Bottoms Up or Top Down

Bottoms Up or Top Down

Insider Action: Still Positive Despite New Highs

By Dr. Paul Price of Market Shadows

I put more faith in actual transactions with money on the line than sentiment surveys where people can say one thing while doing something else. The Thomson Reuters Insider Sell-Buy ratio has proven to be especially prescient in term of calling short-term (weeks to months) action in the broad market.

Open market corporate officer action that registers bullishly often coincides with buying opportunities. Seeing the indicator along with the corresponding movements in the S&P 500 confirms this.

Insider Sell-Buy   as of May 30, 2014

 

Company officials understand their own firms intimately and welcome chances to buy low and sell high. Individual investors often go the other way by chasing momentum stocks that have already risen sharply.

The latest filings show insider buys in mostly lesser-known names.

 

Insider Buys week of May 26, 2014

The recent insider sell list was almost all in big name stocks.

Insider sells    May 26, 2014

Logic and history say it is better to invest ‘bottoms up’ based on valuation than ‘top down’ based on macro-economic factors. Even if you knew world event in advance the stock market action is often contrary to what might be expected.

Had you been privy to last week’s negative Q1 GDP announcement ahead of schedule would you have looked for bullish action?

Bottoms Up or Top Down

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Comments

  1. Great article,
    Could you please name which source or reference can be implemented as indicator of insider buy/sell.

    directly from Reuters?

    • Dr. Paul Price says:

      Barron’s runs the Thomson-Reuters Insider Sell-Buy chart every issue in their Insider Trading column.
      It is only viewable to Barron’s subscribers.

  2. noel auerbach says:

    I agree with Doug. Using what you have shown us on how to compare a company to its historical normal, I saw the move down on Dicks because of a weak quarter and lowered guidance and was able to enter a LEAP position lower than than what the CFO and a director purchased. Thanks Dr. Price, Noel.

  3. Very, very helpful Dr. Price. And did you see the Insiders buying Dicks Sporting Goods (DKS) this week?

    This article helped to re-focus on the important things: individual company valuations and what people are really doing vs what they say. So easy for me to get distracted by b.s. meaningless screaming headlines.

    Thanks again-
    Doug

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