Though the market is coming off its best quarter in 13 years, retail investors remain on the sidelines. An understandable reaction, given the market's extreme volatility over the past couple of years, and no end to the jobs and housing crises in sight.
"While stocks surged, retail investors took money out and hedge funds plowed in, posting their biggest inflows ever in March while equity mutual funds broke a two-month streak of positive flows," writes Jeff Cox at CNBC. Another trend intensified: On up days, market volume was weak -- often less than a billion shares a day on the New York Stock Exchange -- while down days saw significantly greater conviction as investors sought safety and the so-called "risk-off" trade.
"It all amounts to a pretty resounding no-confidence vote in a market that nonetheless has nearly doubled the cycle lows it saw in the dour days of March 2009," concludes Cox.
But what's surprising is the market's behavior in the face of this investor exodus -- if individuals aren't investing, then why does the market continue to climb?
One likely explanation: the meddling Fed's Treasury-buying programs. Here's how it works: The Fed purchases Treasury Bills, aka, government bonds, from financial institutions on the open market. The idea is that banks and institutional investors, now flush with cash, will then go out and buy riskier assets than T-Bills, i.e., stocks, thereby spurring liquidity. And since the Fed owns the printing presses, it has an infinite supply of money to pour into a flailing economy.
But here's the rub: For one, you run the risk of devaluing the dollar. And two, the market has pretty much come to not only expect, but rely on these supportive measures from the government.
How long the market will continue to rally is anyone's guess. What we want to know is, which rebounding stocks are being fueled by retail buying? That data is tough to find -- so we're taking our cues from the trades of company insiders. At the end of the day, they're also retail investors; and if they're using their own money to buy company stock, it's a good sign that the momentum may continue.
These insiders seem to think that the rebounds in their employer's stock is sustainable -- do you? Insider trading data sourced from AOL Money, performance data sourced from Finviz. (Click here to access free, interactive tools to analyze these ideas.)
1. Echo Global Logistics (Nasdaq: ECHO ) : The company's price declined from $12.69 to $12.04 in 2010, a price return of -5.12%. By contrast, the stock has gained 13.87% in 2011. Over the last six months, insiders purchased net 202,262 shares, which represents about 1.65% of the company's float of 12.23M shares.
2. Capital Bank (Nasdaq: CBKN ) : The company's price declined from $3.866 to $2.49 in 2010, a price return of -35.59%. By contrast, the stock has gained 63.86% in 2011. Over the last six months, insiders purchased net 99,652 shares, which represents about 0.73% of the company's float of 13.62M shares.
3. Icahn Enterprises (NYSE: IEP ) : The company's price declined from $39.95 to $35.26 in 2010, a price return of -11.74%. By contrast, the stock has gained 16.76% in 2011. Over the last six months, insiders purchased net 27,000 shares, which represents about 0.43% of the company's float of 6.27M shares.
4. SandRidge Energy (NYSE: SD ) : The company's price declined from $9.43 to $7.32 in 2010, a price return of -22.38%. By contrast, the stock has gained 62.57% in 2011. Over the last six months, insiders purchased net 1,369,450 shares, which represents about 0.41% of the company's float of 335.95M shares.
5. Medivation (Nasdaq: MDVN ) : The company's price declined from $37.65 to $15.17 in 2010, a price return of -59.71%. By contrast, the stock has gained 46.61% in 2011. Over the last six months, insiders purchased net 87,515 shares, which represents about 0.39% of the company's float of 22.21M shares.
6. Cenveo (NYSE: CVO ) : The company's price declined from $8.75 to $5.34 in 2010, a price return of -38.97%. By contrast, the stock has gained 18.91% in 2011. Over the last six months, insiders purchased net 125,366 shares, which represents about 0.24% of the company's float of 51.26M shares.
7. AMN Healthcare Services (NYSE: AHS ) : The company's price declined from $9.06 to $6.14 in 2010, a price return of -32.23%. By contrast, the stock has gained 29.8% in 2011. Over the last six months, insiders purchased net 65,500 shares, which represents about 0.17% of the company's float of 37.45M shares.
8. China Medical Technologies (Nasdaq: CMED ) : The company's price declined from $14.05 to $11.24 in 2010, a price return of -20.0%. By contrast, the stock has gained 11.79% in 2011. Over the last six months, insiders purchased net 16,700 shares, which represents about 0.11% of the company's float of 15.83M shares.
9. Leap Wireless International (Nasdaq: LEAP ) : The company's price declined from $17.55 to $12.26 in 2010, a price return of -30.14%. By contrast, the stock has gained 30.42% in 2011. Over the last six months, insiders purchased net 40,000 shares, which represents about 0.06% of the company's float of 61.78M shares.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.
Kapitall's Eben Esterhuizen does not own shares of any companies mentioned.
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