Capital Markets

Insider Sales Highest Since May 2001

February has historically been a busy month, after the restraints of earnings season are removed.
Stephen TaubMarch 5, 2004

Investors seem to be jubilantly pouring more and more money into the stock market, which has been on a tear after crumbling for nearly three years. Corporate insiders, however, are using this strong rally to lighten their holdings of stock in their own companies.

In February alone, corporate executives sold $4.9 billion of stock in their own companies. This figure is nearly double the historic five-year monthly average and more than 50 percent higher than January’s $3.1 billion, according to Thomson Financial.

Indeed, the February figure represents the highest monthly total for insider sales since May 2001. Last month the number of companies and the number of executives involved in insider selling also both reached three-year highs.

Insider buying and selling activity is widely deemed an early indicator of the overall direction of the stock markets since insiders figure to be the most knowledgeable about the prospects for their companies.

To be sure, February has historically been a big month for insider selling. As Thomson noted, insiders who defer fourth-quarter selling in the prior year for tax-planning purposes and are restrained from selling during January’s earnings season often sell at the first opportunity in February.

Executives did purchase $96 million of stock last month, up 25 percent from January. Since 1996, added Thomson, insider buying has increased from January to February every year except 2002. However, that $96 million volume of acquisitions was well below the five-year monthly average of $163 million.

Thomson added that considering February’s three-year high, it expects March selling to drop off, month over month, as it has for most years in the past decade.