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411 - Insiders Are Bailing - Here's What It Means
The Investment U E-Letter
Saturday, February 12, 2005
[*]
Insiders Are Bailing - Here's What It Means By Dr. Steve Sjuggerud
President, Investment U
Was it a misprint? It had to be...
According to Thomson Financial, for every $1 of corporate insider buys, there were $55 of insider sells in January.
Yep, it's real. Insiders are bailing! What an extreme...
Thomson Financial said, "January's indicator is the most bearish monthly reading that we've seen over the past decade." Thomson considers it to be "very bearish" when there are $20 of sales for every dollar of buys. So the current reading is off the charts.
[align=center]What This Means[/align]
Insider buying is one of the very few signals that have worked in trying to find stocks that might outperform the stock market.
It makes sense, too. The old saying is: there are 1,000 reasons an insider might sell... but only one reason that he'll buy his stock... because he thinks the share price will go up!
The studies prove it works. Tweedy Browne, for example, shows five studies proving that buying stocks that insiders are buying beats the market (see "What Has Worked in Investing" at http://www.TweedyBrowne.com). Also Ned Davis Research has done some nice work here using data from Vickers.
From my research, insiders tend to be right, but early - as much as six to nine months early. So when we see such a massive amount of insider selling - $55 sold for every $1 bought, the highest reading in a decade - we are likely within six to nine months away from some sort of market correction.
[align=center]The Inside Strategist[/align]
This extreme reading got me interested in insider activity. So I looked to a man who focuses exclusively on insiders: Graham Summers. Graham, in addition to being particularly smart and being a fantastic guitar player, is also the editor of The Inside Strategist.
Graham actually sees some buys out there. Graham cites two insiders as particularly adept at trading their own company stock...
One man is Leonard Riggio, the top dog at Barnes & Noble. Riggio sold close to the peak three years ago, and hasn't been heard from since. Lately he's been on a buying spree - buying Barnes & Noble stock. Graham likes it up to $42 a share.
The other man Graham calls "the ultimate insider." He's Patrick Byrne of Overstock.com. Byrne bought $13 million of his own stock in February of last year, at around $20 a share. Today, the shares are around $54. And according to Graham, "Back in August of 2003, Byrne bought $4 million worth of stock. In six months, he'd made 66%."
Graham mentions Byrne in his most recent issue, but says he had been quiet lately. Quiet that is, apparently, until last week... According to Barrons, the insider who bought the most stock last week was Patrick Byrne of Overstock.com.
If Graham is right, Barnes & Noble and Overstock.com might be two stocks worth investigating...
[align=center]How I See It[/align]
I think there are two important points here... a "big picture" point and a "micro" point.
The big picture is that insiders are selling in droves and it is an ominous sign. Large amounts of insider selling preceded many market downturns... the mid-1970s, the 1987 crash, and even in 2001 we saw a large amount of insider selling (based on data from Vickers).
The "micro" picture is that corporate insiders buy heavily when their stock appears irresistible. So there is a chance that a stock with heavy insider buying could buck the trend of the overall market and rise. Something big might be coming. Whatever it is, it's worth further investigation.
I see these as separate thoughts - the market could fall, but some particular individual stocks could rise.
I wouldn't rely on insider activity alone as a buy or sell signal. But when you see heavy insider buying of an individual stock, or heavy insider selling across the board, you absolutely can't ignore its message.
[align=center][size=-2]
http://www.agora-inc.com/reports/BUL/WBULF207/[/size][/align]I just thought it was interesting - I cut out the ads, hope I didn't also take anything pertinent to the gist of the thing - grandma
411 - Insiders Are Bailing - Here's What It Means
Saturday, February 12, 2005
[*]
Insiders Are Bailing - Here's What It Means By Dr. Steve SjuggerudPresident, Investment U
Was it a misprint? It had to be...
According to Thomson Financial, for every $1 of corporate insider buys, there were $55 of insider sells in January.
Yep, it's real. Insiders are bailing! What an extreme...
Thomson Financial said, "January's indicator is the most bearish monthly reading that we've seen over the past decade." Thomson considers it to be "very bearish" when there are $20 of sales for every dollar of buys. So the current reading is off the charts.
[align=center]What This Means[/align]
Insider buying is one of the very few signals that have worked in trying to find stocks that might outperform the stock market.
It makes sense, too. The old saying is: there are 1,000 reasons an insider might sell... but only one reason that he'll buy his stock... because he thinks the share price will go up!
The studies prove it works. Tweedy Browne, for example, shows five studies proving that buying stocks that insiders are buying beats the market (see "What Has Worked in Investing" at http://www.TweedyBrowne.com). Also Ned Davis Research has done some nice work here using data from Vickers.
From my research, insiders tend to be right, but early - as much as six to nine months early. So when we see such a massive amount of insider selling - $55 sold for every $1 bought, the highest reading in a decade - we are likely within six to nine months away from some sort of market correction.
[align=center]The Inside Strategist[/align]
This extreme reading got me interested in insider activity. So I looked to a man who focuses exclusively on insiders: Graham Summers. Graham, in addition to being particularly smart and being a fantastic guitar player, is also the editor of The Inside Strategist.
Graham actually sees some buys out there. Graham cites two insiders as particularly adept at trading their own company stock...
One man is Leonard Riggio, the top dog at Barnes & Noble. Riggio sold close to the peak three years ago, and hasn't been heard from since. Lately he's been on a buying spree - buying Barnes & Noble stock. Graham likes it up to $42 a share.
The other man Graham calls "the ultimate insider." He's Patrick Byrne of Overstock.com. Byrne bought $13 million of his own stock in February of last year, at around $20 a share. Today, the shares are around $54. And according to Graham, "Back in August of 2003, Byrne bought $4 million worth of stock. In six months, he'd made 66%."
Graham mentions Byrne in his most recent issue, but says he had been quiet lately. Quiet that is, apparently, until last week... According to Barrons, the insider who bought the most stock last week was Patrick Byrne of Overstock.com.
If Graham is right, Barnes & Noble and Overstock.com might be two stocks worth investigating...
[align=center]How I See It[/align]
I think there are two important points here... a "big picture" point and a "micro" point.
The big picture is that insiders are selling in droves and it is an ominous sign. Large amounts of insider selling preceded many market downturns... the mid-1970s, the 1987 crash, and even in 2001 we saw a large amount of insider selling (based on data from Vickers).
The "micro" picture is that corporate insiders buy heavily when their stock appears irresistible. So there is a chance that a stock with heavy insider buying could buck the trend of the overall market and rise. Something big might be coming. Whatever it is, it's worth further investigation.
I see these as separate thoughts - the market could fall, but some particular individual stocks could rise.
I wouldn't rely on insider activity alone as a buy or sell signal. But when you see heavy insider buying of an individual stock, or heavy insider selling across the board, you absolutely can't ignore its message.
[align=center][size=-2]
http://www.agora-inc.com/reports/BUL/WBULF207/[/size][/align]I just thought it was interesting - I cut out the ads, hope I didn't also take anything pertinent to the gist of the thing - grandma
