It's been a dizzying few weeks for traders as we went from the longest bull market in history into the fastest bear market in history. After an 11-year bull run, it took just three weeks for the S&P 500 to enter bear market territory. And less than a month after hitting its all-time high, the index sits 30% lower.
As the coronavirus has spread rapidly throughout the globe, economists have slashed growth estimates, with a number predicting the U.S. economy will contract in the second quarter. Consumer confidence is collapsing as schools and non-essential businesses around the country are shuttering. Liquidity is drying up, circuit breakers on the major indexes are tripping and the Federal Reserve's slashing of its benchmark interest rate to near zero on Sunday was followed by a 11% plunge in stocks on Monday.
In short, there's plenty to be worried about right now. And it wouldn't be too hard to fall into a pit of despair -- on a financial and personal level -- as we consider what life will look like over the next few weeks or months.
That's why in times like these I believe it's also important to look for positive signs.
Take the billionaires like Bill Gates and Jack Ma who are pledging millions to fight the disease. Or the NBA players who are donating thousands to help cover missing wages for hourly workers who will be affected by the suspension of the season. Or local restaurants that plan to box up meals to feed the hungry in their area.
I also came across a positive story for stocks recently. The headline read: "Insider Buying Hits Nine-Year High as Stocks Sink to Bear Market."
In the first two weeks of March, close to 1,400 corporate insiders purchased shares of their companies, according to data compiled by The Washington Service. In fact, as average investors were dumping shares across the board, insider buyers outnumbered sellers by a ratio of 3-to-2 -- the most since 2011 -- as they scooped up shares of their companies as prices fell.
This is an encouraging sign. Corporate insiders are executives and officers who work for a particular company. This means they have knowledge of that company that the general public does not, such as sales trends, projections and more. They are the most in the know.
If insiders are unloading their shares, it could be a bad sign. On the other hand, if they are purchasing shares, it's a vote of confidence in the company.
As legendary mutual fund manager Peter Lynch said, "Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise."
If insiders are snapping up shares while everyone else is running for the exits, it's a pretty clear sign they believe their shares are trading for bargain prices.
Luckily, we get a glimpse into what insiders are doing because they must follow strict disclosure requirements. Any time an insider buys or sells shares of their company, they must file a Form 4 with the Securities and Exchange Commission. And there are a number of websites that track and publish insider transaction data, such as Finviz, GuruFocus and MarketBeat.
Let's look at some major insider transactions from recent days to see what insiders are buying. Note that I filtered the results by companies with market caps over $2 billion.
No. of Shares Purchased
|Total Transaction Cost|
Legg Mason (LM)
Wells Fargo (WFC)
Westlake Chemical Co. (WLK)
Mercury General (MCY)
PNC Financial Services Group (PNC)
Total SA (TOT)
Raymond James (RJF)
There are also a number of financial institutions on the list. This is interesting in the face of the Federal Reserve lowering rates and an announcement by eight major U.S. banks, including Wells Fargo, that said they would stock stock buybacks through the second quarter due to the coronavirus pandemic.As you can see, there are a few names from the beaten-down energy sector. Energy has been the worst-performing sector in this downturn, down more than 40% in the past month as oil prices have plummeted on global growth fears and the outbreak of a price war between Saudi Arabia and Russia.
Clearly there are some insiders at these companies who are confident in the longer-term outlook.
While the highest level of insider buying in almost a decade may not signal a bottom, it is a good sign. And traders can use insider buying data to search for stocks that may be bargains in this trying time for the markets.
This article is supplied courtesy of WealthPress.com
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