For the first time in at least 10 years, there is more insider buying than insider selling on Wall Street.
Last week, company insiders purchased an aggregate $682.8 million in stock as the market sold off, according to InsideArbitrage. That buying was up from just $278.6 million in the previous week and outpaced total insider selling of $668.5 million.
While insider buying may seem like a bullish signal on the surface, InsiderArbitrage founder Asif Suria said Sunday that Wall Street insiders tend to be overly optimistic when it comes to their own companies.
“We have been bearish for several weeks now and have written about showing restraint despite the insiders stepping up their insider buying because insiders as a group generally tend to be optimistic about their own companies, sometime buy to ‘signal’ the market and like value investors often tend to be early,” Suria said.
Top Insider Buying Stocks
InsiderArbitrage found the most insider buying among bank stocks, followed by oil & gas stocks and capital markets stocks.
The top five insider purchases of the week are included below:
- American Homes 4 Rent (NYSE: AMH)
- Mohawk Industries, Inc. (NYSE: MHK)
- Energy Transfer LP Unit (NYSE: ET)
- Encompass Health Corp (NYSE: EHC)
- Kinder Morgan Inc (NYSE: KMI)
Company insiders whose compensation includes shares of stock can’t be faulted for selling those shares and raising cash periodically. However, traders tend to pay much more attention to insider buying because executives are going out of their way to put their own money at risk.
Investors and traders should be careful in attempting to time the coronavirus market bottom. It’s nearly impossible to time the bottom, so investors looking to buy the dip should be patient or even consider taking positions in increments as the market falls.
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