Corporate insiders, including top executives, directors and large stockholders, have stopped buying their companies’ shares even as prices have rebounded from August lows, an exceedingly bearish sign at a time when many investors are bracing for a new recession, according to TrimTabs.
Citing Form 4 filings companies make with the Securities and Exchange Commission, TrimTabs said insiders bought $13 million on the five trading days ended Sept. 14, a 59 percent drop from year-to-date average daily purchases of $32 million. The latest aggregate figure is also 92 percent below the $162 million average daily buying on the five trading days between Aug. 2 and Aug. 10, TrimTabs found.
“TrimTabs regards the pullback in insider buying as a bearish sign,” the Sausalito, Calif.-based market research firm said in a press release.
“Insiders know more about their companies’ prospects than anyone else, so it is not positive that they have curtailed their buying so sharply. The huge spike in insider buying in early August coincided with a significant interim low in stock prices,” TrimTabs added.
The findings were released as the Federal Reserve meets this week to discuss what, if anything, it can do to keep the economy from slipping. A slew of factors, from S&P’s downgrade of U.S. debt on Aug. 5, signs of a widening of Europe’s debt crisis and a variety of soft economic indicators have decimated investor and consumer confidence.
Better have cash handy.