It has been a difficult few months for US stocks, with much of the market on sale. Consequently, corporate insiders don’t seem to be finding many bargains.
Elon Musk, the founder and CEO of Tesla, recently pledged to pause sales of his company’s shares for 18-24 months. Some have claimed this is part of an attempt to buck the trend of insider stock sales.
The ratio of companies whose executives or directors have been buying stock versus selling has dropped for six consecutive months, according to InsiderSentiment.com. This marks the longest such decline in almost two years.
This decline in the stock buying-to-selling ratio suggests that insiders are not taking advantage of the current market conditions. There are numerous potential explanations for such seemingly curious actions. For one, it is possible that insiders do not see the current prices as a good purchase opportunity. Alternatively, they may not even have the money to make substantial investments.
Insiders may also be holding back due to a lack of confidence in the market. With the economy still recovering from the reaction to the pandemic and many companies struggling, it is understandable that investors would be cautious.
The decline in insider buying may serve as a warning sign for the market. If insiders are not willing to buy stocks, they likely do not believe the market will rise in the near future. It could also be a sign of a longer-term trend.
Whatever the reason, it is clear that corporate insiders are not buying stocks in the same numbers as they were before. This could be a sign of a lack of confidence in the market, so investors should be wary.