Alan Abelson notes this in this week’s Barrons that the top 8 stocks in the POWERSHARES QQQ exchange-traded fund for the Nasdaq 100 — better known as just “The Qs” (QQQQ) — have seen some insider selling.
Abelson specifically notes Alan Newman’s CrossCurrents advisory letter: Newman’s survey of insider transactions in the top eight issues in the ETF performed on May 10 discovered sometihng rather astounding:
“There were 231 sellers and three buyers, which works out to a somewhat lopsided ratio of 77 to 1. All told, the insiders sold 59.8 million shares and purchased 15,200 shares, a sell/buy ratio of 3,933 to l. Not exactly a resounding vote of confidence in the prospects for their companies.
Moreover, Alan notes, analysts are just as positive on the QQQ leaders as they were back in March 2008 before a 37% fall in price. At that time, 74.1% of the recommendations were Buys and 2.9% were Sells. As of May 10, 2010, 77.7% were Buys and 3.6% Sells. The more things change, we guess, the more things stay the same, especially on Wall Street.
Insiders are hardly infalliable investors and, as Alan observes, their investment habits are not a timing indicator. Still, they do tend to know a bit more about the company and its outlook than the analysts or the folks buying the stocks they’re so determinedly selling.
What this says about valuation, the market, or the recovery is up for debate. But its certainly worth thinking about . . .
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Source: Orgy of Speculation ALAN ABELSON Barron’s, May 29, 2010 http://online.barrons.com/article/SB127508647370598505.html
BR considered:
What this says about valuation, the market, or the recovery is up for debate. But its certainly worth thinking about . . .
reply: ———- Those executives couldn’t know more than stock touts who work for investment companies or CNBC guests. This must be another flaming example of “Executive Stupid”. It’s the patriotic duty of all residents of the US and Earth to tithe at least 15% of their wages into the market. Each should use as an investment adviser the personality they like the most as that person is going to be the most right. Prominent analysts project high earnings this year which should translate to even higher market levels. Who are you going to believe, those lying executives or your friends on Wall Street?
Personally I’ve stepped up selling my company stock into 2010 that I might have done in 2011 or later due to unknown tax rates, tax treatments, etc. Almost every FA out there is telling clients roughly the same thing – e.g. consider accelerating selling company shares, ISOs, NSOs, etc., into 2010 unless you really have the conviction that you’ll make enough in follow-on years to come out ahead vs. the additional taxes / rates. I’m sure I’m not alone…
That was a report on 10th. May. Look what happened in the interim.
If those insiders were looking for a short-term play, they made a lot of money in the latter part of the month. Sometimes, timing and duration are essential to observation and reporting. If the insiders have yet to sell since they rebought on about 20th. or 24th., they’re in profit to the tune of about 4% to 5%.
Perhaps they’re even more astute than the article implies….
Nice insight on this insiders dumping EWall. Regardless even of taxes, I believe this move tells us that insiders (and advisors) regard huge risk on the downside as far outweighing some eventual upside benefits.
Let’s say we’re due for another leg up. Where shall this bring us? SPX1350 is very optimistic, and even if we reach this, that’s “only” 25% up. I’m guessing no one honestly believes that we can move past this mark, at least not this year. Call it trading range at best.
And that’s for the very best case scenario. (just my not so knowledgeable opinion though)
@Trevor: I believe the term “insider” refers to the highest executives in the given companies. Therefore, that also means they can’t have short term positions. No possibility to catch short term moves.
What it says? It’s obviously imperfect, but it says a lot of insiders don’t have faith in the “recovery.” After all, if the economy was on the way to greater heights there would be no need to sell right now. You wouldn’t want to miss out on substantial future gains.
The main news here for is that smart money is getting nervous about its short positions. Or do you think news with any value get spread for the public good? If there is no significant pullback of the stock markets soon, we might see some massive short covering. Hard to believe, but one shouldn’t let believe influence the trading decisions.
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Australia+40%25+Mining+Tax
as a single, add’l, ex., coupled with Ewall’s point, above, gets back to the idea that “Political Risk” will be a growing concern going fwd..
to “flashback”..
