes somewhat useful is when you track CFO data and outlier data.

Yahoo Finance has an outlier for us. According to Argus Research insiders are selling at a 6.43:1 ratio which is higher than 95% of other weeks:

http://pragcap.com/insiders-cant-get-ou ... ast-enough

[winston]

Insiders are Buying By Mark Hulbert, MarketWatch

CHAPEL HILL, N.C. (MarketWatch) — All right, all of you who say you’re contrarians: Now’s the time to see if you really walk the walk, not just talk the talk.

You say that the time to buy is when the blood is running in the streets. Well now would certainly appear to be one of those times. How many of you are stepping up to the plate to buy?

Not many, I am sure.

But there is one group that appears to be doing so. And they have a history of being more right than wrong about the market’s direction.

I’m referring to corporate insiders, a group that includes corporate officers, directors, and largest shareholders. You may recall that, three weeks ago, corporate insiders were selling at an abnormally high pace.

By one measure, in fact, they were then selling at the fastest pace in the nearly 40 years that insider data had been collected.

With the Dow Jones Industrial Average DJIA -5.55% now more than 1,400 points lower, the insiders appear to be shifting back to the buy side in a big way.

Consider an insider indicator calculated by the Vickers Weekly Insider Report, published by Argus Research. This indicator is a ratio of the number of shares that insiders have sold to the number that they have bought.

For insiders transactions last week, according to the latest issue of the Vickers service, which I received late Monday night, this sell-to-buy ratio stood at 1.68-to-1. That’s bullish, according to Vickers, since the long-term average level for this ratio is between 2 and 2.5 to 1.

To further put the current level of this ratio into context, consider that in the week ending July 22, this ratio stood at 6.43-to-1. And among those companies whose stocks are listed on the NYSE and the AMEX, the ratio during that week stood at 13.10-to-1 — which is the highest, and most bearish, reading for the ratio since Vickers began collecting data in 1974.

Further confirmation that the insiders are responding in true contrarian fashion to the market’s plunge: Vickers’ sell-to-buy ratio steadily improved last week as the market dropped. For transactions just last Friday, for example, the day after the Dow’s 513-point plunge, the ratio stood at an extraordinarily bullish 0.33-to-1.

To be sure, you should never throw caution to the winds when following any one stock market indicator. After all, the insiders aren’t always right. And even when they are, the market doesn’t always respond as immediately as it did following their record level of selling in mid July.

Still, it is comforting that a group of investors who presumably know more about their companies’ prospects that the rest of us consider the low prices of their stocks to represent attractive bargains.


Source: MarketWatch

[winston]

Don't Trust Insider Stock Buys: Contrarian View By Ali Meshkati

NEW YORK (Zenpenny) -- On Aug. 1 when we were sitting about 13% higher on the S&P 500, I said the following: "We are entering one of those periods where the market is going to become extremely deceptive in its behavior. Contrarian theory will be tested. As will various popular technical indicators. The decline has already managed to pop up on the screen of most technicians as being oversold and overly bearish. Those who take comfort in such indicators will face pressure in the weeks ahead."

I bring this up because of an article from CBS Marketwatch I came across yesterday that told of the fact that insiders at corporations across America are buying their stock at what they consider to be attractive prices following the steep decline we have faced recently.

My immediate reaction was that in current market conditions, as an indicator, insider buying will work just as well as oversold indicators or traditional sentiment indicators that technical investors (myself included) rely on a majority of the time. In other words, its useless.

In fact, I will go one step further and say that insider buying is a contrarian indicator of the lack of fear with which this decline has been greeted by the general investment public. While investors will acknowledge that things do seem to be bad in the economy, government and subsequently the markets, the consensus seems to be that now is a better time to buy for the long-term than sell. Insiders seem to agree.


http://www.thestreet.com/story/11217889 ... L_ttt_html

[winston]

Insider buying has suddenly "disappeared"
From SHTFplan:

What's next for the stock market? In the grand scheme of things, it really doesn't matter to those of us who have taken our assets off the table and have chosen instead to "get physical."

