Gloomy CEOs: America's Corporate Leaders Turn Bearish

(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFA. Data sourced from Yahoo! Finance. Rebecca owns shares of DELL.)

If you were looking to CEOs for some cheery sentiment to put your economic concerns at ease, a recent survey by Business Roundtable says not to bother. It turns out that the 140 chief executives surveyed are overwhelmingly bearish, more likely to cut jobs, and less likely to increase capital spending or see increased sales over the next six months.

Reuters reports that the CEO Economic Outlook index dropped for a second consecutive quarter to 77.6, its lowest reading since the fourth quarter of 2009. However it remains above 50 indicating forecasts of overall growth rather than decline.  

Supporting causes for this pessimism include the usual suspects: rising oil prices, sluggish economic growth, the European sovereign-debt crisis, a probable US recession and the S&P downgrade.

The survey also paints a bleak picture for the country’s other reigning issues, including unemployment and consumer confidence: 24% of CEOs expected to cut jobs in the US over the next six months, compared to the 11% forecasted in the second quarter. And 36% per cent expected to add jobs in the third quarter, down from 51% in the second quarter. (via Reuters)

Furthermore, “the number of CEOs who expected their companies’ sales to rise over the next six months fell to 65 per cent from 87 per cent and the number who expect to boost capital spending fell to 32 per cent from 61 per cent.”

Reuters reminds investors to keep in mind that although a survey of corporate leaders provides a good starting point for judging corporate health, investors will get a more “detailed view” as big companies begin reporting third-quarter results in the coming days and weeks.

So all this raises an interesting question: Are there any CEOs that are optimistic on the outlook of their companies?

For ideas, we started with a universe of the 200 largest U.S. corporations by market cap.

From this list, we identified the companies that have seen the largest insider purchases over the last six months.

Insider executives at these mega-cap companies appear to be optimistic on the future, in contrast to other CEOs mentioned in the survey above. Does this signal a buying opportunity in these stocks?

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List sorted by market cap.

1. American International Group, Inc. (AIG): The company operates property and casualty insurance networks worldwide and conducts activities in the U.S. life insurance and retirement services industry. Over the last six months, insiders were net buyers of 6,982,680 shares, which represents about 2.88% of the company’s 242.37M share float.

2. News Corp. (NWSA): Operates as a diversified media company worldwide. Over the last six months, insiders were net buyers of 3,639,328 shares, which represents about 0.16% of the company’s 2.24B share float.

3. VMware, Inc. (VMW): Provides virtualization and virtualization-based cloud infrastructure solutions primarily in the United States. Over the last six months, insiders were net buyers of 1,621,764 shares, which represents about 2.07% of the company’s 78.50M share float.

4. Dell Inc. (DELL): Provides integrated technology solutions in the information technology (IT) industry worldwide. Over the last six months, insiders were net buyers of 17,230,709 shares, which represents about 1.11% of the company’s 1.55B share float.

Interactive Chart: Press Play to see how analyst ratings have changed for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


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