Insider Buy/Sales Indicator: Oct. Most Bearish In Decade
DOW JONES NEWSWIRES / Nov 6, 2003
NEW YORK -- Corporate executives bought $52 million of their companies' stock in October, the lowest level of monthly purchases since July 1995, according to Thomson Financial.
The anemic buying, combined with the $3.2 billion in sales, drove the dollar sell-buy ratio up to $59.01 in October, the highest (most bearish) reading in at least a decade, Thomson said. The company said it considers readings above $20 to indicate "very bearish" sentiment. In September, the reading was $35.93.
October was the fifth consecutive month in which buying failed to eclipse the $100 million mark, remaining well below the five-year monthly average of $173 million. The low number of executives (612) and companies (342) with insider buying confirmed the low dollar volume. Both of these indicators are approximately half their normal levels.
Last month's sales volume represented the third highest monthly level of selling since the beginning of 2001 (behind May and August's $3.5 million volumes). October's volume was an 8% increase over September's $2.8 billion.
Sector Perspective
The most notable increases in selling occurred in the three following sectors: Finance sales jumped from $380 million in September to $516 million last month (while insider buying in that space declined 45%); consumer durables sales nearly doubled to $175 million in October from $91 million in the prior month and technology insiders disposed $929 million in stock, their highest sales volume since November 2001.
The semiconductor industry highlighted the technology insider selling last month and had one of the most notable concentrations of consensus selling in the entire market. Executives took profits at such firms as Texas Instruments (TXN), Lam Research (LRCX) and Intel (INTC).
Other notable sales outside of technology included CBRL Group (CBRL), EW Scripps (SSP) and Cott Corp. (COT), where six executives took profits by selling 654,240 COT shares (total) from October 21-29 at prices in the $25-$26 range.
On the buy side, no individual sector stood out as particularly bullish during October. However, Thomson said it found buy examples at McLeodUSA (MCLD), CSX Corp. (CSX), Knight Trading Group (NITE) and Key Energy Services (KEG), where three executives - including CEO Francis John - combined to buy 32,000 KEG shares on October 31 at the $8-level.
Looking Ahead to November
Thomson said over the past decade, it has seen a slight upturn in insider selling from October to November in every year except 1993 and 1997. The middle month of each quarter typically witnesses higher sales volumes because fewer corporate trading restrictions are in place. Conversely, trading during the first month of each quarter is hindered by policies preventing trading prior to the release of the prior quarter's results. Those same policies restrict trading in the third month of a given quarter in preparation of announcing the current quarter's results. However, there is not as clearly discernible a pattern on the buy side, Thomson said.
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Some Insiders Are Finding Values
By DIMITRA DEFOTIS / Barrons / Nov 5
CORPORATE INSIDERS dialed for dollars in a big way in October.
They sold $59 in stock for every $1 they purchased -- the highest such reading in a decade, says Kevin Schwenger, an insider research analyst at Thomson Financial. In September, the insider-sales-to-purchases ratio (in dollar terms) was 35:1, way above the 15:1 it has averaged since 1998.
October was also the sixth month in a row that the dollar volume of sales was more than 20 times that of purchases, a very bearish signal. And last month's $3.1 billion in insider sales represented the third highest monthly level of selling since the beginning of 2001, while buying has fallen below $100 million for five consecutive months, a very anemic level, according to Schwenger.
Yet while many officers and directors have been taking profits throughout the market's recent rally, a much smaller number have been quietly scooping up bargains.
True, buying was "lethargic across the board" in October (a mere $52 million worth of stock in toto). But Schwenger says that over the past couple of months it's been concentrated in what used to be called Old Economy stocks -- steel, chemicals, packaged food and utilities.
Several insider experts particularly note the buying at ConAgra, Pentair and Santander Bancorp, where high-level executives, sometimes more than one, are buying simultaneously.
"There are some insiders getting behind the idea of the market recovery and making significant purchases, which is a light in the dark, even though insiders as a group are not supporting the idea," Schwenger says.<snip> |
