Tuesday, September 21, 2010

Sep 21: Are Insiders Buying Or Selling?

The 'markets' are hot yes?

Here's the chart of S&P 500.

Yes, the market is clearly moving much higher. Yes, the good times are back or what!!!

But then... the glaring thing of course is the utter lack of volume. Volume means market participation and volume is less than 4B! And mind you traded volume of around 4B is already utter dismal. Yeah, it's the market broken or dead?

And then we have seen the incredible amount of money redeemed from equity mutual fund investors.

And last week, posted last Tuesday: Are Insiders Buying Or Selling?

We have Bloomberg publishing the list of S&P corporate insiders disposing their shares. The total amount of shares disposed totally dominates the amount of corporate insiders buying shares.

Which begs the questions to be asked, 'If the markets are really so hot, why are the insiders selling their shares like plaque? Why are mutual fund equity investors fleeing the stock markets? Surely they can tell that the market is hot, right? So why the disposals?'

If things are getting better then why are these insiders, who probably are more privy to the information regarding the health of their business, disposing their shares?

Anyway, here's the latest update: Weekly Insider Buying and Selling by S&P 500 Companies. ( Before you click the link or read the below, have a guess. Markets are 'so hot', what do you think the insiders are doing? Are they buying or are they selling?)

The buyers...

Yeah... that's all.

The sellers...

Well as per Bloomberg data, the SP 500 Insider Buyers purchased some 1.4 million worth of shares. The SP 500 Insider Sellers disposed some 411 million worth of shares.

How do yo want to interpret this?

Let's look at the list of sellers.

Top of the list is Heinz. Some 75.8 Million worth of shares were disposed by insiders!

Amazingly, Heniz is a featured BUY stock ( LOL!) from the Street.com (LOL! LOL! )


  • Shares of Heinz have managed to trade above some heavy overhead resistance at around $47 a share. This overhead resistance level is very important, because since March the stock has failed to take it out to the upside. Investors are now going to want to watch to see if volume can continue to expand above the three-month average daily volume of 2.5 million shares. Follow through volume that is greater than the previous trading session is exactly what is happening here on Heinz. That is bullish action for any stock.
    >>>Top-Rated Food Product Stocks
    If this breakout can hold above $47, then this stock could be setting up to test the next key area of overhead resistance at around $50 to $52 a share. However, if I was long Heinz, I would not want to see the stock come back and close under $47 on heavy volume. A move like that would have me cautious on on the shares in the near term.

Here's data on Heinz: http://www.finviz.com/quote.ashx?t=HNZ&b=2

Current PE of 16.33 and a Forward PE of 14.42.

And here's the Heinz insiders who are selling..

Then we have Google.


The recommendations from the Street on Google.

Doesn't look too 'shabby' or 'bad' yes?

Most rate Google above 600. :D

And Google last traded at ONLY 508.28.

But... the insiders.... thinks otherwise. (ps the list is rather so long so I only show since Aug)

Then we have Starbucks.


Current PE 24.56, Forward PE 18.38.

Recent calls from the Street reckons that the stock should be worth around 30 bucks at least.

And what does the Insiders reckon they should do?

Apparently, even Howard Schultz, the Chairman and President, reckons that it's a wonderful time to exercise their options and dispose (or issit dump) them onto the market! (ps: did you see that the bulk of his options cost was only 10.09! And he disposed them at around 25 bucks! hey world, corporate America, the system works! Reward the rich, screw the poor! )

So the top 3 disposals from insiders.

Consider the industry/sector of their business.

And they are disposing!


Of course... they could all be wrong in disposing their shares but what if they are correct?


bonny b said...

Not worry too much. Money is cheap...please borrow some and make more money. That's how the S&P is kept higher and higher. Our property market is same too. Another bubble to cover the last, until there is no more cheap money. Till then the music goes on...

Moolah said...

Money is cheap...
Market is cheap...
Property is cheap...
Fish is cheap...

What else is cheap?

Oh.. talk is cheapest cos supply is always more than demand!



Big Sea said...


While your research shows that insiders is selling much much more than buying, it could be that insiders are always selling because they are awarded the share as some sort of benefits/compensation.

Take WDC as example. The only one insider purchase is at January 2005 for a mere 5,000 share. In between 2005 to 2010 however,

WDC grows revenue from 4 Billion to 9 Billion
Net profit increase from 0.8 Billion to 2.4 Billion
Accumulated around 2 Billion of cash.

Along the ways there are some strategic achievement which allowed WDC to beat the hell out of Hitachi and Seagate.


For the case of WDC, insider activities is certainly not a good gauge of the companies' performance, both in business and stock.

Moolah said...

Big Sea: Let me clarify. It's NOT MY research! I am merely commenting on weekly summary posted by Bloomberg News.

Yes, I do agree with what you are saying. That's one valid reason why some insiders dumps their share.

However, don't you find it strange that insiders from so many SP 500 companies (98 to be precise) decides to dump their shares last week, more so when the markets are clearly moving higher?

Same thing the previous week.

Which makes me ask why? The markets are clearly moving higher. Why the rush to sell?

ps: err.. why WDC example? WDC had NO insider sales for Sep 2010 and in fact it had only a couple of insider sale this year.

Big Sea said...


WDC because I work there !

bonny b said...

Sob, sob...alas..fish is NOT cheap. Wish it were, but seas getting scraped clean..now can only afford small fish fries. Sigh...

Moolah said...

Fish also got cheap fish mah. :P

Ikan bilis so NOT cheap meh?

bonny b said...

Dear Moo,
Seems u r not one who buys groceries like me, who also happen to be among the many who need to count their pennies. ACE counters are cheap. Ikan bilis is NOT cheap anymore.
In spite of all the indications of insiders not wanting to hold more shares, prices have been rising. It indicates that markets are dictated by the few big bulls(or bullies)who dominate international finance. We, the real ikan bilis, have to be mindful which direction these bulls are charging...or else get trampled. BTW, the small cleaner wrasse always can make a meal of the big fish.

Moolah said...

damn! damn! triple damn!

last I heard... ikan bilis... was some sort of exotic deep fried fish which goes rather well with our nasi lemak.

ACE fish swim what water?

bonny b said...

Share this tot with u..
" “I am also troubled that we didn’t get the value out of this crisis that we should have. The Great Depression led us to a generation—or even two generations—of changed behavior. I grew up hearing about how our grandparents had a “depression mentality.” It’s awful to have a depression, but it’s a great thing to have a depression mentality because it means that we are not speculating, we are not living beyond our means, we don’t quit our job to take a big risk because we know we might not get another job. There is something stable about a country, a society built on those values.
In some sense, from the recent crisis we have developed a “really bad couple of weeks” mentality, and that’s not enough to tide us through, teach us to avoid future bubbles, and ensure a strong recovery.”"..Seth Klarman as quoted in TPC.
Perhaps, it helps us understand the present market movements??

Moolah said...

ps: I always believe that to fix a problem we need to fix the fundamental issues that's causing the problem.

And here we are... oh... it's Sep 2010 alreay... have THEY done anything to fix the fundamental issues that caused the crisis in the first place?

ps: yesterday's gmac was having a fun time in the sun eh?