Corporate insiders buying the dip in their stocks suggests gains are coming for the market in the 2nd half of 2022, research firm says

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  • Corporate insiders see value in their company’s stock prices as they begin to ramp up purchases.
  • That’s good news for the stock market, which has historically seen strong 6-month performance when insiders buying overpowered sellers, according to Argus Research.
  • “While there are many reasons to think stocks could fall further, current insider sentiment is not one of them,” Argus said.

Corporate insiders are starting to see value in their stocks based on recent trading activity, according to a Thursday report from Argus Research.

The research firm observed that “insiders came back in a big way”, snapping up shares of their companies during last week’s sharp stock market sell-off, citing data from Vickers Stock Research.

The data shows corporate insiders are buying their stock either at the same rate at which they are selling or buying more than they are selling, according to the report. The recent influx of buying has pushed the eight-week sell-to-buy ratio of corporate insiders trading activity to a “very healthy” level of almost 1.0. Normally, corporate insiders sell 2-2.5 times more often than they buy. 

A decline in the sell-to-buy ratio to levels seen today has proven bullish for the stock market based on historical data, as “major share-price gains” have materialized over the following three-to-six months, Argus said.

“While there are many reasons to think stocks could fall further, current insider sentiment is not one of them,” Argus said. “Insiders apparently see across-the-board value in stocks” as they are “keeping the faith.” 

The positive signal from corporate insiders is important to investors given the ongoing concerns of 40-year highs in inflation, fast-rising interest rates, and mounting concerns of an economic recession. The increasingly worrying economic indicators has sparked a more than 20% sell-off in the S&P 500, and a more than 30% decline in the Nasdaq 100.

Some companies that have seen insider buying activity over the past week include: Occidental Petroleum, Analog Devices, and Sysco Corporation, among others.

Argus Research, Vickers Stock Research

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