6 Weeks of Manic-Depressive Insider Trading Action

Bottoms Up is the Way to Go

By Dr. Paul Price of Market Shadows

Even corporate insiders have been indecisive over the last six weeks as world events and market sentiment shifted rapidly. The Thomson Reuters Insider Sell-Buy ratio has been pretty accurate during that period and over the full year ended June 27, 2104.

Bullish signals have been more reliable than bearish ones, which have registered false negatives on occasion. Transactions by corporate officers and directors can be taken seriously as real money is on the line rather than simply answers to a sentiment poll, which may be suspect as to methodology and/or accuracy. (Also, there are many reasons insiders sell large amounts of stocks, but only one reason insiders buy large positions — they think the stock will go higher. Buying is a stronger indicator than selling.)

Note: The chart below is for the week ended June 27, 2014, but the red line shows as carrying into July. That error is from the source, Thomson Reuters. Hopefully it will be corrected before next week’s update.

Insider Sell-Buy  Jun. 27, 2014

Does the recent swing to bearish levels mean you shouldn’t be buying stocks right now? No, but it suggests more stringent standards for identifying bargains. This is not the time for indiscriminate deployment of cash. (Not that it’s ever a great time for indiscriminate deployment of cash. 🙂

Companies like Bed, Bath & Beyond (BBBY), Panera Bread (PNRA), Con Agra (CAG), Valmont Industries (VMI) and Kelly Services (KELYA) traded far enough below normal valuations to temp me into buying, or adding to my personal holdings last week.

Making buy and sell decisions on specific company fundamentals is usually a better way to go than simply moving into or out of cash due to general market conditions.

Market Shadows’ Virtual Value Portfolio managed to hit a new all-time peak on June 27, 2014, despite all the mixed messages which have been floating around.

VVP performance  Jun. 27, 2014

 

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Comments

  1. Thanks a lot.

  2. Sergio Cruz says:

    Hello, I have access to the chart by this open link:
    http://online.barrons.com/public/page/9_0210-instrans.html

  3. Dr. Price

    Thank you always for sharing priceless experience and knowledge.

    The insider transactions ratio chart. Is there a website I could go and view the chart ? I see the source is Thomson Reuters but I could not find the chart. Thanks.

    • Dr. Paul Price says:

      It is a paid (subscription) feature that is available each week on Barrons.com and in the physical Barrons issue which hits newsstands each Saturday morning.

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