But there are still millions of Americans who are depending on stocks for their livelihoods and retirements. So for those who are wondering what the sentiment is on Wall Street, consider why the insiders have quit buying stocks:

Chief executives. Board members.

The head honchos. The people who know.

Just a few weeks ago, they were out in force, buying up shares in their own companies with both hands.

No longer. They’ve disappeared. Almost overnight.

Insiders and business owners are uncertain. So, too, are financial analysts and media pundits.

The average American is certainly confused, irritated and concerned with what the next wave of crisis may bring.

http://www.shtfplan.com/headline-news/u ... t_09212011

[winston]

Moneyball Investing: A Simple Way to Beat the Market By Chris Mayer


The key dilemma around Moneyball, the book by Michael Lewis and the movie based on it (I recommend both), is pretty simple.

Wealth creation is ultimately measured in the ability to create cash.

Cash, though, comes from all kinds of sources – rising asset values, sales of assets, earnings, dividends, etc. – ultimately reflected in stock prices.

In markets, one of the best predictors of wealth creation is ownership by the people in charge. Hardly anyone focuses on ownership.

Ask a CNBC talking head how much stock the CEO owns of his favorite play? He won't know. Heck, ask most fund managers how much skin their management team has in the game. They won't know either. They don't look for it. And that is your opportunity.

One interesting way to look at this idea was put forward by Horizon Kinetics, one of the few firms I know of that focuses on ownership. In fact, the firm created the Horizon Kinetics ISE Wealth Index, a benchmark tracking the most-successful business leaders. According to the firm's website, the index includes:

… companies whose senior management has demonstrated a track record of skill and specific industry knowledge that has translated into high levels of long-term shareholder value creation. In many cases, these individuals have also used their respective companies as the primary means for accumulating substantial personal wealth…

Due to this vested interest factor, these management teams often prioritize the creation of long-term shareholder value and, as a result, outperform the markets.

And the proof in the pudding is in the table below…

To get in the Wealth Index, a company must meet several criteria. One is simply that there must be a wealthy individual in a position of control (e.g., chairman, CEO). Wealthy means at least $1 billion in personal assets, as measured by public data. So the members of this index are, essentially, a list of companies with a billionaire owner-manager.

You can find the 98 stocks in the index at www.ise.com/index. Click on "Index Options," which is under "Products Traded." Then scroll down the table to find the index (the ticker is RCH), and then click "View."

Not surprisingly, the index includes six current holdings in my Capital & Crisis newsletter, including Federal-Mogul (FDML), which counts legendary investor Carl Icahn as its majority shareholder. I think it's going to be one of the market's top-performing stocks over the next few years.

Having owner-operators with a track record is critically important if you are a long-term investor. As Warren Buffett pointed out, "After 10 years on the job, a CEO whose company annually retains earnings equal to 10% of net worth will have been responsible for the deployment of more than 60% of all the capital at work in the business."

Talk about having an impact!

Buffett, too, is a big believer in what he calls "the biblical standard" (quoting Matthew 6:21: "For where your treasure is, there will your heart be also"). He wrote in his 2004 annual letter that every director of Berkshire Hathaway was a member of a family owning at least $4 million in stock. None of them acquired shares with options or grants. "Charlie [Munger] and I love such honest-to-God ownership," Buffett writes. "After all, who ever washes a rental car?"

It's a simple thing, yet nearly all the financial world's eyes focus on everything but this. By focusing on this pool of Wealth Index companies, you vastly increase your odds of success — as the table above shows.

In Moneyball, Beane succeeds because he focuses on those basic odds. "We are card counters at the blackjack table," Beane says. "And we're gonna turn the odds on the casino."

You can do the same in the stock market by limiting yourself only to companies that exhibit one of the chief characteristics of wealth creation: significant ownership by the people in charge.

www.dailywealth.com