#1: The most bullish sign is that the insiders buy their own (1197 reads) 作者: ceo/cfo, 时间: 2007-2-04 周日, 04:56 — 作者：ceo/cfo 在 海归茶馆 发贴, 来自【海归网】 http://www.haiguinet.com
company stocks in the open market, in my humble opinion. Even that said, there are some exceptions such as chk ceo's buys being "earmarked" for a special M & A... Let's wait and see how the market pans out in 2007. (for American stock markets)
ZT
The True Investment Mood of Insiders
THOSE WHO ba<x>se THEIR STOCK-MARKET TIMING on the behavior of corporate insiders are running scared these days, since insiders in recent months have sold a lot more of their companies' stock than they have purchased.
But a leading academic expert says that these worries are overblown. According to him, recent insider behavior is neutral, rather than bearish, suggesting an average year for the stock market in 2007.
Corporate insiders, of course, are a company's officers, directors and largest shareholders. They presumably know more about their firms' prospects than the rest of us, so many advisers pay close attention to whether insiders, on balance, are buying or selling. This turns out to be relatively easy to do, since insiders are required to report any transactions to the Securities and Exchange Commission fairly quickly after a trade.
Vickers Weekly Insider Report is a newsletter that compiles the insider reports that are filed with the SEC. Vickers interprets the insider data in light of the long-term average ratio of insider selling to insider buying, which stands in the range of around 2.5 to 1. Vickers considers it to be a bearish sign whenever the ratio of insider selling to buying rises above this long-term average, and bullish whenever the sell-to-buy ratio falls well below it.
This certainly explains why followers of insiders are so concerned right now. According to Vickers, the sell-to-buy ratio for all insider transactions over the last six months stands at about 13 to 1, far in excess of the long-term average of 2.5 to 1.
But don't count University of Michigan finance professor Nejat Seyhun among the worrywarts. By the way, Prof. Seyhun is one of academia's leading experts on interpreting the behavior of corporate insiders. In addition to a number of articles in scholarly journals on the subject, Prof. Seyhun has also written a major book on interpreting insiders' behavior, Investment Intelligence from Insider Trading, published by MIT Press.
Prof. Seyhun says that when corporate-insider behavior is properly interpreted, it is not anywhere close to being as bearish as the raw data otherwise would suggest. ba<x>sed on his reading of the insider-trading data, in fact, Prof. Seyhun says that "2007 is likely to shape up as an average year for stock investors."
Why such a difference in the pictures painted by the raw data and the data as interpreted by Prof. Seyhun? Perhaps the biggest source is the role that stock options play in the behavior of corporate insiders. When an insider acquires stock through exercising an option, and then sells the shares he acquires, only the sale is conducted at the then-current market price. Since the insider data that get reported in the popular press focuses on open-market purchases and sales, option exercises will make it look as though insiders are primarily selling and only occasionally buying. Needless to say, this will significantly skew the ratio of insider selling to insider buying.
Other factors that Prof. Seyhun also takes into account, when interpreting an insider's transaction, include the type of insider who undertook it, its size, and whether the transaction took place in the context of a rising or falling stock price. Prof. Seyhun weights each insider transaction according to these and other factors, and then calculates for every month a ratio of weighted insider buys to weighted insider sells -- a ratio that he calls the Insider Confidence Index.
According to Prof. Seyhun, the average level of his Insider Confidence Index since 1975 has been 60. Its average level in 2006 was 60.2, right in line with that longer-term average. It is for this reason that he concludes that recent insider activity is "neither overly bullish nor overly bearish."
Giving particular credence to Prof. Seyhun's reading is the picture that his Insider Confidence Index was painting a year ago, as I reported in my Barron's Online column in early April of last year. (See Hulbert on Markets, "Recent Insider Selling Re-examined," April 6, 2006.)
At the time, this index stood at 77.3, significantly above average, and Prof. Seyhun said that "2006 is likely to shape up as a good year for stock investors."
The Dow Jones Industrial Average was trading around 11,200 at the time I wrote that earlier column, about 1,400 DJIA points below where it stands currently.
Let's hope Prof. Seyhun's interpretation of the data is as spot-on this year as it was in 2006.
