As we turn the page on a new year the trend in insider trading remains largely the same as it was in 2009. Although the holiday week was shortened, insiders still found time to unload millions of shares in their own companies. In the last week of the year insiders sold over $222MM worth of stock while purchasing just $18.5MM worth of stock.
We believe this very bearish data is likely due to the long-term trends executives see within their own companies. Although insider trading is never a good short-term indicator it is very useful as a long-term indicator. After all, insiders rarely purchase their own shares with a short time horizon. Therefore, we believe insiders continue to refuse to invest their own money in their companies due to the negative trends they see in top line growth and job growth. In other words, they know the margin expansion story is not sustainable in the long-run and that the likelihood of another downturn in the market remains very high over the course of the next few years.
INSIDER TRADING REMAINS BEARISH AS 2010 BEGINS
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