While many people are ditching stocks and shares looking for a safe haven in which to invest their money, many executices are buying into their stock while they perceive the prices to be low.
Bloomberg reports that with 66 insiders from 50 companies buying shares between 3rd and 9th of August, more executives in Standard & Poor’s 500 Index companies have bought their own stock than at any time since the credit crisis started.
The feeling is that these insiders are bullish as they have the best information on which to act and this is therefore a good sign of the actual strengths of these companies. Shawn Price, a manager at Navellier & Associates told Reuters that “Nobody knows a company better than the people running it. It’s a positive sign that they are committing their personal capital.”
Bloomberg put the following together:
Morgan Stanley Chief Executive Officer, James Gorman, and two managers, Financial Officer Ruth Porat and Paul J. Taubman co-head of the firm’s investment bank, purchased a total of 175,000 shares in the bank after its share price dropped to a low not seen since March 2009. Mr Gorman alone bought his first tranche of 100,000 shares since joining MS in 2006.
Dan Ekerson, CEO of General Motors bought $250,000 in GM shares on August 9th.
MEMC Electronics Materials Inc CEO Ahmad Chatila with five other company officers bought 468,057 shares on August 5th.
The CEO of Celgene Corp, Robert Hugon, bought 10,000 shares in his company on Aug 8th.
Data put together by InsiderScore shows that 919 insiders have bought stock since August 1st.
Bloomberg points out that there were also 14 executives also selling during this period ‘bringing the ratio of those with buyers and those with sellers to 7 to 2’.
“It’s a fire sale and the insiders are stepping up to buy at these prices,” Daniel Genter, who oversees about $3.7 billion as president of Los Angeles-based RNC Genter Capital Management, said in a telephone interview with Bloomberg. “The insiders are saying that the lower valuation is unreasonable because they believe the earnings power of their companies is likely to go up.”
So, insiders are saying their shares are oversold. Or is this just misplaced sentiment?