“NEW YORK (CNNMoney) — First quarter earnings have been decent, if not spectacular. And many corporate executives are issuing cautiously optimistic guidance for the rest of the year.
But while insiders’ lips are saying one thing, their wallets are saying another. The level of insider selling among S&P 500 (SPX) companies is the highest in nearly 10 years. That is not good.
Sure, executives have many reasons for selling their stock. They may have automatic plans to sell shares every now and then, regardless of the stock price. They may be selling for diversification purposes.
They may also need the cash for a variety of personal reasons, like sending their kids to college, buying a house or getting a divorce. (To pull a line from Us Weekly about celebrities, CEOs are just like us!)
Still, the sheer volume of insider sales (nearly 1,800 by S&P 500 executives over a three-month period according to data crunched by Montreal-based brokerage Brockhouse Cooper) is alarming.
You can’t help but cynically wonder if insiders decided to take money off the table after a first quarter in which stocks had a mid-to-late 1990s “irrationally exuberant” surge.
“Corporate managers are not buying the current rally. If the people who know their companies best are selling, maybe you should reconsider whether to buy,” said Pierre Lapointe, global macro strategist with Brockhouse Cooper. He added that the current level of insider selling could signal as much as a 10% decline in stocks over the next few months….”
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