(Bloomberg) – The shares of American companies rose this week to a record, in which they apparently shake off concerns about rates, immigration and inflation. Nevertheless, business leaders do something that is definitely less bullish: they sell their shares at a rapid pace.
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A indicator of insider sentiment that reflects the number of buyers versus sellers, shows that there were only 98 companies where at least one insider bought the shares of the company this month until January 22, compared to 447, with at least one insider sold, according to collected data. by the Washington service. With a little more than a commercial week to go in January, that purchase sale ratio with 0.22 is currently on track to be the lowest in the figures that go back to 1988.
This amount of sales generally does not give confidence among investors, because it indicates that business leaders who lead the companies are not convinced about their own shares. Nevertheless, such signals must be taken with a pinch of salt, since there are many factors that can lead to a sale, including the general market performance, the share value and the personal reasons of the managers.
Apart from a natural season pattern in the pattern of prior knowledge, these were this time concentrated in the large technology companies that achieved huge profits in 2023 and 2024, says Mark Hackett, main market strategist at Nationwide.
“After a huge run of two years in shares, especially in the area where the majority of sales takes place, it is normal that there is an increase in sales,” said Hackett. “It is important to pay attention, because this can indicate a decreasing confidence in the risk/revenue profile of the group of shares with high valuations; It is important not to respond because this can be part of risk management and possibly not reflect no lack of trust. ”
This explains why another series of data helps to paint a more complete picture of the sentiment that companies have for their own shares: the repurchase of corporate bonds.
Data from Birinyi Associates show that the return before January are at the strongest level since at least 1999. Large American companies, including General Electric Co., Citigroup Inc. and Netflix Inc. have announced plans to buy back shares this month.
According to Jeff Rubin, head of research by Birinyi, American companies have announced more than 48 billion dollars up to and including January 22, with which they are on their way to the strongest January since 1999, understood that the data reached.
Moreover, a large part of the American companies is currently in a black out period for the purchase of shares, given the ongoing reporting season for the fourth quarter. However, this usually does not change the Insider Buy-Sell ratio of the company, according to Washington Service.
“There is often a big difference between insider activities and business activities, even though the same people make the decisions about both,” says Matt Maley, main market strategist at Miller Tabak + Co. Returning companies can also be Beerarish, given the theory. That self -confident management would usually prefer to invest in the company again and grow it, instead of giving money back to investors, he said.
“However, when an insider decides to sell shares, that is rarely a good sign,” he added.
The stock market is currently in a strange moment. On the one hand, the stock indexes to new highs are rising with optimism that inflation is on the right track and that the Federal Reserve can continue to lower interest rates. Yet there are major risks due to possible rates wars, massive deportation efforts and uncertain geopolitics, all of which have the power to push the prices up again.
The ratings, especially those of technology companies, also rise high, so that many are worried about how much power is left in the current rally.
For the time being, however, investors choose to concentrate on the positive points. On Thursday, the S&P 500 index closed at a record level, and after years of being led by the tech giants, more and more shares in the benchmark are also taking part in the higher march. Market professionals expect this to continue to improve this year.
Nevertheless, the large number of insiders of companies that sell shares can give reason to care, because they have been a good track record for years in providing early insight into the direction of the market. The Insider Buy-Sell ratio had risen in August 2015 and at the end of 2018, with the first one preceding a market base and coincided with the last one. In March 2020, the purchases of company insiders were right to form the low point of a Bearmarket route.
“The growth in the number of buying back could be more a secular trend,” says Steve Sosnick, main strategist at Interactive Brokers, and notes that the more shares -based rewards become more popular for employees, much of the returns are meant to compensate that destruction . Buying back are also an instrument to keep stock prices high, he added.
“Selling with prior knowledge, however, seems to me to be the more bearish data point,” Sosnick added.