Insiders are now starting to sell shares

They caught the market low exactly in March and have earned brilliantly since then. Now the company insiders get out.

With US stocks soaring to the most expensive level in two decades, executives at companies benefiting from the rally are starting to get nervous. The business insiders in particular, who correctly predicted the market low with their purchases in March, are now mostly sellers. Almost 1,000 board members and company executives sold shares of their own companies this month. The number of sellers exceeds the number of buyers by five to one, as data compiled by the Washington Service financial information service shows. There has only been an even higher rate in the past three decades.

Data from the information platform InsiderInsights.com show a similar trend. In the past four weeks, the number of companies with insider sales was 186 percent higher than that of companies with purchases. It is nearing the 200 percent mark that has tended to mark short-term market peaks in the past decade, says Jonathan Moreland of InsiderInsights.com.

The rise follows a recovery in stocks from the bear market sell-off and an almost unprecedented rally. After technology stocks peaked despite the pandemic and recession, some executives are now selling stocks.

Some analysts warn against interpreting too much into insider sales. However, similar increases had preceded price losses this year and in 2018. “I would not say that everyone should sell everything and shorten the market now because of the latest insider data. But the signal gives me a better feeling when I sell some of my winners, ”explains Moreland.

Managers were one of the few groups who dared to bargain during the March market downturn. When stocks crashed into the fastest bear market ever, insider buying was the most dynamic in nine years. In contrast, less than 200 company insiders bought shares in July, compared to a total monthly average of 1160 in the first half of this year, according to data from Washington Service.

“If the market is as close to all-time highs as it is now, it looks as if the insiders are not convinced of this level of the market,” said Robert Pavlik, portfolio manager at SlateStone Wealth. “That can be true, but you cannot know for sure.” Bloomberg / est

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