Insider Observations – trading weak and strong stocks

After several weeks of deteriorating insider sentiment, we saw an improvement this past week. Insider sentiment remains neutral (S/B Ratio 1.48 which means about 3 sell for every 2 buys).

A week ago we thought the sentiment was heading toward bearish, but instead, they shifted this past week with buying picking up while selling eased off. It is not a coincidence that sentiment improved during a week where the Russell 2000 declined -3% while the S&P 500 was flat.

The number of stocks on the new low list (859) is now on par with those touching new highs last week (893). The insider activity we reviewed this past week included buying in weak stocks and selling in very strong stocks, the numbers equally balanced. The quality of the buying lacked conviction, and much of it seemed half-hearted. Likewise, much of the selling was routine and not aggressive. Despite this, we still found 12 stocks to upgrade and downgraded 4. The upgrades and downgrades were from a variety of sectors with no strong industry themes.

This has been the case since late October when the filings began to increase after 3Q results. We anticipate 3-4 weeks of heavy insider filings and would not be surprised to see large sales increase ahead of potentially higher tax rates in 2022.

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