Insider Buying and Selling

I am dismayed by the lack of animal spirits. We are now three weeks into the earnings season and I see no pick up in insider buying. In fact, there is a substantial drop in buying.  Insiders find ways to sell with their so-called “planned sales” which in reality is just a legal loophole around the SEC restrictions on insider selling during earnings blackout periods.

Buys

There were no buys last week of any interest.  10% shareholders adjust their holdings but there were no significant buys by directors and officers of any companies.

Sales

There were sales and option exercises but nothing that stood out to us as meaningful.

In this report, we examined open market purchases from employees and directors. . Insiders sell stock for many reasons, but they generally buy for just one – to make money.  As a standard, we only look at material amounts of money, $200 thousand or more, as anything less could just be window dressing. The bar is different from selling because the natural state of management is to be sellers. This is because most companies provide significant amounts of management compensation packages as stock. Therefore, with selling, we analyze for unusual patterns, such as insiders selling 25 percent or more of their holdings or multiple insiders selling near 52-week lows. Another red flag is large planned sale programs that start without warning. We generally ignore 10 percent shareholders as they tend to be OPM (other people’s money) and not the SMART money we are trying to go to school on.  Although this info is available for free from the SEC’s Web site, Edgar, we subscribe to the Washington Service as they provide a way to manage and make sense of the vast realms of data.
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