Corporate Insiders In Buying Frenzy
Published November 24th, 2008 in Canadian Markets, Trading, REITs, Natural Resources Tags: bear market, buy sell ratio, canadian insider, corporate insiders, esop, gold, HUI, ink research, insiders, insiderscore, k ratio, precious metals, REI.un, REIT, riocan.As the market races to the bottom, corporate insiders are racing right along buying with both hands. For the past four weeks, insider activity as monitored by InsiderScore, corporate executives and board members have been in what can only be described as a buying frenzy.
According to InsiderScore, “insiders are more bullish now than at any time since the two weeks immediately following the Black Monday market crash of October 1987“:
Source: InsiderScore.com and SentimenTrader.com
I checked with a similar service that tracks Canadian stocks: Canadian Insider and not surprisingly, the Canadian market is showing a similar pattern of insider buying.
The pattern was especially noticeable for Canadian REITs. And I’m not referring to ESOP where there is a preset schedule. REIT insiders are going out into the market and buying of their own volition. RioCan REIT, which I mentioned a few days ago, had 11,440 units purchased just on November 19th and November 20th, as an example.
The same can’t be said about precious metal stocks. For example, Barrick (ABX) and NovaGold (NG) do not show any buying interest from corporate insiders. If anything, there is a slight bias of selling. Which means that while insiders as a group are very bullish, they are still being selective. The k-ratio fell to 0.23 and has rebounded with Friday’s move in gold. That’s getting close to an attractive level for gold stocks, but if we are headed for a deflationary spiral, gold doesn’t stand a chance. But so far, the Philadelphia Gold Bugs Index (HUI) has bounced off the 175 level which I mentioned would act as support.
There’s Always a But…
A caveat to consider: in September 2007 insiders were enthusiastic buyers. Although not nearly as now. That uptick in buying was, of course, not very profitable since most stocks topped out shortly afterward. The question now is, does today’s frenzy mean that insiders see real value or will we simply see the market fall more and insiders get even more excited about buying?
Whatever the answer to that, the solace that the current buying pattern does provide is that insiders are not selling. The worst possible scenario after all, would be to see the “smart money” insiders bail out after the market’s face melting 50%+ decline.
bear market, buy sell ratio, canadian insider, corporate insiders, esop, gold, HUI, ink research, insiders, insiderscore, k ratio, precious metals, REI.un, REIT, riocan
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Excellent chart — I had not been aware of this. I will point out that this is the fourth spike down in the last year and a half, meaning that insiders had incorrectly called the bottom three times in the recent past. Fourth time is the charm, perhaps.
Ted, what we are seeing is a 100 year flood type situation because before, when insiders would step up buying at a certain level, it would coincide with a market bottom, but as you point out, that didn’t happen for the last 3 times.
Insiders appear to be wrong so far. Look at REI_un for example. It has fallen. And ABX? It’s near its 2008 high!