Corporate Insider Selling Is Cooling Off

There are numerous reasons why corporate insiders buy and sell shares of the company where they work.

However, outsiders often track this insider trading activity because these employees are thought to have better information about their companies than outsiders. For example, if selling activity slows and/or buying picks up, then one might assume the outlook for the company is improving.

“Corporate insider activity is generally in line with historical averages,” noted Goldman Sachs’ David Kostin in a new note to clients. “Insider sales rose in late 2012 as S&P 500 reached its previous peak but has since receded. Purchase activity, while relatively minuscule in volume, is higher than at any point in the past decade outside of the financial crisis, suggesting managements and other corporate insiders expect further upside.”

As you can see from the chart, the information derived from insider trading activity isn’t great. For much of the current bull market, selling actually accelerated.

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