Insider buying into the Coronavirus crash hasn’t yet reached levels associated with previous stock market bottoms.


As we’ve previously written, when insiders as a group buy en masse, it has historically signaled that stocks were broadly undervalued and a market bottom was at hand. As of Friday’s close, the WhaleWisdom Insider Sell vs Buy Ratio for the week of Feb. 24 was 1.42. This ratio reflected 467 selling transactions by officers and directors compared to 328 buy transactions for the Feb. 24 -28 period. By comparison, when stocks bottomed in the last week of 2018 after a 21%, 2-month correction, the reading was 0.66. That week there were 236 buys and 155 sells. So, insider buying into the Coronavirus crash has yet to signal a buying opportunity.

The 1.42 reading could suggest that stock valuations are not cheap relative to other market bottoms. Or possibly insiders — like the rest of us — are uncertain how the Coronavirus pandemic will affect their own companies, and are waiting for more clarity before buying. In any case, aggregate insider buying into the Coronavirus crash hasn’t yet reached levels associated that accompanied previous market bottoms following steep corrections since 2008.

There is almost always more insider selling than buying. Insiders are widely granted stock as employment compensation, so selling most always outpaces buying. But in rare weeks, selling dries up as buying increases. Insider Sell vs Buy Ratio readings less than 1.0 indicate that well-informed insiders broadly view their own company’s shares as undervalued.

Here are the lowest readings of the WhaleWisdom Insider Sell vs Buy Ratio. All these readings occurred at or near significant market bottoms:

The lowest WhaleWisdom Insider Weekly Sell vs Buy ratio was on Nov. 17, 2008 at the height of the financial crisis.

Date  Insider Weekly S-B ratio 6 mo return
11/17/08 0.25 18.48%
8/8/11 0.32 10.46%
3/9/09 0.44 13.81%
8/24/15 0.57 -1.96%
12/24/18 0.66 22.98%
11/21/11 0.68 13.92%
9/19/11 0.73 38.93%
10/22/18 0.77 10.88%
2/8/16 0.9 17.10%
8/23/10 0.91 23.94%

A word of caution: The lowest Insider Sell vs Buy Ratios occurred during times of heightened stock market volatility. A low ratio — when it happens — should not be viewed as a signal that stock prices will march inexorably higher. For example, the lowest reading in our database was recorded on Nov. 17, 2008 and preceded an 18.4% S&P 500 rally over the next seven weeks. However, the final bottom was not put in until the first week of March 2009 — a level 10% lower than the Nov. 2008 bottom.

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