Insiders bail on stock market after earnings – CNBC.com
Brendan McDermid | Reuters
Traders on the floor of the New York Stock Exchange.
Insider selling jumped in the last week as executives looked to cash in on their companies after earnings came out.
Vickers Stock Research’s “Total Eight-Week Sell/Buy” ratio, a comprehensive tracking of executive buying and selling, increased in the last week, with more than three sales for every purchase. To be exact, the ratio climbed to 3.29 from 2.94 seven days earlier.
Under 2-to-1 is considered bullish. But above 2.5 sales-to-purchases is considered a negative signal for the market, according to Vickers. Because automatic sale plans cause insider selling to always outnumber buying, it is difficult to translate insider action into a market signal. Vickers does that by tracking the ratio over time and seeing which level of selling-to-buying has foretold past market declines.
Stock purchases by company executives indicate that “short-term insider sentiment has fallen back into bearish territory,” the report said.
The figures are even more bearish when looking just at insider action over the last week with almost four sales for every purchase.
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According to the report, companies with the most inside sales included specialty pharmaceuticals company Mylan (2.2 million shares), which reports earnings later this month, Best Buy (1.2 million) and semiconductor firm PMC Sierra (640,000).
There were some bright spots, however. Analyst David Coleman highlighted significant moves in the last few weeks for four companies that reported earnings at the end of January.
Executives bought a total of 42,000 shares of AK Steel Holding, which is expected to post a profit in the next two years, but a decline in revenue in 2016.
Insiders bought about 27,000 shares of home builder Beazer Homes USA when the stock fell to $14.50, just above the 52-week low.
Between Jan. 23 and Feb. 2, insiders bought about 24,000 shares of Southwest Bancorp. Four insiders at specialty chemicals company Rayonier Advanced Materials bought at total of 25,000 shares.
Companies with the most inside buys included medical technology company Entellus Medical (1 million), which announced the closing of its initial public offering on Feb. 3. Other names topping inside buys were natural gas and oil extraction company Atlas Energy (290,000), which reports earnings later this month, and supply chain management service firm Modus Link Global Solutions (216,000), the report said.
As of Tuesday, just 39 of the S&P 500 firms have both beaten expectations for the last quarter and raised forecasts for the current quarter, according to The Earnings Scout. This could explain executives’ bearish actions.
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The SEC bars insider buys and sales around earnings results to stop execs from using the information they know to make short-term gains.Therefore, with earnings season winding down, Tuesday’s report from Vickers is the first viable read on insider action in a month.
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Insiders bail on stock market after earnings – CNBC.com
