TrimTabs: Insider Buying Is Collapsing

September 21, 2011

Insiders have curtailed their buying in a big way, and that can’t be good, TrimTabs says.

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.

Analysts and economists have been raising the odds that the U.S. economy may slip back into recession after the mortgage-debt-related financial crisis of 2008.

The collapse of Lehman Brothers three years ago was the catalyst that brought global credit markets to a halt and pushed the U.S. economy into what has come to be regarded as its worst downturn since the 1930s.

Some fear Europe’s debt crisis could end up pushing some banks with a fair amount of eurozone sovereign debt on their books to the brink of insolvency, should countries such as Greece begin to default on their obligations.

French banks in particular are viewed as vulnerable, though the French government has pledged to do everything in its power to prevent a Lehman Brothers-like collapse of any of its financial institutions.

The Fed meeting ends on Wednesday, Sept. 21, and any announcement it makes will become public during regular business hours for U.S. stock markets.



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