Trade Like An Insider
When insiders start dumping their stock… you better pay attention.
TrimTabs reports: “As corporate buying is at least taking a breather, corporate insiders are ramping up share selling as the major U.S. stock market averages are at or near record highs.”
Insiders sell company stock for many reasons: to raise money to pay big tax bills, costly divorce settlements, buying French chateaus or simply to diversify their overly concentrated portfolio.
That’s why insider selling isn’t an automatic red flag, but when the volume of insider selling skyrockets… it is time to get worried.
In August, corporate insiders sold $450 million worth of stock each and every day. This totaled a whopping $10 billion for the month: the largest amount of insider selling this year and close to an all-time near record.
The selling wave continued in September, with an average of $400 million per day. TrimTabs reported insiders sold $5.7 billion of stock in the first three weeks of September. The largest amount of any September in the last 10 years.
Also interesting is the fact insiders are selling the shares they purchased with their own money, i.e. their personal stock holdings, while converse are buying back stocks like there’s no tomorrow with shareholders’ money.
Corporations have authorized a record $827.4 billion of stock buybacks in 2018.
What’s Wrong With This Picture?
Moreover, corporations are sacrificing buybacks over investing to grow their company; corporations are spending 2.5x times more money on buybacks than capital investment such as equipment, new factories and technology.
I find it odd, almost wrong, that insiders are using shareholder money to keep their stock propped up in order to line their pockets while they sell shares hand over fist.
Monkey See Monkey Do Wall Street Style
If you want to see if the stocks you own have insider rats running to jump ship, go here.
According to Insider Tracking, the five companies with the largest amount of insider selling are Globus Medical (NYSE: GMED), Netflix (NASDAQ: NFLX), Salesforce.com Inc. (NYSE: CRM), Amarin PLC (NASDAQ: AMRN) and Twitter (NYSE: TWTR).
Take note of what I’m telling you if you own any of these companies.
But also know this. Just because insiders are selling doesn’t mean the stock price is going to fall off a cliff tomorrow.
As always, timing is everything.
But if I owned a stock with a massive amount of insider selling… I’d at least have my finger sitting on the sell button ready to bail at any given moment.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch
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