If you have been paying attention to the market, you know there's a low-volume rally going on led by Wall Street investors and avoided by Main Street. But did you know company insiders are also avoiding the rally? They're actually selling at unusually high rates.
Granted, corporate insiders are Main Street people too, but they tend to have significantly more involvement in the market, and their trends often coincide with institutional investors.
Insider sentiment
Insider actions are closely monitored by investors because, after all, who knows a company better than the people who work for it? When they put their own money on the line, they are expressing a belief that the company is undervalued, or at least heading in a better direction. When they sell, it is often a bearish indicator.
So you can imagine the confusion: While stock prices soar and institutions are buying up as many shares as they can, the company's own board members are jumping ship. What gives?
The data
According to MarketWatch's Mark Hulbert, corporate insiders are selling their company's stock at rates not seen since late-July, right before the U.S. government lost its triple-A credit rating and the Dow dropped 2,000 points.
"Consider a ratio calculated by Argus Research of the number of shares insiders have sold in the open market to the number that they have bought. Last week, according to the latest issue of Argus' service, the Vickers Weekly Insider Report, this sell-to-buy ratio stood at 5.77-to-1. And among insiders at companies listed on the New York Stock Exchange, this ratio was even more lopsided at 8.2-to-1."
Compare these to the numbers in November, when the sell-to-buy ratio of insiders on the open market stood at 0.81-to-1.
Business section: Investing ideas
Most insiders are probably happy they bought when they did, and so are the mimickers of insider trends. But by that logic, should investors today ignore the rally and start selling?
We decided to run a screen on company insiders that are bucking the trend.
Specifically, we screened rallying companies that are currently trading 10% above their 20-, 50-, and 200-day moving averages (MA). Then we screed for significant net insider buying in the last six months.
Corporate insiders believe in these rallies. Do you? (Click here to access free, interactive tools to analyze these ideas.)
1. Assured Guaranty: Provides credit enhancement products to the public finance, structured finance, and mortgage markets in the United States and internationally. The stock's current share price is trading 10.44% above its 20-day MA, 24.11% above its 50-day MA, and 27.57% above its 200-day MA. Over the last six months, insiders were net buyers of 3,868,970 shares, which represents about 2.41% of the company's 160.59M share float.
2. American Reprographics: Provides business-to-business document management services. The stock's current share price is trading 16.27% above its 20-day MA, 33.65% above its 50-day MA, and 20.31% above its 200-day MA. Over the last six months, insiders were net buyers of 738,539 shares, which represents about 2.32% of the company's 31.83M share float.
3. Dynavax Technologies (Nasdaq: DVAX ) : A clinical-stage biopharmaceutical company, discovers and develops novel products to prevent and treat infectious diseases. The stock's current share price is trading 11.2% above its 20-day MA, 21.16% above its 50-day MA, and 50.59% above its 200-day MA. Over the last six months, insiders were net buyers of 180,000 shares, which represents about 0.15% of the company's 118.14M share float.
4. First Bancorp (NYSE: FBP ) : Operates as the holding company for FirstBank Puerto Rico that provides a range of financial services and products to retail, commercial, and institutional clients in Puerto Rico, the United States, and the British Virgin Islands. The stock's current share price is trading 21.38% above its 20-day MA, 23.49% above its 50-day MA, and 19.04% above its 200-day MA. Over the last six months, insiders were net buyers of 1,181,944 shares, which represents about 33.02% of the company's 3.58M share float.
5. Mueller Industries: Manufactures copper, brass, plastic, and aluminum products. It operates in two segments, Plumbing & Refrigeration, and Original Equipment Manufacturers (OEM). The stock's current share price is trading 10.43% above its 20-day MA, 19.06% above its 50-day MA, and 20.59% above its 200-day MA. Over the last six months, insiders were net buyers of 6,496,626 shares, which represents about 17.31% of the company's 37.53M share float.
6. Pharmacyclics (Nasdaq: PCYC ) : Operates as a clinical-stage biopharmaceutical company focusing on developing and commercializing small-molecule drugs for the treatment of immune mediated disease and cancer. The stock's current share price is trading 10.9% above its 20-day MA, 24.04% above its 50-day MA, and 67.54% above its 200-day MA. Over the last six months, insiders were net buyers of 1,340,060 shares, which represents about 2.48% of the company's 54.11M share float.
7. QLT: Engages in the development and commercialization of therapies for the eye. The stock's current share price is trading 10.47% above its 20-day MA, 11.64% above its 50-day MA, and 10.32% above its 200-day MA. Over the last six months, insiders were net buyers of 1,655,013 shares, which represents about 5.64% of the company's 29.32M share float.
8. Radian Group (NYSE: RDN ) : Provides credit-related insurance coverage and financial services in the United States and internationally. The stock's current share price is trading 25.44% above its 20-day MA, 45.61% above its 50-day MA, and 15.8% above its 200-day MA. Over the last six months, insiders were net buyers of 311,370 shares, which represents about 0.24% of the company's 132.01M share float.
9. Sunrise Senior Living (NYSE: SRZ ) : Provides senior living services in the United States, Canada, the United Kingdom, and Germany. The stock's current share price is trading 11.46% above its 20-day MA, 28.41% above its 50-day MA, and 11.58% above its 200-day MA. Over the last six months, insiders were net buyers of 916,790 shares, which represents about 2.22% of the company's 41.33M share float.
10. Vistaprint: Operates as an online provider of marketing products and services to micro businesses worldwide. The stock's current share price is trading 19.64% above its 20-day MA, 24.03% above its 50-day MA, and 10.71% above its 200-day MA. Over the last six months, insiders were net buyers of 613,552 shares, which represents about 2.11% of the company's 29.10M share float.
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.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Insider data sourced from Yahoo! Finance, all other data sourced from Finviz.
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