“Robert Higgs on Jan 4, 2010 "Writing in today's Wall Street Journal, Gary S. Becker, Steven J. Davis, and Kevin M. Murphy discuss how the government's multifaceted efforts to "reform" health care, energy and environmental controls, financial regulation, taxation, monetary policy-making, and various other aspects of the politico-economic order have created such great uncertainty that business people are reluctant to invest or to hire new workers, and therefore recovery from the present recession, to the extent that it is occurring at all, is proceeding unusually slowly. As I read this article, I nodded yes "¦ yes "¦ yes "¦ they are talking about regime uncertainty, all right"¦" ""¦Before I could write anything about the WSJ article, however, Brooks Wilson wrote a nice post about it at his blog, which I recommend. Wilson has artfully combined my crisis hypothesis on the growth of government with my regime-uncertainty argument to produce what he calls "the crisis paradox" "” "crisis is the best time politically and worst time economically to enact fundamental economic reform." Indeed. But, of course, that is precisely how things tend to happen, making political entrepreneurship the mortal enemy of economic prosperity"¦" http://www.independent.org/blog/?p=4646
regime uncertainty~political risk
an unpopular topic, to be sure, one, exacerbated by 44's reign. http://www.ritholtz.com/blog/2010/03/nyt-john-dugan-is-a-bank-tool/
"There were 231 sellers and three buyers, which works out to a somewhat lopsided ratio of 77 to 1. ”
Insiders have far better information than we do. Though convention states insider selling isn’t necessarily a negative sign, a lopsided ratio of this magnitude is impossible to ignore.
Happy Memorial Day to all our American friends.
The Greek
Probably there are some people who will take their capital gains this year rather than risk a higher tax rate on it next year. Rational people would look at a 5% tax as equivalent to a similar market value loss and not sell to beat taxes if they think we are in a 10% dip – but many people don't act rational relative to taxes. But if they think we are close to the top then they may consider tax savings as extra gravy. I have always been surprised how often the insiders are not selling at the top – you would think they had the ability to get an almost perfect record, yet they are not much better than everybody else.
I noticed this quite a while back, when some of Apple senior staff were noted to be unloading shares, and when I investigated further, it turned out that practically ALL of their senior execs were unloading shares, and not just cashing in their stock options, they were unloading ALL their stock holdings in AAPL (Steve Jobs being the noteworthy exception).
At the time I was concerned that this might portend a less-that-rosy future for that company’s business, but after more than a little investigation, I became convinced that they were instead opting to take as much as they could under 2010 capital gains rates, due to the expectation of future hefty taxes on the well-to-do (the Willie Sutton principle in play).
The only thing that bothers me is that I can’t figure out where that money is going … my best guess being Caribbean tax havens or Swiss bank accounts (which remain well-guarded by Phil Gramm, despite a token 50 grand of tax cheats being given up to make it look like they have come clean). Or maybe they’re stockpiling bars of bullion, I dunno. Somehow I doubt that all that money is piling into California munis.
Perhaps it is going into FusionIQ.
@constantnormal: don’t you make a case on AAPL alone. same goes for other examples here. When many different execs from different companies have began unloading their stuff, I believe we can objectively believe that they’re not very trusting into what’s coming next. Taxes or not.
As of Barrons insiders survey is going, been watching this link : http://online.barrons.com/public/page/9_0210-instrans.html
From time to time. As of june2010, doesn’t seem that much bearish ?:p
How can this be meaningful without some sort of comparison? What’s the normal insider sell/buy ratio for these particular stocks? At what point is the ratio significant based on historical comparison of price action in these particular stocks? Where’s the context?
Are we seeing early boomer execs, 2 to 5 years from retirement, who have way too much exposure to their employer (good though it might be) doing some rebalancing? Plus the 2010 tax issue.
“. . .and, as Alan observes, their investment habits are not a timing indicator.”
Just thought I’d throw that in since, curiously, it seems to negate the whole point of the article.
I thought that most insiders got their shares thru options and routine compensation, so exactly why would they buy more? Then there’s the issue of buying on insider information which might inhibit their purchases as well.
Nothing to see here, move along. . .
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"Law professors were never like economics professors," a Harvard Law professor told me. "If you disagreed with someone, you didn't call him a fool." "”Calvin Trillin, "Harvard Law," The New Yorker, March 26, 1984, p. 54.
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